FEMA - Repatriation of Advance
This query is : Resolved
16 December 2008
Foreign Company has a subsidiary indian non banking financial company. Parent Company has advanced some money to indian subsidiary for 6 months. Now indian subsidiary wants to repatriate this advance money. What are the formalities to be fulfilled?
16 December 2008
Procedure for getting approval for FDI
Getting an automatic approval for procuring 100% FDI is easy for most of the sectors / activities. Thanks to the investment-friendly policies offered by the government that allow a flexible and transparent investment environment in the country. The investment in such sectors can be made without getting prior approval from the central government.
However, the following special sectors or activities require prior approval from the government. They have to approach the government through the Foreign Investment Promotion Board (FIPB) in order to get approval.
Sectors/activities that are not eligible for procuring FDI.
Sectors/activities that require an industrial license.
A proposal from a foreign investor who has already got collaboration with any other business in India in the same field.
A proposal from a foreign investor for acquiring the shares from an existing financial services company in India. These proposals are restricted by certain policies adopted by the Securities and Exchange Board of India (SEBI) in 1997.
Investment proposals for categories/items that do not fall under the Sectoral Policy/CAPS category.
Getting an automatic approval for procuring 100% FDI is easy for most of the sectors / activities. Thanks to the investment-friendly policies offered by the government that allow a flexible and transparent investment environment in the country. The investment in such sectors can be made without getting prior approval from the central government.
However, the following special sectors or activities require prior approval from the government. They have to approach the government through the Foreign Investment Promotion Board (FIPB) in order to get approval.
Sectors/activities that are not eligible for procuring FDI.
Sectors/activities that require an industrial license.
A proposal from a foreign investor who has already got collaboration with any other business in India in the same field.
A proposal from a foreign investor for acquiring the shares from an existing financial services company in India. These proposals are restricted by certain policies adopted by the Securities and Exchange Board of India (SEBI) in 1997.
Investment proposals for categories/items that do not fall under the Sectoral Policy/CAPS category.
16 December 2008
Procedure for getting automatic approval
The only procedure in procuring automatic approval is to inform the Reserve Bank of India (RBI) through bank in which share application money has been received in the prescribed Form FC-GPR within 30 days after making the inward transfer of funds required for the business and submit all the necessary documents within a period of 30 days of issuing the shares to the investors.
The only procedure in procuring automatic approval is to inform the Reserve Bank of India (RBI) through bank in which share application money has been received in the prescribed Form FC-GPR within 30 days after making the inward transfer of funds required for the business and submit all the necessary documents within a period of 30 days of issuing the shares to the investors.
16 December 2008
Procedure for getting FIPB approval
Approval for proposals that are not covered under the automatic category, such as the composite proposals that involve foreign investment/technical collaboration, is made through FIPB route. There are two types of proposals under this procedure.
All FDI applications except the Non-Resident Indian (NRI) and 100% Export Oriented Units (EOU) have to be submitted to the FIPB, Department of Economic Affairs, Ministry of Finance.
Applications under the NRI and 100% EOU category have to be submitted to the SIA under the Department of Industrial Policy and Promotion.
Applications can be made either in the Form FC-IL (Composite form for Foreign Collaboration and Industrial License) or in a plain paper with all the details mentioned in it.
Those proposals approved by the FIPB do not require any further approval from the RBI for any kind of inward transfer of funds and issue of shares to foreign investors. However, they are supposed to intimate the Regional Office of the RBI about the inward transfer of funds or the issue of the shares to the investors within a period of 30 days.
Approval for proposals that are not covered under the automatic category, such as the composite proposals that involve foreign investment/technical collaboration, is made through FIPB route. There are two types of proposals under this procedure.
All FDI applications except the Non-Resident Indian (NRI) and 100% Export Oriented Units (EOU) have to be submitted to the FIPB, Department of Economic Affairs, Ministry of Finance.
Applications under the NRI and 100% EOU category have to be submitted to the SIA under the Department of Industrial Policy and Promotion.
Applications can be made either in the Form FC-IL (Composite form for Foreign Collaboration and Industrial License) or in a plain paper with all the details mentioned in it.
Those proposals approved by the FIPB do not require any further approval from the RBI for any kind of inward transfer of funds and issue of shares to foreign investors. However, they are supposed to intimate the Regional Office of the RBI about the inward transfer of funds or the issue of the shares to the investors within a period of 30 days.
16 December 2008
Getting approval for External Commercial Borrowing (ECB)
There are two ways in which ECB approval can be procured – automatic route and approval route.
Industrial sectors, including the infrastructure, are approved through automatic route that does not require RBI/government approval. ECB up to US$20 million with a minimum three-year maturity or ECB up to US$500 million with a minimum five-year maturity is allowed under this category. The maximum ECB that can be raised through automatic route during a financial year is US$500 million.
To get the automatic approval, the following procedures have to be followed.
Apply in the prescribed format in Form 83, along with a duplicate, to the concerned Authorized Dealer (AD). The form has to be certified by a Company Secretary or a Chartered Accountant. The AD will forward one copy of the application to the Director, Balance of Payments Statistics Division, Department of Statistical Analysis and Computer Services (DESACS), Reserve Bank of India, for allotting the loan registration number.
After receiving the loan registration number, the borrower will be eligible to use the loan.
The borrower will have to submit the ECB-2 Return every month to the DESACS. It has to be certified by the concerned AD and should reach the DESACS within seven working days from the last day of the closing month.
The approval for all proposals other than those fall under the automatic route, are decided by an Empowered Committee under the RBI.
There are two ways in which ECB approval can be procured – automatic route and approval route.
Industrial sectors, including the infrastructure, are approved through automatic route that does not require RBI/government approval. ECB up to US$20 million with a minimum three-year maturity or ECB up to US$500 million with a minimum five-year maturity is allowed under this category. The maximum ECB that can be raised through automatic route during a financial year is US$500 million.
To get the automatic approval, the following procedures have to be followed.
Apply in the prescribed format in Form 83, along with a duplicate, to the concerned Authorized Dealer (AD). The form has to be certified by a Company Secretary or a Chartered Accountant. The AD will forward one copy of the application to the Director, Balance of Payments Statistics Division, Department of Statistical Analysis and Computer Services (DESACS), Reserve Bank of India, for allotting the loan registration number.
After receiving the loan registration number, the borrower will be eligible to use the loan.
The borrower will have to submit the ECB-2 Return every month to the DESACS. It has to be certified by the concerned AD and should reach the DESACS within seven working days from the last day of the closing month.
The approval for all proposals other than those fall under the automatic route, are decided by an Empowered Committee under the RBI.
16 December 2008
Thanx for the information.
But, i want to know what are the formalities to be fulfilled at the time of repatriation of advance to foreign parent company?
But, i want to know what are the formalities to be fulfilled at the time of repatriation of advance to foreign parent company?
16 December 2008
Ravikumar
Ur attention please...
For automatoc approval..within 30 days of inward remittance Annex II and Annex III (not FC GPR)has to be filed as per 30.05.2008 notification. And withn 30 days of issue FCGPR to be filed..All docs to be routed thru AD Bank..
RGDS
VIVEK
Ur attention please...
For automatoc approval..within 30 days of inward remittance Annex II and Annex III (not FC GPR)has to be filed as per 30.05.2008 notification. And withn 30 days of issue FCGPR to be filed..All docs to be routed thru AD Bank..
RGDS
VIVEK
16 December 2008
Thanks for your information the same i have posted earlier query.
16 December 2008
Advance received is not for allotment of shares. The same was received for day to day operations. Now indian subsidiary wants to repay it to the foreign parent company.
16 December 2008
Apart from the above all regular formalities like:
Structuring and incorporation of the Indian Business Entity and the related issues and formalities.
Provision for nominee signatory for executing documents (in case the promoters are unable to visit India at that time); provision for registered office and company secretary.
Planning and structuring the Indian company vis-à-vis the local taxation and other laws and such other issues.
Structuring and incorporation of the Indian Business Entity and the related issues and formalities.
Provision for nominee signatory for executing documents (in case the promoters are unable to visit India at that time); provision for registered office and company secretary.
Planning and structuring the Indian company vis-à-vis the local taxation and other laws and such other issues.
16 December 2008
Working capital is not allowable under FEMA. It is violation of law.
16 December 2008
Advance received is not for allotment of shares. The same was received for day to day operations. Now indian subsidiary wants to repay it to the foreign parent company.
16 December 2008
Ravi
Thanx for the reply.
I have one more query.
Where money is received for issue of shares
if shares are not issued within 180 days from the date of inward remittance, money should be refunded immediately through authorized channels. What are the formalities (such as form / declaration)to be complied with at the time of refund.
Thanx for the reply.
I have one more query.
Where money is received for issue of shares
if shares are not issued within 180 days from the date of inward remittance, money should be refunded immediately through authorized channels. What are the formalities (such as form / declaration)to be complied with at the time of refund.
16 December 2008
Get it from the following URL:
http://www.banknetindia.com/banking/equityfdi.htm
http://www.banknetindia.com/banking/equityfdi.htm
16 December 2008
The equity instruments are not issued within 180 days from the date of receipt of the inward remittance or date of debit to the NRE/FCNR (B) account, the amount of consideration so received should be refunded immediately to the non-resident investor by outward remittance through normal banking channels or by credit to the NRE/FCNR (B) account, as the case may be. The AD Category – I banks may allow such outward remittances after satisfying themselves with the bonafides of the transactions and that no part of the remittance represents interest on the funds received as advance. 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. Accordingly, AD Category – I banks may apply to the Regional Office concerned of Foreign Exchange Department of the Reserve Bank for refund of such advance.
In all cases where, as on November 28, 2007, 180 days have elapsed since receipt of funds and the equity instruments have not been issued, the companies are required to approach the Foreign Exchange Department of the Regional Office concerned of the Reserve Bank through their AD Category - I bank with a definite action plan either for allotment of equity instruments or for refund of the advance, with full details, for specific approval.
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. Accordingly, AD Category – I banks may apply to the Regional Office concerned of Foreign Exchange Department of the Reserve Bank for refund of such advance.
In all cases where, as on November 28, 2007, 180 days have elapsed since receipt of funds and the equity instruments have not been issued, the companies are required to approach the Foreign Exchange Department of the Regional Office concerned of the Reserve Bank through their AD Category - I bank with a definite action plan either for allotment of equity instruments or for refund of the advance, with full details, for specific approval.
16 December 2008
The notification copy is available from the following URL:
https://www.caclubindia.com/notice_circulars/notice_list_detail.asp?notice_id=208
https://www.caclubindia.com/notice_circulars/notice_list_detail.asp?notice_id=208
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