Merry Christmas and happy new year
The greatest gift you can give someone is your time. Because when you give your time, you are giving a portion of your life that you will never get back. Give your precious time to your valuable ones this Christmas and New Year. Welcome 2018 with all new hope and excitement. This edition, we will be discussing about FEMA amendments along with our usual Legal terms and News Bites related to notifications by MCA, SEBI, RBI, IT and GST.
Saranya Deivasigamani,
CEO
FEMA AMENDMENTS
The Reserve Bank of India (RBI) has simplified the Foreign Exchange Management (Transfer or Issue of Security by a Person Resident Outside India) Regulations, by putting all the 93 amendments under one notification, a move that will significantly make it easier for foreign investors to invest in the country. The new notification combines two regulations on foreign investments — one which is popularly called investment in an Indian company or a partnership, or in a limited liability partnership, or FEMA 20, and the other — FEMA 24, which is investment in a partnership firm. Another significant change is the introduction of a late submission fee that could allow an investor to regularise any contravention due to non-reporting, by paying the fee. The Regulations, 2017 will be effective from 7th November 2017 (Date of publication in the Official gazette) except proviso (ii) to sub-regulation 1 of regulation 10 of these Regulations and proviso (ii) to sub-regulation 2 of regulation 10 of these Regulations. As per the Regulations, except with the permission of RBI or as provided, an Indian entity or an investment vehicle, or a venture capital fund or a Firm or an Association of Persons or a proprietary concern shall not receive any investment in India from a person resident outside India or record such investment in its books. Any investment made by a person resident outside India shall be subject to the entry routes, sectoral caps or the investment limits, as the case may be, and the attendant conditions for such investment as prescribed. Restrictions have been put on citizen of Bangladesh or Pakistan or an entity incorporated in Bangladesh or Pakistan for making investment in India. Further, it has been provided that all transaction under these regulations shall be undertaken through banking channels in India and subject to payment of applicable taxes and other duties/ levies in India. Reporting requirements have also been prescribed for any Investment in India by a person resident outside India. The format, periodicity and manner of submission of such reporting shall be as prescribed by Reserve Bank in this regard. Investment by a person resident outside India is prohibited in lottery business, gambling and betting , Chit funds, Nidhi company, Trading in Transferable Development Rights (TDRs), Real Estate Business or Construction of Farm Houses, manufacturing of Cigars, cheroots, cigarillos and cigarettes, of tobacco or of tobacco substitutes, activities/ sectors not open to private sector investment e.g. atomic energy and railway operations, foreign technology collaboration in any form including licensing for franchise, trademark, brand name, management contract. Regulations, 2000 did not specify for computing limits as a percentage of the total paid-up equity capital on a fully diluted basis. Regulations, 2017 expressly provides in the definition of FDI, Foreign Portfolio Investment and in other relevant provisions to consider total equity paid up capital on a fully-diluted basis. Regulation, 2017 aligns the requirement to issue capital instruments with Act, 2013. Further, proviso has been inserted to the effect that prior approval of RBI will be required for payment of interest in case of any delay in refund of the amount. FDI Reporting requirements under Regulations, 2017 are as under:| Form | Purpose | To be filed with | Timeline |
| Advance Remittance Form (ARF): | Reporting of amount of consideration received for issue of capital instruments and where such issue is reckoned as Foreign Direct Investment. | Regional Office concerned of RBI under whose jurisdiction the Registered office of the company operates. | Within 30 days from date of receipt. |
| Form Foreign Currency- Gross Provisional Return (FC-GPR): | Reporting of capital instruments issued to a person resident outside India and where such issue is reckoned as Foreign Direct Investment. Issue of ‘participating interest/ rights’ in oil fields shall be reported Form FC-GPR. | Regional Office concerned of RBI under whose jurisdiction the Registered office of the company operates. | Within 30 days from date of issue of capital instruments/ participating interest/ rights’ in oil fields. |
| Annual Return on Foreign Liabilities and Assets (FLA): | Annual reporting by Indian company which has received FDI or LLP which has received capital contribution in the previous year(s) including the current year. | RBI (done vide email). | On or before the 15th day of July of each year. |
| Form Foreign Currency-Transfer of Shares (FC-TRS) | For following transfers:
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Authorised Dealer Bank | Within sixty days of transfer of capital instruments or receipt / remittance of funds whichever is earlier. In case of transfer as per Regulation 10 (9), reporting to be done on receipt of every tranche of payment. |
| Form Employees’ Stock Option (ESOP): | An Indian company issuing employees’ stock option to person’s resident outside India. | Regional Office concerned of RBI under whose jurisdiction the Registered office of the company operates. | Within 30 days from the date of issue of employees’ stock option. |
| Form Depository Receipt Return (DRR): | Reporting of issue/ transfer of depository receipts issued in accordance with the Depository Receipt Scheme, 2014 by the Domestic Custodian. | RBI | Within 30 days of close of the issue. |
| Form LLP (I): | LLP receiving amount of consideration for capital contribution and acquisition of profit shares. | Regional Office of the RBI under whose jurisdiction the Registered Office of the LLP is situated. | Within 30 days from the date of receipt of the amount of consideration. |
| Form LLP (II): | Disinvestment/ transfer of capital contribution or profit share between a resident and a non-resident (or vice versa). | Authorised Dealer Bank | Within 60 days from the date of receipt of funds. |
| LEC(FII): | Purchase/ transfer of capital instruments by FPIs to be reported by Authorised Dealer Category I banks. | RBI | No timeline specified. |
| LEC(NRI): | Purchase/ transfer of capital instruments by Non-Resident Indians or Overseas Citizens of India to be reported by Authorised Dealer Category I banks. | RBI | No timeline specified. |
| Downstream Investment (Form DI) | An Indian company making downstream investment in another Indian company which is considered as indirect foreign investment for the investee company. | Secretariat for Industrial Assistance, DIPP | Within 30 days of such investment and, even if capital instruments have not been allotted along with the modality of investment in new/existing ventures (with/ without expansion programme. |
| Form Convertible Notes (CN): | Issue of CN to a PROI by an Indian startup company; or Transfer of CN to or from PROI. | Authorised Dealer bank | Within 30 days of such transfer. |
Legal Term
Sine quo non
An essential condition; a thing that is absolutely necessary.
MCA Updates
- Extension of last date for filing CRA-4 without additional fees extended till 31st December 2017.
SEBI Updates
- Categorization and Rationalization of Mutual Fund Schemes.
RBI Updates
- Investment by Foreign Portfolio Investors (FPI) in Government Securities Medium Term Framework – Review.
- Conversion of debt into equity- Review.
Income Tax Updates
- No major notifications.
GST Updates
- No major notifications.
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