Saturday, September 25, 2010

CAP on FDI in India and Procedures to be observed on receipt of FDI by an Investee Company:

CAP on FDI in India and Procedures to be observed on receipt of FDI by an Investee Company:


In majority of cases , 100% FDI is permitted without any prior approval from RBI or FIPB.

However , Approval is required for licensed industries such as hazardous chemicals and defense equipment .

Some Sectors have FDI cap which is detailed below :

Sector FDI Cap
• Private Banking 74%
• Telecom 74%
• Civil Aviation 49%
• Insurance 26%
• Single Brand Retail 51%
• News Media 26%
• Defense Sector 26%
  • Development of Townships , Housing , Built-up infrastructure and Construction -development projects- 100% 
Prohibited Sectors

• Agriculture with some exceptions
• Gambling & Lottery
• Retail (except Single Brand retail)
• REAL estate - Real Estate Business or Construction of Farm Houses
• Tobacco Products
Chitfund
Nidhi Company
Trading in Transferable Development Rights (TDRs).
Reserved For Government Sector only
• Atomic Energy
• Railways

Reporting of FDI to RBI –Procedures

In case of FDI only , allotment has to be made within 180 days of receipt of funds in India and investee company has to report to RBI within 30 days on receipt of funds. There is a separate form for this and it is known as “ Foreign Inward Remittance Reporting Form “. After filing this , RBI will allot a UIN (Unique Identification Number ) for each FDI reported to RBI. Allotment has to be made within 180 days of receipt of funds and Form FC-GPR is to be filed with your regional RBI within 30 days of allotment through your authorised dealer ( banker).
Along with the Form FC-GPR , the following certificates will have to be enclosed:
• A certificate from the Company Secretary of the company accepting investment from persons resident outside India certifying that
o All the requirements of the Companies Act, 1956 have been complied with;
o Terms and conditions of the Government approval, if any, have been complied with;
o The company is eligible to issue shares under these Regulations, and
o The company has all original certificates issued by Authorized Dealers in India evidencing receipt of amount of consideration.
• A certificate from Statutory Auditors or a Chartered Accountant indicating the manner of arriving at the price of the shares issued to the persons resident outside India.

In case of issue of bonus shares by an Indian company , even though there is no inflow of funds and but , the company has to file Form FC-GPR within 30 days of allotment of bonus shares to a foreign company through its authorised dealer.

R.V.Seckar

3 comments:

  1. Dear Readers,

    If you need further info or clarification on the subject, please revert to me at rvsekar2007@gmail.com

    Regards

    R.V.Seckar

    ReplyDelete
  2. Thank you for sharing. Not to many people in your position are so gracious. Your article was very poignant and understandable. It helped me to understand very clearly. Thank you for your help.
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    ReplyDelete
  3. Greetings of the Day !!!

    I read your article and it helped me to understand the provisions of FEMA very well. It was good to understand to learners very well.

    I have a query please help me out with your valuable advice.

    A Joint Venture company was incorporated under the Companies Act, 1956 with 50:50 percent of share capital held by foreign company and Indian company. and now the company increase the subscribed capital through Right Issue so that the paid up capital structure has changed to 80:20 percent, foreign company and Indian Company respectively.
    My query is
    Can the Joint Venture company known as the subsidiary company of the foreign company (as per the definition of Subsidiary Company in Companies Act,2013),or
    It will fall under the definition of Associates Company(as per Companies Act, 2013),or
    Any other provisions will applicable to the company.
    Please help me with your valuable advice.

    Thanks & Regards
    Bighnes Prasad
    Mob. No. 07277242677

    ReplyDelete