Require the guidance of learned member for the following Querry:
The case is of a Private Limited Company having paid up share capital of Rs 4.5 Crores. It had two Promoter Director - Mrs A and Mrs B. The Husband of Mrs A and Mrs B are real brother. Currently Mr. A is also Director in the company.
Mrs B is a Non Resident India in Income Tax (but an Indian Citizen). The company had taken fund of around Rs 2.75 crores and issued shares of Rs 2.25 crores to her (i.e. shares issued to NRI).
Is their any violation of FEMA and if yes, what are the repircations. Further what are the remedies available to the company.
Lastly shall all the director be considered to be part of default and if yes, what shall be a way out if a Director want to get out of this issue.
In this reference please read master circular issued by RBI on FDI on July 01, 2010.
REPORTING OF FDI
(i) Reporting of Inflow
(a) An Indian Company receiving invest from outside India for issuing shares under the FDI scheme, should report the details of the amount of consideration, to the Regional office concerned of the Reserve Bank not later than 30days from the date of receipt in the advance. (b) Indian company are required to report the details of the receipt of the amount of consideration for issue of shares through an AD Category-I bank, together with the copy of the FIRC evidencing the receipt of the remittance along with the KYC report on the non-resident investor from the overseas bank remitting the amount.
(ii) Time frame within which shares have to be issued
The equity instruments should be issued within 180 days from the date of receipt of inward remittance or by debit to the NER/FCNR (B) account of the non-resident investor. In case the equity instruments are not issued within 180 days from the date of receipt of the inward remittance or the date of debit to the NER/FCNR (B) account, the amount of consideration so received should be refunded immediately to the non-resident investor by onward remittance through normal banking channels or by credit to the NER/FCNR(B) account, as the case may be. Non-compliance with the above provision would be reckoned as a contravention under FEMA and could attract penal provisions. In exceptional cases, refund of the amount of consideration outstanding beyond a period of 180 days from the date of receipt may be considered by the Reserve Bank, on the merits of the case. (iii) Reporting of Issue of Shares
(a) After issue of shares the Indian company has to file Form FC-GPR not later than 30 days from the date of issue of shares. (b) Part-A of Form FC-GPR has to be dully filled up and signed by MD/Director/Secretary of the Company and submitted to the Authorised Dealer(AD) of the company, who will forward it to the RBI. (c) The report of the receipt of consideration as well as Form FC-GPR have to be submitted by the AD bank to the Regional office concerned of the RBI under whose jurisdiction the Registered office of the company is situated. (d) Part-B of Form FC-GPR should be filed on an annual basis by the Indian Company, directly with the “Advisor, Balance of Payment Statistical Division, Department of Statistics and Information Management, RBI, C9, 8th Floor, Bandra-Kurla Complex, Bandra (E), Mumbai-400051”. This is an annual return to be submitted by 31st July every year, pertaining to all investments by way of direct/portfolio investments/re-invested earning/ others in the Indian company during the previous years.
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