Types And Procedures For FDI Reporting To RBI | Foreign Direct Investment

types and procedures for fdi reporting to rbi

TYPES AND PROCEDURES FOR FDI REPORTING TO RBI

Types and procedures for fdi reporting to rbi- Many countries still suffer from capital scarcity. For countries like those foreign direct investments has been the most important source of funds. An individual or entity of a foreign country invests money in Indian companies under FDI. For an investment to be considered FDI a minimum of 10% or above from overseas has to be there. The foreign exchange management act 2000 regulates all the policies related to foreign direct investment in India, which is governed by the Reserve Bank of India (RBI).

MODES OF FOREIGN DIRECT INVESTMENT (FDI)

Basically, there are two routes through which overseas individuals or entities can invest in Indian companies. The first one being an automatic route which does not require any approval from Reserve Bank of India or Government and the second one being government through which requires permission from the concerned authorities such as FIFB, DIPP, Government of India.

TYPES OF FDI BY OVERSEAS ENTITIES OR INDIVIDUALS

There are various categories of foreign investors like Foreign Institutional Investors, Foreign Venture Capital Investors, Foreign Portfolio Investors, Non-Resident Indians, etc.

Subject to certain conditions mentioned in the FDI policy a foreign company or a business entity may enter India through following ways:-

1) Setting up Wholly Owned Subsidiaries or Joint Venture with an Indian company.

2) By operating as a foreign company but been registered with the Registrar of the Company or the MCA.

Liaison office- This office is concerned only about collecting information from the market and not earning any revenue from such activities.

Branch office- The scope of the branch office is broader than the liaison office. Unlike liaison office, a branch office is allowed to collect revenue by providing certain services and the technical knowledge of products that are being manufactured by the holding company.

Project office- These offices are meant to execute certain projects and allowed to be set up in India if:-

  • contract in India has been secured by the foreign company the founding of which will be done either by the bilateral and multilateral funding agency.
  • loan has been approved to an Indian company that is contract in the project by a bank.

FDI IN ( LLPS )LIMITED LIABILITY PARTNERSHIP

If the LLPs are adhering to all the provided limits, then FDI is allowed in LLP up to 100% since 2015 under the automatic route. Moreover, those LLPs can further invest in another LLP. Partner of LLP can be a foreign company or individual. Earlier the LLPs were not allowed to make further investments.

FDI IN PARTNERSHIP OR SOLE PROPRIETORSHIP COMPANY

Under the automatic route, Non-Resident Indians are allowed to contribute to the partnership and sole proprietorship concern:-

  • The partnership or sole proprietorship concern is not engaged in any real estate or agricultural business.

FDI IN SMALL SECTOR INDUSTRIES

In small scale factors, the foreign investment is limited upto 24% of the paid-up capital. foreign investment issued more than 24% state of capital some of the sectors of small scale has to comply with the following conditions:-

  • not to increase in the manufacturing of reserved items.

FDI IN PRIVATE LIMITED COMPANY

Subject to certain acts such as Companies Act 2013, Foreign Exchange Management Act 2000 and Consolidated FDI Policy, an Indian company being eligible can issue shares and take foreign investments.

SHARES AND OTHER SPECIFIED SECURITIES’ PAYMENTS

There is a specified route through which outside companies purchasing shares from Indian companies have to pay back to Indian companies:-

  • sending back money internally show normal banking channel
  • debiting the amount to the NRE account of the person which is maintained with an authorized dealer in India.

AFTER ALLOTMENT COMPLIANCES OF RBI

Like earlier times, there is only one reporting that is required to be made after allotment in form FC – GPR. Earlier, there used to be two stages of reporting that is the first stage being after receiving money in Advance Reporting Form ARF and second being after allotment in form FC-GPR. After the money has been received the investing company of India need to call a board meeting and as per the provisions of Companies Act 2013 an allot securities. An e-form called PAS-3 with RoC within 30 days of allotment has to be filed by Investee Indian Company. An additional filing of form FC-GPR with RBI in the portal of RBI has to be done by in Investee Indian company. Types And Procedures For Fdi Reporting To Rbi

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PROCEDURE OF REPORTING OF FOREIGN INVESTMENT:-

CREATING ENTITY USER

There is a specified link given with which the Investee Indian company has to create Entity Master if they are receiving foreign investment first time. Following details have to be filled in by the representative of Investee Indian company:-

  • Full name, address, mail ID, pan number, mobile number.
  • Investee Indian Company’s username
  • Investee Indian Company’s name
  • RBI’s jurisdictional regional office
  • Authority letter in a prescribed format

Once all the formalities are done, user id and password will be provided in the given mail ID.

CREATING BUSINESS USER

After the successful filing of all the details of entity master, the company has to create a business user through the given link. Business User is basically filled by a representative of the company and it is the short form. Following details have to be filled in:-

  • Full name, address, PAN number, mobile number, email ID
  • Investee Indian Company’s username.
  • The Bank to whom reporting is made details must be given of that Bank.
  • Name of the Investee Indian Company
  • A letter of authority in a prescribed form.

After completion of business user id and password will be provided mail ID.

FOR THE ISSUE OF SHARES FC-GPR FORM MUST BE FILED:-

Following documents are necessary to file this form within 30 days from the date of issue of shares:-

  • copy of the certificate of foreign inward remittance received from authorized Bank
  • authorized Bank must give a copy of KYC of foreign investor
  • certificate specifying acceptance of investment from persons residing outside India must be delivered from the company secretary:-
  • Provided that all the requirements of Companies Act 2013 have been taken care of.
  • Eligibility of the company to issue shares under the regulations
  • certificate mentioning the manner of receiving price of the shares to the foreign investors from Statutory Auditors
  • declaration of an Indian company from the authorized representative in a prescribed format.

CONCLUSION

To conclude, it can be said that if the Indian company fails to comply with the provisions mentioned above within a specified period, it will be disqualified from receiving any further Foreign Investments whether direct or indirect, under the Foreign Exchange Management Act 1999 and other related regulations.

 

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