t p shridar company secretary +919444898899€¦ · 3. form llp-i fdi in llp thru capital contrib...

T P Shridar Company Secretary +919444898899


First

get your

fundamentals

in place!


OVERVIEW

• Foreign Exchange Regulation Act (FERA) – 1947.

• Major change in 1973 - FERA 1973.

• FERA repealed.

• Foreign Exchange Management Act (FEMA 1999).

The Foreign Exchange Management Act



WHY FEMA?

• FERA - Regulation or Rationing of scarce Foreign Exchange.

• When the forex reserves improved substantially,

• There was no need of rationing.

• Hence FEMA introduced in 1999.



APPLICABILITY – Extra Territorial Jurisdiction.

• Applicable to the whole of India including J&K.

• Any transaction that has an international dimension.

• All branches, offices & agencies OUTSIDE INDIA

• Owned & controlled by a person resident in India.

• Any contravention there under committed outside India by any

person to whom the Act applies.



APPLICABILITY

• FEMA is an additional law.

• Over and above any applicable law to any forex transactions.

• FEMA will also apply.,

FEMA Manual

FEMA Manual



OBJECT OF FEMA

• Consolidate and amend the law relating to foreign exchange.

• Facilitating external trade and payments.

• Promote the orderly development and maintenance of foreign

exchange markets in India.



ENFORCEMENT OF FEMA

Entrusted with Directorate of Enforcement.

• Controlling Authority - Reserve Bank of India

• Implementing Authority - Enforcement Directorate

• Make Rules - Central Government

• Make Regulations - Reserve Bank of India


DIFFERENCE BETWEEN RULES AND REGULATIONS:

RULES REGULATIONS

Guidelines or instructions of doing

something correctly

Refer to the directives or statute

enforced by law

Does not have a legal binding Has a legal binding



OVERVIEW OF FEMA

• 7 chapters containing 49 Sections.

• 5 sets of Rules made by Ministry of Finance.

• 23 sets of regulations made by RBI.

• Master Circulars issues by RBI.

• Master Directions issued by RBI.

• Notifications / Circulars issued by RBI.




Areas of FEMA practice.

The areas of practice would be advising and filing of:

1. FC-GPR - Foreign Currency - Gross Provisional Return

2. FC- TRS - Foreign Currency - Transfer Of Shares

3. FLA - Foreign Liabilities And Assets Statement

4. ODI - Overseas Direct Investment

5. APR - Annual Performance Report

6. ECB - External Commercial Borrowings

7. BO/LO - Setting Up Branch Office / Liaison Office In India



FIRMS PORTAL -

Foreign Investment Reporting And Management System:

• Earlier reporting were made through e-Biz portal.

• e-Biz was withdrawn and FIRMS introduced - In Sep 18.

• RBI introduced a SINGLE MASTER FORM (SMF).

• Companies will have to create two platforms.

1. Entity User Creation / Entity Master Creation .

2. Business User Creation.



1. Entity User creation:

• Master Data Creation through the Entity User.

• Obtain the username and password.

• Use username & password create the Entity Master.



CHALLENGES IN ENTITY USER CREATION:

Auto Generated password may be DELAYED

Password mail may go into SPAM

Authority letter strictly in the format provided in the USER MANUAL

Resulting in delay in reporting requirements,



ENTITY MASTER CREATION:

Similar to MASTER DATA in MCA

Total foreign investment to be disclosed

Entity User is only with respect to an entity which has received foreign investment including indirect foreign investment

Business User is the one who would be making filing in Single Master Form, in compliance with the provisions of FEMA 20(R)



Business User creation – INVESTEE COMPANY:

# DETAILS

1. Authority Letter & copy of PAN of the Business User (Authorised Rep)

2. First Name , Middle Name And Last Name of the Business User (Auth Rep)

3. User Name (alpha - numeric)

4. Email ID of the Business User (for receiving auto generated password)

5. Mobile No. of the Business User (Authorised Representative)

6. Address of the Business User (Address of the Investee Company)

7. IFSC Code of the AD Bank (ONE IFSC CODE FOR EACH BANK)



Creating Entity Master and Business user - CHALLENGES:

1. Both authorising and the authorised persons should be

signatories to the Bank account.

2. Password allotment by AD Bank may take time.

3. The mail for Password may go into SPAM

4. Once an username is rejected, the same cannot reused.

5. Different username for Entity User & Business User.



LIST OF FORMS AVAILABLE ON FIRMS PORTAL

23-OCT-2018

1. Form FC-GPR FOREIGN DIRECT INVESTMENTS

2. Form FC-TRS TRANSFER OF SECURITIES

3. Form LLP-I FDI IN LLP THRU CAPITAL CONTRIB

4. Form LLP-II DISINVESTMENT / TRANSFER

5. Form ESOP FOR GRANT OF OPTIONS

6. Form CN CONVERTIBLE NOTES

7. Form DRR DEPOSITORY RECEIPTS

8. Form DI DOWN STREAM INVESTMENT



• CONSOLIDATED FDI POLICY

• Formulated in August 2017 by….

• Dept. of Industrial Policy & Promotion (DIPP).

• Ministry of Commerce & Industry - Government of India.



• T I S P R O REGULATIONS

• Introduced by RBI – November, 2017 (amended)

• TISPRO - Transfer or Issue of Security by a Person

Resident outside India

• Foreign Exchange Management Regulations, 2017

• Also various other Master Directions.



FOREIGN DIRECT INVESTMENT

Pre-filing Check List For FDI

1. Review the FDI policy to understand the sectoral cap.

2. Check if FDI is permitted under Automatic or Approval route

3. Check the percentage of FDI that is permitted for the

industry.

4. Do a capital evolution and confirm the FDI already made



FOREIGN DIRECT INVESTMENT

Pre-filing check list for FDI (Contd…)

5. Check if the FDIs already made is reported and taken

on record by RBI.

6. If earlier investments have not been taken on record,

take effective steps for RBI to take the same on record.

7. Check if FIRC and KYC have been received.

8. Check the purpose mentioned in the FIRC.



NEED FOR FILING FC-GPR:

Allotment of capital instruments has to be completed within 60 days of the receipt of FDI by the Investee Company,

Filing of FC-GPR has to be done within 30 days of allotment of capital instrument

Refund of excess application money (if any) has to be done within 15 days from the completion of 60 days of receipt of FDI (Master Direction – Foreign Investment in India –Mar-2019)



FORM FC-TRS:

Every transfer of capital instruments between a R & NR shall be reported to RBI through Form FC-TRS.

• The transfer shall comply with below conditions:

• Foreign Investment must be in compliance with FDI Regulations

• Transfer must be in accordance with the Foreign Exchange Management (Transfer or Issue of a Security by a Person Resident Outside India) Regulations, 2017



RESPONSIBILITY OF FILING FORM FC-TRS:

The onus of reporting is on the resident transferor/ transferee or the person resident outside India holding capital instruments on a non-repatriable basis, as the case may

In case where the Non-Resident Investor acquires shares on the stock exchanges, the responsibility of filing form FC-TRS is on Investee Company.


The Foreign Exchange Management Act OVERSEAS DIRECT INVESTMENT

CHECK LIST FOR ODI:

1. Permitted up to 400% of the net worth as per the last

audited balance sheet.

2. Investments exceeding USD 1 (one) billion (or its

equivalent) in a financial year would require prior approval

of the Reserve Bank.

3. Indian Parties are prohibited from making investment (or

financial commitment) in foreign entity engaged in real

estate or banking business without prior approval of RBI.



OVERSEAS DIRECT INVESTMENT

AUTOMATIC ROUTE:

• With effect from July 03, 2014, it has been decided that any

financial commitment (FC) exceeding even when the total FC of

the Indian Party is within the eligible limit under the automatic

route (i.e., within 400% of the net worth as per the last audited

balance sheet) would require prior approval of the reserve

bank .




APPROVAL ROUTE:

• Prior approval of the Reserve Bank would be required in all

other cases of direct investment (or financial commitment)

abroad. For this purpose, application together with necessary

documents should be submitted in Form ODI through their

Authorised Dealer Category – I banks.




APPROVAL ROUTE:

Reserve Bank would look into -

a) Viability of the JV / WOS outside India;

b) Contribution to external trade and other benefits which will

accrue to India.




APPROVAL ROUTE: (Contd….)

c) Financial position & track record of the Indian Party and the

foreign entity.

d) Expertise and experience of the Indian Party.



EXTERNAL COMMERCIAL BORROWINGS (ECB):

• ECBs are commercial loans raised by eligible resident entities.

• It should conform to parameters.

• The parameters apply in totality and not on a standalone

basis.

• All eligible borrowers can raise ECB up to USD 750 million (or

equivalent) per financial year under the automatic route.



END USE RESTRICTIONS:

a) Real estate activities.

b) Investment in capital market.

c) Equity investment.

d) Working capital purposes except from foreign equity holder.

e) General corporate purposes except from foreign equity holder.

f) Repayment of Rupee loans except from foreign equity holder.

g) On-lending to entities for the above activities.



Reporting Requirements:

• Borrowings under ECB Framework are subject to reporting

requirements in respect of the following:

• Loan Registration Number (LRN):

• Preparation of ECB Agreement between the Borrower and

Lender in line with the ECB Regulations,

• Borrower is required to submit Form ECB, which will contains

terms & conditions of the ECB, in duplicate to the designated

AD Category I bank.


Changes in terms and conditions of ECB:

• Changes are permitted in ECB parameters,

• Should be reported through revised Form 83 at the earliest, in

any case not later than 7 days from the changes effected.



Reporting of actual transactions- Monthly Returns:

• The borrower is required to report actual ECB transactions

through ECB 2 Return on monthly basis within 7 working days

• ECB return can be signed by a PCS – good and continuous

business opportunity,

• Changes, if any, in ECB parameters should also be incorporated

in ECB 2 Return.



How do I get instant solution for my queries in FEMA

There are always……

Instant coffee & 2 minutes noodles!

Share your name and qualification, for enrolling in a

WhatsApp group that will give you instant guidance for all

your FEMA related queries.

Contact: 90030 12871


t p shridar company secretary +919444898899€¦ · 3. form llp-i fdi in llp thru capital contrib...

Documents