REPORTING FDI ( FOREIGN DIRECT INVESTMENTS) TO RBI UNDER SMF AND FIRMS

REPORTING OF FOREING INVESTMENTS TO RBI UNDER SMF AND FIRMS

Reserve Bank of India has issued a Circular dated June 7, 2018- introducing Single Master Form [SMF] with an objective of integrating the existing reporting norms for various types of foreign investment in India. Further, RBI vide notification dated August 31, 2018, has directed AD Banks that all the Foreign Investment reporting would be made on FIRMS RBI website in Single Master Form [SMF] w.e.f. September 1, 2018.

INTRODUCTION:

As per Regulation 2(xviii) of the FEMA 20(R) - ‘Foreign Investment’ means any investment made by a person resident outside India on a repatriable basis in capital instruments of an Indian company or to the capital of an LLP; 

As per Regulation 2(xvii) of the FEMA 20(R) “Foreign Direct Investment? (FDI) means investment through capital instruments by a person resident outside India in an unlisted Indian company, or in 10 percent or more of the post-issue paid-up equity capital on a fully diluted basis of a listed Indian company;”

Single Master Form subsumed 9 reporting Forms, such as FCGPR, FC-TRS, Form LLP-I, Form LLP-II, Form ESOP, Form CN, Form ODI and Form InVi.

S.N0	Type of Form	Full Form	Applicability Form
01	Form- FC-GPR	Foreign Currency – Gross Provisional Return	Issue of capital instruments by an Indian company to a person resident outside India
02	Form- FC-TRS	Foreign Currency – Transfer of Shares	Transfer of capital instruments between a person resident outside India and a person resident in India
03	Form LLP-I	Limited Liability Partnerships-I	Foreign direct investment in an LLP through capital contribution and profit shares;
04	Form LLP-II	Limited Liability Partnerships-II	Disinvestment or transfer of capital contribution and profit shares in an LLP
05	Form ESOP	Employees’ stock option Scheme	Issue of employee stock options, sweat equity shares or shares against the exercise of employee stock options by an Indian company to an employee resident outside India
06	Form CN	Convertible Notes	Issue or transfer of convertible notes;
07	Form DRR	Depository Receipts	Issue or transfer of depository receipts;
08	Form DI	Downstream Investment	Reporting of downstream investment or indirect foreign investment in a company or an LLP; and
09	Form InVi	Investment Vehicle	Reporting of investment by a person resident outside India in an investment vehicle

           

Procedure to be followed for reporting of SMF

Step 1:  Register as Entity User

·        Creation of Entity Master is the first step towards reporting under Single Master Form.

The RBI portal for registration in Entity Master can be accessed here: https://firms.rbi.org.in

·        To register on Entity Master, the reporting Indian entity must authorize a single person to act as Entity User?, by issuing an authority letter in his favor.

·         

·        Please refer to the format of authority letter at the end of the User Manual. The Entity User will be solely responsible for the information reported and shall be the point of contact for RBI, w.r.t. foreign investment in the entity.

Step 2:  Register as Business User

·        The Business User will register itself on FIRMs and select the IFSC code of the bank which would approve the eKYC and the reporting would be made in SMF. In case the IFSC details are changed.e BU wishes to submit the reporting to another branch or another bank, the entity being the same, he/she needs to repeat the registration process for a Business user with the new IFSC code and obtain separate Login.

·         

1.      Go to the FIRMS website at https://firms.rbi.org.in

2.  At the Login box, click on the Registration form for New Business User.

3.  Fill up the details in the popped up registration form for BU;

4.  Click Submit button. In case any error is displayed, rectify the same and click the Submit button.

5.  A Message “Record Saved Successfully” is displayed at the top of the Login box.

DOCUMENTS REQUIRED TO BE ATTACHED TO THE SMF
S.NO	Type of Form	When to File	Attachments	Remarks
1	For FCGPR	Within 30 days from the date of allotment	a. FIRC	File Size Allowed 1 MB
			b. KYC	File Size Allowed 1 MB
			c. Valuation Report	File Size Allowed 1 MB
			d. CS Certificate	Merge into one file & File size shall not exceed 1 MB
			e. Board Resolution
			f. Terms of CCPS & Shareholding Pattern
			g. Declaration Letter-By authorized a representative of Indian Company
			h. Reason for the delay- If any
			i. Debit advice note or Swift Message- In case of Excess amount received
			In case the inward remittance received from a different person [i.e from other than Investor]    following documents required to be attached :	File Size Allowed 1 MB
			(a) KYC reports of both the remitter and the beneficial owner.
			(b) A no-objection certificate (NOC) from the remitter for issuing capital instruments to the beneficial owner mentioning their relationship.
			(c) A letter from the beneficial owner explaining the reason for the remitter making remittance on its behalf.
			(d) A copy of agreement/board resolution from the investee company for issuing capital instruments to a person other than from who the remittance has been received.
2	For FC-TRS	Within sixty days of the transfer of capital instruments or receipt/ remittance of funds[ whichever is earlier.]	a. FIRC	File Size Allowed 1 MB
			b. KYC	File Size Allowed 1 MB
			c. Valuation Report	File Size Allowed 1 MB
			d. Buyer Consent Letter	Merge into one file & File size shall not exceed 1 MB
			e. Seller Consent Letter
			f. FEMA Declaration & Other attachments
			g. Declaration by Auth Representative- i.e Director
			h. Debit Authorization Letter if any
			i. Declaration by the non-resident transferor or transferee
			j. Reason for Delay - If any
3	Form LLP-1	within 30 days from the date of receipt of the amount of consideration	a. FIRC	File Size Allowed 1 MB
			b. KYC	File Size Allowed 1 MB
			c. Declaration Letter-By authorized a representative of Indian Company	File Size Allowed 1 MB
			d. Other Relevant Attachments if any
4	Form LLP-2	within 60 days from the date of receipt of funds	a. FIRC	File Size Allowed 1 MB
			b. KYC	File Size Allowed 1 MB
			c. Valuation Certificate	File Size Allowed 1 MB
			d. Declaration Letter-By authorized a representative of Indian Company	File Size Allowed 1 MB
			e. Other Relevant Attachments if any
5	Form CN	within 30 days of issue/ transfer	a. FIRC	File Size Allowed 1 MB
			b. KYC	File Size Allowed 1 MB
			c. Declaration Letter-By authorized a representative of Indian Company	File Size Allowed 1 MB
			d. Other Relevant Attachments if any
6	Form ESOP	within 30 days from the date of issue	a. CS Certificate	File Size Allowed 1 MB
			b. Declaration Letter-By authorized a representative of Indian Company	File Size Allowed 1 MB
			c. Other Relevant Attachments if any
7	Form DRR	Within 30 days of close of the issue/ program.	a. Declaration Letter-By authorized a representative of Indian Company	File Size Allowed 1 MB
			b. Other Relevant Attachments if any
8	Form DI	Within 30 days from the date of allotment of capital instruments.	a. Declaration Letter-By authorized a representative of Indian Company	File Size Allowed 1 MB
			b. Other Relevant Attachments if any

Delays in Reporting:

a) The person/ entity responsible for filing the reports provided in Part IV of this Master Directionshall be liable for payment of late submission fee (LSF) for any delays in reporting.

(i) The LSF shall be applicable to the transactions undertaken on or after November 7, 2017.

(ii) The payment of LSF is an option for regularising reporting delays without undergoing the compounding procedure.

b) Calculation and Payment of LSF:

(i) Where LSF is required to be paid, the reports shall be, wherever necessary, conditionally acknowledged subject to payment of the LSF. The final acknowledgment/ communication, wherever applicable, shall be given after the late submission fee is paid by the applicant.

(ii) The amount of LSF will be as per the following Matrix:

Amount involved in reporting	Late Submission	Maximum amount of LSF
(in Rs.)	Fee (LSF) as % of	Applicable
	amount involved *
Up to 10 million	0.05 percent	Rs.1 million or 300% of the
		amount involved, whichever
		is lower
More than 10 million	0.15 percent	Rs.10 million or 300% of the
		amount involved, whichever
		is lower

* The % of LSF will be doubled every twelve months the floor (minimum applicable amount) for LSF will be Rs 100

(iii) For calculating the LSF amount, the period of contravention shall be considered proportionately {(approx. rounded off to next higher month ÷ 12) X amount for 1 year}.

(iv) For the purpose of calculation, “months” shall include Sundays/ Holidays

(v) For the purpose of calculation, the period shall begin from the day after the 30th day (from the date of receipt of funds/ allotment or transfer of shares) and end on the day preceding the day on which the transaction report is received in the Reserve Bank The date of reporting to the AD bank shall be deemed to be the date of reporting to the Reserve Bank provided the prescribed documentation is complete in all respects.

(vi) In case the reporting form (whether in physical or electronic form) is incomplete then the delay will continue till such time the form is received completely in all respects.

(vii) The applicant cannot claim a refund in any manner for the amount already deposited as LSF. It will, therefore, be in the applicant’s own interest to ensure compliance with the reporting norms and timelines.

The LSF may be paid by way of a demand draft drawn in favor of “Reserve Bank of India” and payable at the Regional Office concerned.

Courtesy : CSThukaram Jadhav

RBI NOTIFICATION-ALL NEW FILINGS FOR FC-GPR , FC-TRS , LLP-I , LLP-II AND CN WILL BE IN SMF ONLY W.E.F SEPTEMBER 01, 2018. FC-GPR AND FC-TRS SHALL NOT BE FILED ON EBIZ

RBI NOTIFICATION-ALL NEW FILINGS FOR FC-GPR , FC-TRS , LLP-I , LLP-II AND CN WILL BE IN SMF ONLY W.E.F SEPTEMBER 01, 2018. FC-GPR AND FC-TRS SHALL NOT BE FILED ON EBIZ

PENDING FCGPR/ FCTRS IN e-biz

As you aware , RBI with the objective of integrating extant reporting structure of various types of foreign investment in India would introduce a Single Master Form (SMF) which would be available online from September 1 ,2018.

Hitherafter FCGPR –FCTRS has to be filed in Form SMF

Hitherafter , all FEMA  compliances and reporting to be made through RBI website  https://firms.rbi.org.in    in Form SMF.

NO MORE AVAILABILITY OF e-biz PORTAL FOR FILING

At present , FCGPR / FCTRS filing is carried through on e-biz portal. Due to launching of SMF portal on 1 Septemeber ,2018 , e-biz portal would no longer be available for filing.  All the Banks are advised to all filings pending for disposal in the e-biz portal at the earliest on or before  20 Septemebr 2018.  All Banks should send a weekly report to this effect  has to be forwarded to Regional Office , RBI , FED giving detaisl fo cases pending and cases cleared , for monitoring.

ALL PENDING FILING CASES

Further , it is also observed that  many cases are pending at the company / entity level for resubmission with clarification or additional documents. You are therefore , advised to immediately inform all your clients who have received foreign investment to ensure that cases where resubmission was to be done should be done within one week with complete documents failing which it would not be possible for us to treat the FCGPR as filed.

To Provide Reasons for not Filing

Further, where the entities have not been able to register for the Entity master, they may do so from September 01, 2018. However, they may provide the reasons for not registering within the time period along with the authority letter.

Ref : RBI Circular FE.CO.FID/1282/10/02/035/2018-19 dated 31 August ,2018

Foreign investment in India - Reporting in Single Master Form

Dear All ,

Foreign investment in India - Reporting in Single Master Form

For details click the following:

https://drive.google.com/file/d/1uX_RtDUJcEfRUsM2WPP1i3gE5OVj5Uei/view?usp=sharing

The Interface for uploading the Single Master Form is available in the following link:

https://firms.rbi.org.in

Regards

R V Seckar

https://drive.google.com/file/d/1uX_RtDUJcEfRUsM2WPP1i3gE5OVj5Uei/view?usp=sharing

DEADLINE REMINDER - LAST DATE FOR FILING OF FLA RETURN UNDER FEMA FALLS ON 15 JULY 2018

DEADLINE REMINDER - LAST DATE FOR FILING OF FLA RETURN UNDER FEMA FALLS ON 15 JULY 2018

RBI INTRODUCES CHANGES IN THE ECB MONTHLY REPORTING THROUGH ECB 2 RETURN

RBI INTRODUCES CHANGES IN THE ECB MONTHLY REPORTING THROUGH ECB 2 RETURN

CHANGES IN PART E.1  and E.2 OF ECB 2 MONTHLY RETURN

It has been decided to capture the details of the hedges for ECBs through a simplified format of ECB 2 Return. Part E of the Return, accordingly, is modified so as to include only standard information on hedged/unhedged ECB exposure (Annex).

Details of hedging in Part E.1 of the Return and foreign exchange earnings and expenditure in Part E.2 of the Return should be furnished in additive format.

Further, for reporting in respect of natural hedge, provisions contained in paragraph 2 (iii) of A.P. (DIR Series) Circular No. 15 dated November 07, 2016 should be followed.

REVISED FORM ECB-2 WILL BE WITH EFFECT FROM END OF JUNE 2018

 Revised monthly reporting format of ECB 2 Return would be applicable from month-end June 2018.

Any Lapse will be considered as a Contravention under FEMA

It is reiterated that any lapse at the time of reporting through this return and / or failure to adhere to the time line of its submission and / or any lapse at the time of reporting through Form 83 is a contravention of the provision of Foreign Exchange Management Act, 1999 (42 of 1999).

PROVIDING PRACTICING COMPANY SECRETARIAL SERVICES For more details, please click the following link https://www.linkedin.com/company/r-v-seckar-co-practicing-company-secretary/

RBI INTRODUCES SINGLE MASTER FORM (SMF) FOR REPORTING Foreign investment in India(FDIs) .

RBI INTRODUCES SINGLE MASTER FORM (SMF)  FOR REPORTING Foreign investment in India(FDIs) .

The Main Objective of SMF FORM

With an objective of integrating the extant reporting structures of various types of foreign investment in India, RBI will introduce a Single Master Form (SMF).

The SMF would be filed online.

SMF for Direct FDI and through Investment Vehicle Route

SMF would provide a facility for reporting total foreign investment in an Indian entity {as defined in Foreign Exchange Management (Transfer or issue of security by a person resident outside India) Regulations 2017, dated November 7, 2017}, as also investment by persons resident outside India in an Investment Vehicle.

Prior to implementation, RBI will provide an interface to Indian entities to input data on foreign investment in specified format between June 28, 2018 to July 12, 2018.

OFFERING SERVICES AS PRACTICING COMPANY SECRETARY

TO KNOW MORE ABOUT FOR ALL YOUR COMPANY SECRETARIAL NEEDS , PLEASE CLICK THE FOLLOWING LINK:

https://www.linkedin.com/company/r-v-seckar-co-practicing-company-secretary/

NON-COMPLAINT INDIAN COMPANIES 

CANNOT RECEIVE FDIs

Entities not complying with this prerequisite will not be able to receive foreign investment and will be non-compliant with FEMA,1999.

The entities may be in readiness with the requirements to be provided in the Entity Master at Annex 1. The format of the SMF is at Annex 2. The final form, when hosted, will be available in the Master Direction-Reporting under FEMA, 1999.

ENTITY MASTER DATA -Annex I

1. All Indian Entities needs to provide till date all the foreign investments received by them which will be called Entity Master Data and the format is provided in Annex 1 of said notification.

Subsequent Investments in Annex 2

2. For any subsequent foreign investments, an Integrated reporting structure of various types of foreign investment introduced which will be called Single Master Form (SMF). The format of the SMF is at Annex 2 of said notification.

Important Amendments in Foreign Exchange Management (Transfer or Issue of Security by a Person Resident outside India) (Amendment) Regulations, 2018

Important Amendments in Foreign Exchange Management (Transfer or Issue of Security by a Person Resident outside India) (Amendment) Regulations, 2018

The following are some of the important amendments made by RBI recently.

1.Prior Approval is needed for FDIs in investing companies investing in NBFCs not registered with the Reserve Bank and in core investment companies 

 Foreign Investment in investing companies not registered as Non-Banking Financial Companies with the Reserve Bank and in core investment companies (CICs), both engaged in the activity of investing in the capital of other Indian entities, will require prior Government approval.

2.100% Automatic Route for FDIs in NBFCs registered with RBI

Foreign investment in investing companies registered as Non-Banking Financial Companies (NBFCs) with the Reserve Bank, will be under 100% automatic route.

3.Joint Audit in case Foreign Investor Prefers

Wherever the person resident outside India who has made foreign investment specifies a particular auditor/ audit firm having international network for the audit of the Indian investee company, then audit of such investee company shall be carried out as joint audit wherein one of the auditors is not part of the same network.”

OFFERING FOLLOWING SERVICES AS PRACTICING COMPANY SECRETARY

For details , Please click the following link:

https://rvseckarcompanylaw.blogspot.com/2018/04/corporate-compliance-services-r-v.html

4.FDIs in Airlines is now Restricted to 49% (other than NRIs) under Automatic route

(a) (i) Scheduled Air Transport Service/ Domestic Scheduled Passenger Airline (ii) Regional Air Transport Service

100%

Automatic up to 49% Government route beyond 49% (Automatic up to 100% for NRIs and OCIs)

5.Foreign investment in M/s Air India Limited shall be subject to the following conditions:

    i.        Foreign investment in M/s Air India Ltd., including that of foreign airline(s), shall not exceed 49% either directly or indirectly.

  ii.        Substantial ownership and effective control of M/s Air India Ltd. shall continue to be vested in Indian Nationals.”

6.100% FDIs are Allowed in Real Estate Broking Business

Real estate broking services shall be excluded from the definition of “real estate business” and 100% foreign investment is allowed in real estate broking services under automatic route.”

_{7.FDI in Single Brand Retailing}

“(i) Single brand retail trading entity shall be permitted to set off its incremental sourcing of goods from India for global operations during initial 5 years, beginning 1st April of the year of the opening of first store, against the mandatory sourcing requirement of 30% of purchases from India. For this purpose, incremental sourcing shall mean the increase in terms of value of such global sourcing from India for that single brand (in INR terms) in a particular financial year from India over the preceding financial year, by the non-resident entities undertaking single brand retail trading, either directly or through their group companies. After completion of this 5 years period, the SBRT entity shall be required to meet the 30% sourcing norms directly towards its India’s operation, on an annual basis.”

_{8.Definition of Sourcing Norms}

“Sourcing norms will not be applicable up to three years from commencement of the business i.e. opening of the first store for entities undertaking single brand retail trading of products having 'state-of-art' and 'cutting-edge' technology and where local sourcing is not possible. Thereafter, condition mentioned at 15.3.1(e) above will be applicable. A Committee under the Chairmanship of Secretary, DIPP, with representatives from NITI Aayog, concerned Administrative Ministry and independent technical expert(s) on the subject will examine the claim of applicants on the issue of the products being in the nature of ‘state-of-art’ and ‘cutting-edge’ technology where local sourcing is not possible and give recommendations for such relaxation.”

9.Definition of Medical Devises under Pharmaceuticals

“in-vitro diagnostic device which is a reagent, reagent product, calibrator, control material, kit, instrument, apparatus, equipment or system, whether used alone or in combination thereof intended to be used for examination and providing information for medical or diagnostic purposes by means of examination of specimens derived from the human bodies or animals.”

10.Issue of Shares for the materials imported or pre-operative expenses incurred is under Automatic Route

(4) An Indian company may issue, subject to compliance with the conditions prescribed by the Central Government and/or the Reserve Bank from time to time, capital instruments to a person resident outside India, if the Indian investee company is engaged in an automatic route sector, against:

a.  Swap of capital instruments; or

b.  Import of capital goods/ machinery/ equipment (excluding second-hand machinery); or

c.  Pre-operative/ pre-incorporation expenses (including payments of rent etc.).

Provided Government approval shall be obtained if the Indian investee company is engaged in a sector under Government route. The applications for approval shall be made in the manner prescribed by the Central Government from time to time.

For full details , Please click the following link:

https://rbi.org.in/scripts/BS_FemaNotifications.aspx?Id=11240