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FDI

Priya Sharma (Company Secretary & Student.MBA) (998 Points)

06 October 2009

In case a Pvt Limited Company is receiving investment from abroad from an entity incorporate outside, is it still necessary to file KYC Report along with the Reporting that is in Annexure II.??

Rgds

Priya

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Ashis Mahapatra (Consultant-Tax & FEMA/FDI) (183 Points)
Replied 06 October 2009

Originally posted by :Priya Sharma
"	In case a Pvt Limited Company is receiving investment from abroad from an entity incorporate outside, is it still necessary to file KYC Report along with the Reporting that is in Annexure II.?? Rgds Priya	"

Dear Priya

KYC is absolute requirement for filling FCGPR without which the Regional office will not accept your application.This can be obtained by your AD banker from the Foreign Banker who remitted Foreign Exchange to Indian bank.The shares must be issued in the name of the party who actually remitted the money.In case is there any understanding / agreement between the actual beneficiary and the person who remitted the money to india then they have the responsibility to clear it from their end & instruct Foreign banker to send KYC to Indian bank accordingly.And ensure FIRC must contain the descripttion money received towards "Share appllication money" only.Aditionally other terms and conditions for FDI to be satishfied.

Attched hereunder the the respective portion of FDI master cicular for your reference (Important points highligted).

18. Reporting of FDI

(i) Reporting of inflow

(a) An Indian company receiving investment from outside India for issuing shares / convertible debentures / preference 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 30 days from the date of receipt in the Advance Reporting Form enclosed in Annex - 6.

The Form can also be downloaded from the Reserve Bank's
websitehttps://www.rbi.org.in/Scripts/BSViewFemaForms.aspx.

(b) Indian companies are required to report the details of the receipt of the amount of consideration for issue of shares / convertible debentures, through an AD Category - I bank, together with a copy/ies of the FIRC/s evidencing the receipt of the remittance along with the KYC report (enclosed as Annex – 7) on the non-resident investor from the overseas bank remitting the amount. The report would be acknowledged by the Regional Office concerned, which will allot a Unique Identification Number (UIN) for the amount reported.

(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 the inward remittance or by debit to the NRE/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 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. 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 (including bonus and shares issued on rights basis) and shares issued under ESOP)/fully and mandatorily convertible debentures / fully and mandatorily convertible preference shares, the Indian company has to file Form FC-GPR, enclosed in Annex - 8, not later than 30 days from the date of issue of shares. The Form can also be downloaded from the Reserve Bank's website https://www.rbi.org.in/Scripts/BS_ViewFemaForms.aspx.

(b) Part A of Form FC-GPR has to be duly filled up and signed by Managing Director/Director/Secretary of the Company and submitted to the Authorised Dealer of the company, who will forward it to the Reserve Bank. The following documents have to be submitted along with Part A:

(i) A certificate from the Company Secretary of the company certifying that :

a) all the requirements of the Companies Act, 1956 have been complied with;
b) terms and conditions of the Government’s approval, if any, have been complied with;
c) the company is eligible to issue shares under these Regulations; and
d) the company has all original certificates issued by authorised dealers in India evidencing receipt of amount of consideration.

(ii) A certificate from Statutory Auditor or Chartered Accountant indicating the manner of arriving at the price of the shares issued to the persons resident outside India.

(c) The report of receipt of consideration as well as Form FC-GPR have to be submitted by the AD bank to the Regional Office concerned of the Reserve Bank 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 Reserve Bank⁶. This is an annual return to be submitted by 31st of July every year, pertaining to all investments by way of direct/portfolio investments/re-invested earnings/other capital in the Indian company made during the previous years (i.e. the information in Part B submitted by 31st July 2009 will pertain to all the investments made in the previous years up to March 31, 2009). The details of the investments to be reported would include all foreign investments made into the company which is outstanding as on the balance sheet date. The details of overseas investments in the company both under direct / portfolio investment may be separately indicated.

(e) Issue of bonus/rights shares or stock options to persons resident outside India directly or on amalgamation / merger with an existing Indian company, as well as issue of shares on conversion of ECB / royalty / lumpsum technical know-how fee / import of capital goods by units in SEZs has to be reported in Form FC-GPR

Rgrds

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Deepak Jain (CA) (69 Points)
Replied 28 October 2009

As per A. P. (DIR Series) Circular No. 44 dated May 30, 2008 For reporting of the receipt of the amount of consideration for issue of shares a format has been prescribed . A format for the Know Your Customer (KYC) report on the non-resident investor from the overseas bank remitting the amount required to be submitted has also been introduced.The KYC report should, henceforth, be submitted at the time of reporting the receipt of the amount of consideration from the nonresident investor. Accordingly, Any company whether private or public is required to report the details of the receipt of the amount of consideration for issue of shares together with a copy of the FIRC evidencing the receipt of the remittance along with the KYC report on the non-resident investor, through their AD ( their Banker), not later than 30 days from the date of receipt of the amount of consideration. The report would be acknowledged by RBI concerned, which would allot a Unique Identification Number (UIN) for the amount reported. The format of Know Your Customer (KYC) Form in respect of the non-resident investor is as under Registered Name of the Remitter / Investor (Name, if the investor is an Individual) Registration Number (Unique Identification Number* in case remitter is an Individual) Registered Address (Permanent Address if remitter Individual) Name of the Remitter’s Bank Remitter’s Bank Account No. Period of banking relationship with the remitter

Attached File : 57 annex ii report by the indian company receiving amount of consideration for issue of shares convertible debentures under the fdi scheme.doc downloaded: 726 times

Ashis Mahapatra (Consultant-Tax & FEMA/FDI) (183 Points)
Replied 28 October 2009

Absolutely correct. KYC & FIRC to be filed along with Intimation letter to RBI Regional office within 30days of FE received for obtaining UIN.But however non filing of such Intimation within prescribe days does not escape the party from this KYC obligation . If shares are not alloted within 180 days the money should be refunded immediately.So in a delayed case,if the shares are assumed to be alloted to foreign investors beyond 180 days OR alloted but FCGPR is not filed within such 30 days from date of allotment ..Its advisable to file/process FCGPR along with KYC/FIRC without going for UIN first & filing FCGPR separately.Because this will further delay in FCGPR which may make more sense & party will be separately questionable for this.

From RBI point of veiw the Reg Off will not entertain the FCGPR unless the party obtained UIN or not attaching KYC in a delayed case.The delay or non intimation is a separate issue where RBI ,for its satishfaction, may dig all the matters relating to that transaction & dispose with due respect to FEMA or any other allied Act

Hariharakrishnan (Officer) (46 Points)
Replied 23 August 2010

Onre of our clients incorporated a company on 4th April, 2009 and issued shares to a foreign company on 1st October, 2009. Since there was no business during the above period, the CA issued a certificate stating that the CCI norms do not apply. But RBI returned the FCGPR saying that the certificte is to be as per CCI norms only. Could somebody send the format for the certificate and also the working pattern.

Thanks and regards,

Haarri

Ajay Mishra (Company Secretary) (74337 Points)
Replied 23 August 2010

Dear Friend

Please follow the below given formalities in case of FDI:

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, 8^th Floor, Bandra-Kurla Complex, Bandra (E), Mumbai-400051”. This is an annual return to be submitted by 31^st 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.

Regards

CS Ajay Mishra