Saturday, August 17, 2024

#GOVT SIMPLIFIES FDI RULES TO HELP INDIAN COMPANIES EXPAND VIA MERGERS, ACQUISITIONS THROUGH SHARE SWAPS

 

#GOVT SIMPLIFIES FDI RULES TO HELP

 INDIAN COMPANIES EXPAND VIA 

MERGERS,ACQUISITIONS THROUGH 

SHARE SWAPS



The Finance Ministry on Friday issued a notification amending the Foreign Exchange Management (Non-debt Instruments) Rules, 2019, to simplify FDI rules for enabling easier cross-border share swaps between Indian and foreign companies.

In an important amendment to the FEMA (Non Debt Instruments) Rules, 2019, which deal with foreign investment in Indian entities, it is now permitted to issue shares by an Indian company against swap of equity capital of an overseas company.

Earlier:

1. An Indian company could issue its own equity shares to a non-resident/ foreign entity against acquisition of shares of an “Indian company”; or

2. An Indian company could sell its equity capital in an overseas entity to an overseas company against shares being issued by such overseas acquirer to the Indian company.

ODI-FDI Share Swap not permitted earlier:

However, in a non-cash transaction involving share swap, issuance of shares by an Indian company to a non-resident/ foreign entity against acquisition of shares of an overseas company owned by such foreign seller was not permitted.

Effective Share Swap:

While an effective swap could be effectuated through acquisition of an overseas company from a foreign entity by the Indian company for cash consideration, and thereafter issuance of shares by the Indian company to the overseas seller against cash consideration, complications in terms of conceptualising the construct of binding documents and foreign exchange loss arose.

With this amendment, a direct swap is now permissible, and logically so, the said complications could now be addressed.

It sounds like RBI wants to facilitate acquisition offshore but not the capital flow? Effectively a company in India wanting to set up a WoS could identify a target & share swap to own it - with little or no cash considerations?

https://pib.gov.in/PressReleasePage.aspx?PRID=2046086

Saturday, May 18, 2019

Process Of Raising Funds Through Non-Convertible Debentures by an Indian Company from NRIs


Process Of Raising Funds Through Non-Convertible Debentures by an Indian Company from NRIs


Dear All,

In this video , I am going to explain the procedures for obtaining loan by an Indian Company either on repatriation basis or non-repatriation basis from NRIs  for their own business purposes.

For details , please click the following video link:


R V Seckar


Practicing Company Secretary

7904719295

Tuesday, February 19, 2019

NOW INDIAN COMPANIES WHO ARE IN CIRP PROCESS CAN USE ECB TO REPAY THEIR RUPEE TERM LOAN.


NOW INDIAN COMPANIES WHO ARE IN CIRP PROCESS CAN USE ECB TO REPAY THEIR RUPEE TERM LOAN.


Attention of Authorized Dealer Category-I (AD Category-I) banks is invited to paragraph 1 of the Statement on Developmental and Regulatory Policies of the Sixth Bi-monthly Monetary Policy Statement for 2018-19 dated February 07, 2019.
RELAXATION
2. In terms of paragraph 2.1.(viii) of the Annex to the A.P. (DIR Series) Circular No. 17, dated January 16, 2019 on “External Commercial Borrowings (ECB) Policy – New ECB Framework”, ECB proceeds cannot be utilised for repayment of domestic Rupee loans, except when the ECB is availed from a Foreign Equity Holder as defined in the aforesaid framework.

NOW , ECB CAN BE RAISED TO REPAY THE RUPEE TERM LOAN BY COMPANIES UNDER CIRP

3. On a review it has been decided, in consultation with the Government of India, to relax the end-use restrictions for resolution applicants under the Corporate Insolvency Resolution Process (CIRP) and allow them to raise ECBs from the recognised lenders, except the branches/ overseas subsidiaries of Indian banks, for repayment of Rupee term loans of the target company under the approval route. Accordingly the resolution applicants, who are otherwise eligible borrowers, can forward such proposals to raise ECBs, through their AD bank, to Foreign Exchange Department, Central Office, Mumbai of the Reserve Bank for approval.
4. All other provisions of the ECB policy remain unchanged. AD Category – I banks should bring the contents of this circular to the notice of their constituents and customers. The amended ECB policy will come into force with immediate effect.
5. The directions contained in this circular have been issued under section 10(4) and 11(2) of the Foreign Exchange Management Act, 1999 (42 of 1999) and are without prejudice to permissions / approvals, if any, required under any other law.
Yours faithfully
Ajay Kumar Misra
Chief General Manager-in-Charge



R V Seckar , Practicing Company Secretary , 9848915177, rvsekar2007@gmail.com


Saturday, February 2, 2019

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 herehttps://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

R V Seckar 09849015177 rvsekar2007@gmail.com, -