Wednesday, February 24, 2016

Reporting of FC-TRS (Transfer of shares) through online through E-Biz Portal


Reporting of FC-TRS (Transfer of shares) through online through E-Biz Portal

Description:-
Foreign investors can invest in Indian companies by purchasing / acquiring existing shares from Indian shareholders or from other non-resident shareholders. General permission has been granted to non-residents / NRIs for acquisition of shares by way of transfer in the following manner.
1.     Transfer of shares by a Person resident outside India
a.     Non-Resident to Non-Resident (Sale / Gift)
Note: Transfer of shares from or by erstwhile OCBs would require prior approval of the Reserve Bank of India.
b.     NRI to NRI (Sale / Gift)
c.      Non-Resident to Resident(Sale / Gift)
Note: Transfer of shares from a Non-Resident to Resident other than under SEBI regulations and where the FEMA pricing guidelines are not met would require the prior approval of the Reserve Bank of India.
2.     Transfer of shares/convertible debentures from Resident to Person Resident outside India
3.     Transfer of Shares by Resident which requires Government approval
4.     Prior permission of the Reserve Bank in certain cases for acquisition / transfer of security
5.     Escrow account for transfer of shares





Reporting of FDI for Transfer of shares route
        i.            The actual inflows and outflows on account of such transfer of shares shall be reported by the AD branch in the R-returns in the normal course.
      ii.            Reporting of transfer of shares between residents and non-residents and vice- versa is to be made in Form FC-TRS. The Form FC-TRS should be submitted to the AD Category  I bank, within 60 days from the date of receipt of the amount of consideration. The onus of submission of the Form FC-TRS within the given timeframe would be on the transferor / transferee, resident in India.












You can download the copy of the FC-TRS from the following link:
    iii.            The sale consideration in respect of equity instruments purchased by a person resident outside India, remitted into India through normal banking channels, shall be subjected to a KYC check (Annex 9-ii) by the remittance receiving AD Category- I bank at the time of receipt of funds. In case, the remittance receiving AD Category- I bank is different from the AD Category - I bank handling the transfer transaction, the KYC check should be carried out by the remittance receiving bank and the KYC report be submitted by the customer to the AD Category -I bank carrying out the transaction along with the Form FC-TRS.
    iv.            The AD bank should scrutinize the transactions and on being satisfied about the transactions should certify the form FC-TRS as being in order.
      v.            The transferee/his duly appointed agent should approach the investee company to record the transfer in their books along with the certificate in the Form FC-TRS from the AD branch that the remittances have been received by the transferor/payment has been made by the transferee. On receipt of the certificate from the AD, the company may record the transfer in its books.
In case of transfer of shares by way of sale from resident to non-resident/ non-resident to resident, the resident transferor / transferee / Investee Company/ NRI transferor / Non Resident transferor should file FC-TRS within 60 days from receipt of funds
In terms of Section 2 (ze) of Foreign Exchange Management Act, 1999 "Transfer" includes sale, purchase, exchange, mortgage, pledge, gift, loan or any other form of transfer of right, title, possession or lien.
Please click on the link "Master Circular for Foreign Investment in India"for further information on Foreign Investments in India issued by RBI
Prerequisites:-
Before reporting the transaction, applicant needs to obtain following documents in soft copy:
  • Certificate indicating fair value of shares from a Chartered Accountant / SEBI registered Category I Merchant Banker.
  • Copy of Broker's note if sale/ purchase is made on Stock Exchange.
  • Declaration from the NR buyer to the effect that he is eligible to acquire shares / compulsorily and mandatorily convertible preference shares / debentures/others under FDI policy and the existing sectoral limits and conditionality (such as minimum capitalization norms, etc) and Pricing Guidelines have been complied with
  • Declaration from the FII/sub account to the effect that the individual FII / Sub account ceiling as prescribed has not been breached
  • Extracts of Share Purchase Agreement (SPA) containing:
    • Name of the buyer and seller
    • Name of the investee company
    • No. of shares to be transferred
    • Price at which they are transferred
    • Mode of transfer
    • Date of transfer
    • Any other relevant information
  • If the sellers are NRIs/ erstwhile OCBs, the copies of RBI approvals, if applicable, evidencing the shares held by them on repatriation/non-repatriation basis
  • No Objection/Tax Clearance Certificate from Income Tax Authority/ Chartered Accountant
  • Approval letter from RBI / FIPB
  • Power of attorney (if signatory is agent)
Payment Details:-
There is no payment required to avail this service on eBiz.
Service Window:-
Applicant can apply for Reporting of FC-TRS at any time of the year.
Processing Steps:-
Application, once submitted will flow through following status before request is completed. Applicant can use this information to track status of his application.
1.     Submitted
2.     Resubmission Required*
3.     Application Approved
4.     Application Rejected*
5.     Clarification Required*
Note: Items marked with * are states in certain exception flows. Your application may not necessarily pass through these states during processing.
Department
Foreign Exchange Department
Reserve Bank of India
(www.rbi.org.in)
Contact Department
Address:
Reserve Bank of India,
Central Office
Fort
Mumbai - 400 001
India
Telephone Nos: +91 22 - 22601000
Fax: +91 22 - 22665330
Website Address: www.rbi.org.in
General Problem faced after submitting FCGPR thru ebiz:
After submitting FCGPR thru ebiz portal, RBI can raise the following queries:

1) RBI need the acknowledgment letter for UIN generated thru ebiz portal, even though there is no mandatory field to attach the same. In case of multiple tranches of inward remittance, take print out of all acknowledgment and then scan it in one pdf file. There is only one additional option for attachment (apart from mandatory attachment) so if u received money in three tranches, u can attach only one acknowledgement if u r planning to attach acknowledgement separately for each tranches (after filing advance reporting).

2) RBI do ask for clarification that the conversion of Preference Shares or Debentures will not take place below value price as per valuation report. In that case, certificate required from company means that company need to give declaration and not any kind of certificate to be issued.

3) Whenever RBI ask for certificate from PCS and from Company for any clarification, it means only certificate to be issued by PCS and company need to give declaration.

Compliance pertaining to notice / mail received from RBI is much Important.

Monday, February 22, 2016

The Detailed Procedure for online submission of FCGPR

The Detailed Procedure for online submission of FCGPR
Contributed by CS Shilpi Varshney

For registering - https://www.ebiz.gov.in/homebook

For FC-GPR - You have to click at https://www.ebiz.gov.in/fc-gpr-central

Reporting of Advance Foreign Remittance to RBI-https://www.ebiz.gov.in/arf-central

1- Fill in the basic details on ebiz portal including mail id and phone no. Once all details are updated and confirmed, you will get a mail for activation of the account on your registered mail id. Click activate and your account will be Active on ebiz portal. 
2- Login through account and now register the organisation by giving basic details. Snapshots enclosed. 
3- Select "Reporting of FCGPR on home page on ebiz. 
4-Download empty form and fill in the details. Attach CS Certificate, Valuation report, FIRC and BR for allot. 
5- Attach DSC to the form and save the form in the name- xyz-_IFSC Code of the AD bank. 
Note- You don’t need to register DSC on ebiz portal as we do on MCA. Here signed form is enough. 
6-Login again. 
7- Click on Submit forms. 
8-Select Region - CENTRAL

             Service Name- Submission of FC GPR Central
             Organisation Name - The name of your company which you registered in Step 2 will come in drop down. 
9- Select the form and click submit. 
10- Your form will be submitted and you will be allotted an application number, using which you can check the status of your submitted form. 

If you file FC-GPR through online beyond 30 days of the allotment of shares to FDI investor , RBI online form will come with the message “ form being filed beyond 30 days and will not allow you to proceed further. You have to attach an attachment stating the reason for late filing.

Friday, February 12, 2016

Company Incorporation procedure in UAE


Company Incorporation procedure
In UAE
Article Written by CS Shika  Mehra
Step by step process and does not require endless visits to a lawyer at every juncture of company formation. The procedures for incorporation in UAE are recognized to be a legal one and it includes the registration of company name and licensing of business activity.
LICENSING
 
The basic requirement for all business activity in Dubai is one of the following three categories of licenses:
1. Commercial licenses covering all kinds of trading activity;
2. Professional licenses covering professions, services, craftsmen and artisans;
3. Industrial licenses for establishing industrial or manufacturing.
 
OWNERSHIP REQUIREMENTS
Fifty-one per cent participation by UAE nationals is the general requirement for all UAE established companies except:
  • Where the law requires 100% local ownership;
  • In the Jebel Ali Free Zone;
  • In activities open to 100% AGCC ownership; ( Gulf cooperation council)
  • Where wholly owned AGCC companies enter into partnership with UAE nationals;
  • In respect of foreign companies registering branches or a representative office in Dubai;
  • In professional or artisan companies where 100% foreign ownership is permitted.
 
BUSINESS INCORPORATION TYPES:
1. Limited Liability Company: The most common form of business in the UAE. Dubai requires a share capital of AED. 300,000 (Rs. 51, 81,000/-) ( 1 AED = Rs.17.27/-) but this varies by Emirate, by Free Zone, and by activity. e.g. The new procedures for incorporation in UAE for Real Estate brokers who wish to rent out property in their own name is to now give a bank guarantee of around AED 1 million.
An UAE national, ‘Sponsor’ must own 51% of the shares of this company – even though he may not invest any funds into the venture. An agreement with him can be reached about the profit sharing percentage or the fee he will be entitled to instead.
2. Joint Venture: These companies are basically formed to share the profits or losses of another venture which will be run by one or more of the partners. This maybe a written or verbal contract and need not be notarized.
3. Professional Company: These are partnership companies between members of the same profession to supply a professional service e.g. accounting, educational services, medical and so on.
4. Sole Proprietorship firm to Practice a Profession: For a foreign professional investor, the procedures for incorporation in UAE allow him / her to form such a firm without any UAE national being a ‘partner’. However, a UAE national must be taken on as a fee based ‘Service Agent’ instead of a ‘Sponsor’ to sign important documents such as applications for visas and practicing licenses.
 
FREE ZONE INCORPORATIONS
Free Zones offer the following incentives to the investors.

1.100% foreign ownership
2. No corporate taxation for 50 years; renewable for an additional 50 years.
3. Freedom to repatriate capital and income
4. No personal income tax.
5. Full exemption from import duties.
6. No currency restrictions.
7. No bureaucratic red-tapism.
8. No recruitment problems.
9. Modern efficient communication.
10. State of the art infrastructure.
11. Abundant energy

LIST OF FREE ZONES:
There are more than 38 Free Zones operating in UAE.
1) Abu Dhabi Airport Free Zone (ADAFZ)
2) ADPC – Khalifa Port and Industrial Zone (KPIZ)
3) Umm Al Quwain Free Trade Zone (UAQFTZ)
4) Ajman Free Zone (AFZ)
5) Dubai Academic City
6) Dubai Airport Free Zone (DAFZ)
7) Dubai Biotechnology & Research Park (DuBiotech)
8) Dubai Car and Automotive City Free Zone (DUCAMZ)
9) Dubai Gold and Diamond Park
10) Dubai Healthcare City
11) Dubai Industrial City (DIC)
12) Dubai International Academic City
13) Dubai International Financial Centre (DIFC)
14) Dubai Internet City
15) Dubai Knowledge Village
16) Dubai Logistics City
17) Dubai Media City
18) Dubai Multi Commodities Centre (DMCC Free Zone)
19) Dubai Outsource Zone
20) Dubai Silicon Oasis
21) Dubai Studio City
22) Dubai Techno Park
23) Dubai Technology and Media Free Zone
24) Economic Zones World
25) Fujairah Creative City
26) Fujairah Free Zone
27) Hamriyah Free Zone
28) Higher Corporation for Specialized Economic Zones
29) Industrial City of Abu Dhabi
30) International Media Production Zone
31) Jebel Ali Free Zone
32) Jumeirah Lakes Towers Free Zone
33) RAK Investment Authority Free Zone
34) Ras Al Khaimah Free Trade Zone
35) Ras Al Khaimah Media Free Zone
36) Sharjah Airport International Free Zone
37) Twofour54
38) U.S.A. Regional Trade Center (USARTC) Free Zone
FREE ZONES UNDER CONSTRUCTION
1) Dubai Maritime City
2) Dubai Carpet Free Zone
3) Dubai Auto Parts City
4) Heavy Equipment and Trucks Zone
5) Mohammad Bin Rashid Technology Park
6) Dubai Flower Center
7) Dubai Textile Village
8) International Humanitarian City
9) Dubai International Arbitration Center
PROCEDURE OF INCORPORATING COMPANY IN FREE ZONE

1. Determine the free zone license type.
2. Confirm the activities.
3. Legal structure of the company.
4. Confirm the business facilities required.
5. Verify the fees and other charges.
6. Submit the application form and other documents.
7. Secure the preliminary approvals.
8. Payment of the fees.
9. Sign the agreements and other legal documents.
10. Receive your business license and other certificates or documents.
OFFSHORE COMPANY:
Offshore companies can feature in most financial planning scenarios when trying to mitigate tax exposure and/or with regards to passing assets on to beneficiaries freely in the event of death. Sometimes referred as Special Purpose Vehicles (SPV), there is an array of scenarios where an offshore company becomes invaluable and this article relates to their uses when buying property.

The offshore possibility has basically been set up to cater for companies who need to have a regional “tax relief-invoicing-facility” – There is no minimum capital required and also no need to set up an actual office facility. The off-shore regulations have been issued according to international standards and the company will have to register minimum 2 directors, keep financial records and issue an annual financial report audited by a professional auditing company approved by JAFZA/RAKFTZ.

 

ALL ABOUT ECB REGULATIONS, FDI in LLPs, OPTIONALITY CLAUSE in FDI REGULATION, PARTLY PAID SHARES AS FDI , ISSUING NCPS/NCD/RPS AS BONUS SHARES, ISSUE OF WARRANTS , ISSUING NCPS/NCD/RPS AS BONUS SHARES, ISSUE OF SHARES AGAINST LEGITIMATE DUES


ALL ABOUT ECB REGULATIONS, FDI in LLPs, OPTIONALITY CLAUSE in FDI REGULATION, PARTLY PAID SHARES AS FDI , ISSUING NCPS/NCD/RPS AS BONUS SHARES, ISSUE OF WARRANTS , ISSUING NCPS/NCD/RPS AS BONUS SHARES,  ISSUE OF SHARES AGAINST LEGITIMATE DUES
 
·        ECBs governed by clause (d) of sub-section 3 of section 6 of the Foreign Exchange Management Act,   1999
·        (FEMA). Notifications No. 3, 120 & 8
 
ECB
v                                          Definition of ECB - Commercial loans raised by eligible resident entities from recognised non-resident entities and should conform to parameters such as minimum maturity, permitted and non-permitted end-uses, maximum all-in-cost ceiling, etc.
v                                          Various Parameters
 
v                                          Whether they apply individually or in tot0 ?
 
FORMS OF ECB
·        Loans including bank loans
·        Securitized instruments (e.g. floating rate notes and fixed rate bonds, non-convertible, optionally convertible or partially convertible preference shares / debentures)
·        Buyers’ Credit
·        Suppliers’ Credit
·        Foreign Currency Convertible Bonds (FCCBs) Financial Lease and
·         Foreign Currency Exchangeable Bonds (FCEBs)
                              

ECB FRAMEWORK & ROUTES
 
·        Track I : Medium term foreign currency denominated ECB with minimum average maturity of 3/5 years.
 
·        Track II : Long term foreign currency denominated ECB with minimum average maturity of 10 years.
 
·        Track III : Indian Rupee (INR) denominated ECB with minimum average maturity of 3/5 years.
 
·        Two Routes – Automatic & Approval
 
           TRACK I – ELIGIBLE BORROWERS
 
·        Companies in manufacturing and software development sectors.
 
·        Shipping and airlines companies.
 
·        Small Industries Development Bank of India (SIDBI).
 
·        Units in Special Economic Zones (SEZs).
 
·        Export Import Bank of India (Exim Bank) (only under the approval route).
             TRACK I RECOGNISED LENDERS
 
·        International banks.
·        International capital Markets
·        Multilateral financial institutions / regional financial institutions and Government owned (either wholly or partially) financial institutions.
·        Export credit agencies.
·        Suppliers of equipment.
·        Foreign equity holders.
 
·        Overseas long term investors
 
·        Overseas branches / subsidiaries of Indian banks
                   TRACK I – MINIMUM AMP
·        3 years for ECB up to USD 50 million or its  equivalent.
 
·        5 years for ECB beyond USD 50 million or its equivalent.
                     TRACK I – ALL IN COST
It includes rate of interest, other fees, expenses, charges, guarantee fees whether paid in foreign currency or Indian Rupees (INR) but will not include commitment fees, pre-payment fees / charges, withholding tax payable in INR Should not exceed:
 
·        For ECB with minimum average maturity period of 3 to 5 years - 300 basis points per annum over 6 month LIBOR or applicable bench mark for the respective currency.
 
·        For ECB with average maturity period of more than 5 years - 450 basis points per annum over 6 month LIBOR or applicable bench mark for the respective currency.
                          TRACK I – END USE
Permissible end uses include new project, import of capital goods, local sourcing of capital goods, modernisation, ODI, etc.
             TRACK II - ELIGIBLE BORROWERS
·        All entities listed under Track I. Companies in infrastructure sector. Holding companies.
 
·        Core Investment Companies (CICs).
·        Real Estate Investment Trusts (REITs) and Infrastructure Investment Trusts (INVITs) coming under the regulatory framework of the Securities and Exchange Board of India (SEBI).
TRACK II RECOGNISED LENDERS
·        All entities listed under Track I but for overseas branches / subsidiaries of Indian banks.
TRACK II – MINIMUM AMP
·        10 years irrespective of the amount of borrowing
TRACK II – ALL IN COST
 
·        The maximum spread over the benchmark will be 500 basis points per annum.
·        Remaining conditions such as penal interest will be as given under Track I.
 
TRACK II – END USE
·        The ECB proceeds can be used for all purposes excluding the following:
 
·        Real estate activities Investing in capital market
 
·        Using the proceeds for equity investment domestically
 
·        On-lending to other entities with any of the above objectives
 
·        Purchase of land
 
·        Holding companies can also use ECB proceeds for providing loans to their infrastructure SPVs.
TRACK III - ELIGIBLE BORROWERS
 
·        All entities listed under Track II.
 
·        All Non-Banking Financial Companies (NBFCs).
 
·        NBFCs-Micro Finance Institutions (NBFCs-MFIs), Not for Profit companies registered under the Companies Act, 1956/2013, Societies, trusts and cooperatives (registered under the Societies Registration Act, 1860, Indian Trust Act, 1882 and State-level Cooperative Acts/Multi-level Cooperative Act/State-level mutually aided Cooperative Acts respectively), Non-Government Organisations (NGOs) which are engaged in micro finance activities.
 
·        Companies engaged in miscellaneous services viz. research and development (R&D), training (other than educational institutes), companies supporting infrastructure, companies providing logistics services.
 
·        Developers of Special Economic Zones (SEZs)/ National Manufacturing and Investment Zones (NMIZs).
TRACK III RECOGNISED LENDERS
 
·        All entities listed under Track I but for overseas branches / subsidiaries of Indian banks. In case of NBFCs-MFIs, other eligible MFIs, not for profit companies and NGOs, ECB can also be availed from overseas organisations and individuals
TRACK III – MINIMUM AMP
 
·        3 years for ECB up to USD 50 million or its equivalent.
 
·        5 years for ECB beyond USD 50 million or its equivalent.
 
TRACK III – ALL IN COST
·        The all-in-cost should be in line with the market conditions.
 
TRACK III – END USE
 
·        Eligible end uses for NBFCs
 
·        Eligible end use for Developers of SEZs/ NMIZs.
 
·        Eligible end uses for NBFCs-MFI, other eligible MFIs, NGOs and not for profit companies registered under the Companies Act, 1956/2013
 
·        For other eligible entities under this track, the ECB proceeds can be used for all purposes excluding the following:
 
·        Real estate activities Investing in capital market
 
·        Using the proceeds for equity investment domestically;
 
·        On-lending to other entities with any of the above objectives;
 
·        Purchase of land
PERMISSIBLE AMOUNT
·        IN A FY under automatic route
 
·        Up to USD 750 million or equivalent for the companies in infrastructure and manufacturing sectors;
 
·        Up to USD 200 million or equivalent for companies in software development sector;
 
·        Up to USD 100 million or equivalent for entities engaged in micro finance activities; and
 
·        Up to 500 million or equivalent for remaining entities.
 
RUPEE DENOMINATED BONDS RAISED OVERSEAS
 
·        Form of borrowing
·        Available and Routes
·        Minimum Maturity
·        Eligible entities
·        Recognised Lenders
·        All-in-cost
·     Permissible End uses
FDI REGULATION
OPTIONALITY CLAUSE
 
Obligation for buy-back of securities from the investor at the price prevailing/value determined at the time of exercise of the optionality so as to enable the investor to exit without any assured return
·        Minimum lock-in period Exit as under:
·        Listed company- market price prevailing at the recognised stock exchanges;
·        Unlisted company - at a price not exceeding that arrived at on the basis of Return on Equity (RoE) as per the latest audited balance sheet.
·        RoE = Profit After Tax / Net Worth; Net Worth would include all free reserves and paid up capital.
·        Investments in CCDs and CCPS of an investee company may be transferred at a price worked out as per any internationally accepted pricing methodology at the time of exit duly certified by a Chartered Accountant or a SEBI registered Merchant Banker.
FDI IN LLP
·        Under Approval Route for LLPs formed and registered under the Limited Liability Partnership Act, 2008
Eligible Investors
 
·        Only in sectors where 100% FDI is allowed other than those linked to performance linked conditions
 
·        Pricing guidelines
·        Mode of Payment
 
·        Reporting in Form LLP – I and Form LLP-II
·        No downstream investment by LLPs
·        No ECBs
PARTLY PAID SHARES AS FDI
·        Pricing shall be determined upfront
 
·        25% of the total consideration amount ( including share premium, if any), shall be received upfront balance consideration within a period of 12 months. The time period shall not be insisted upon where the issue size exceeds Rs. 500 crore and the issuer complies with Regulation 17 of the SEBI (ICDR) Regulations regarding monitoring agency.
 
·        For unlisted Indian company, the balance consideration amount can be received after 12 months where the issue size exceeds rupees five hundred crores if a monitoring agency is appointed.
WARRANTS
·        Pricing of the warrants and price/ conversion formula shall be determined upfront
 
·        25% of the consideration amount shall also be received upfront.
 
·        Balance consideration towards fully paid up equity shares shall be received within a period of 18 months The price at the time of conversion should not in any case be lower than the fair value worked out, at the time of issuance of such warrants, in accordance with the extant FEMA Regulations and pricing guidelines stipulated by RBI from time to time.
ISSUE OF SHARES AGAINST LEGITIMATE DUES
 
Under automatic route for dues remittance of which does not require prior permission of the GoI or RBI subject to:
 
The equity shares shall be issued in accordance with the extant FDI guidelines on sectoral caps, pricing guidelines etc. (Import dues deemed as ECB or trade credit or payable against import of second hard machinery under GoI) The issue of equity shares shall be subject to tax laws as applicable to the funds payable and the conversion to equity should be net of applicable taxes.
ISSUING NCPS/NCD/RPS AS BONUS SHARES
 
An Indian company may issue non-convertible/redeemable preference shares or debentures to non-resident shareholders, including the depositories that act as trustees for the ADR/GDR holders, by way of distribution as bonus from its general reserves under a Scheme of Arrangement approved by a Court in India under the provisions of the Companies Act, as applicable, subject to no-objection from the Income Tax Authorities.
OTHER RELAXATIONS
 
·        For a liability to be converted which is denominated in FCY (ECB, import of capital goods, etc.), the exchange rate prevailing on the date of the agreement has to be taken.
 
·        Revision in Form FC-GPR to capture brownfield/greenfield investment
 
·        Reporting mechanism for Transfer of Shares Sector specific liberalization for Defense, Railways and Construction Development, Manufacturing of Medical Devices and Insurance