Presentation restricted to FEMA Act, Regulations framed there
under, Master Circular
Procedural Aspects in Inbound Investments07 November 2015
Impact Seminar on Inbound Investment Policies, Opportunities
& Challenges
By NIRC of ICSI
Vijay GuptaACMA, FCA, FCS
AgendaInbound Investment Schemes (only snap shot)FDI/ECB Policy
referencesFIPBReporting of FDI Inflow Reporting of Issue of Shares
Transfer of sharesDownstream Investments Annual Return of
Liabilities & AssetsSchedule 4 of FEMA 20FPIs & NRIs under
Portfolio Investments SchemeLimited Liability
PartnershipRemittancesExternal Commercial BorrowingsCompounding
FEM (Transfer or Issue of Security by a Person Resident Outside
India) Regulations, 2000: FEMA 20Sch. 1Foreign Direct Investment
(FDI) SchemeSch. 2 & 2APurchase/Sale of shares or convertible
debentures or warrants of an Indian Company by Registered Foreign
Portfolio Investor (RFPI) under Foreign Portfolio Investment (FPIs)
Scheme (Registered FIIs under Sch. 2 subsumed with Sch. 2A)Sch.
3Purchase/Sale of Shares and/or Convertible Debentures by an NRI on
a stock exchange in India on repatriation and/or non-repatriation
basis under Portfolio Investment Scheme Sch. 4Purchase and Sale of
Shares or Convertible Debentures or Warrants] by NRI, on
Non-repatriation basis Sch. 5Purchase and Sale of Securities other
than Shares or Convertible Debentures of an Indian company by a
person resident outside IndiaSch. 6
Investment in an Indian venture capital undertaking by a
registered Foreign Venture Capital InvestorSch. 7Indian depository
receipts by eligible companies resident outside IndiaSch. 8Scheme
for investment by Qualified Foreign Investors in equity shares
(Subsumed under Sch. 2A)Sch.9Scheme for Acquisition/Transfer by a
person resident outside India of capital contribution or profit
share of (LLPs)Sch. 10Depository Receipts Scheme, 2014 (DRs)
Composite Caps: Foreign investments, direct or indirect, under
Schedule 1(FDI), 2 (FII), 2A (FPI), 3 (NRI), 6 (FVCI), 8 (QFI), 9
(LLPs) and 10 (DRs) vide PN 8 dated 30 July 2015 by DIPPForeign
Investment in India- Schematic RepresentationForeign Inbound
InvestmentsForeign Direct InvestmentsForeign Portfolio
InvestmentsForeign Venture Capital InvestmentsOther Investments
(G-Sec, NCDs, etc.)Investments on Non-Repatriable basisFIIs/ QFIs/
RFPIsSch. 2, 2A, 8Automatic RouteGovt. RouteNRIs/ PIOsSch. 3SEBI
Regd. FVCIs/AIFsSch. 6FIIs/RFPIs, NRIs, PIO, QFIs Long Term
InvestorsSch. 5NRIs, PIOsSch. 4VCF, IVCUsPersons Resident Outside
IndiaCompanySch. 1, 10LLPSch. 9
FDI/ECB PolicyForeign Exchange Management (Transfer or Issue of
Security by a Person Resident outside India) Regulations, 2000 FEMA
20Foreign Exchange Management (Borrowing or Lending in Foreign
Exchange) Regulations, 2000 FEMA 03Department of Industrial Policy
and Promotion, Ministry of Commerce & Industry, Government of
India (DIPP) Circular on Consolidated FDI Policy (last updated on
May 12, 2015)RBI Master Circular on Foreign Investments in India
dated 01 July 2015 (updated on 16 July 2015)External Commercial
Borrowings and Trade Credits dated 01 July 2015 (updated on 06
October 2015)RBI FAQs - Foreign Investments in India 10.02.2015No
FAQs on ECB
FIPB Review books 2014, 2011-2013; 2010; 2009; 2008; FAQs by
FIPB for eFilingAnnual Return on Foreign Liabilities and Assets
(FLA return) 18 June 2014 for LLP alsoFDI inflows - FIPB/SIA;
Acquisition of Existing Shares; & Automatic Route of RBI:
Website of DIPP.nic.inECB/FCCB data under Automatic/Approval
Routes: Monthly Press Release by RBIIn case of any conflict between
FDI Circular and FEMA Regulations, the relevant FEMA Notification
will prevail. The procedural instructions are issued by the Reserve
Bank of India vide A.P.Dir. (Series) circularsRead Circulars,
latest Master Circulars, FAQs as Regulations may not be amended
simultaneously by Notification.
Kinds of InvestmentAutomatic Route no prior approval from the
RBI/ GovernmentApproval Route prior approval of the FIPB required
(no separate RBI approval) Mode of InvestmentGreenfield: Setting up
a new JV/ WOS (fresh issue of shares)Brownfield: Relating to
existing investments/ business activities:Foreign Direct Investment
into an Indian companyBrownfield InvestmentShare PurchaseGift of
sharesShare swapRights/ Bonus issue/ ESOP/ Sweat
EquityMerger/Demerger/ Amalgamation/ ReconstructionConversion of
ECB/ pre-incorp payables/ import payables, royalty, other
legitimate dues etc.Types of instruments: CapitalEquity
sharesFully, compulsorily & mandatorily convertible Preference
SharesFully, compulsorily & mandatorily convertible
DebenturesDifferential voting rights shares as to dividend, voting
or otherwisePermittedNon-convertible, optionally convertible or
partially convertible instruments considered as debtTo comply with
ECB normsWarrants: Upfront 25% of consideration; Conversion in 18
monthsUpfront pricing/ conversion formulaPartly paid Equity Shares
only: Upfront 25% of consideration including premium; Full payment
in 12 months; NA Listed Indian company: issue size exceeds rupees
five hundred crore and the issuer complies with Regulation 17 of
the SEBI (Issue of Capital and Disclosure Requirements(ICDR))
Regulations regarding monitoring agency. Listed Indian company:
issue size exceeds rupees five hundred crore and the issuer
complies with Regulation 17 of the SEBI (Issue of Capital and
Disclosure Requirements(ICDR)) Regulations regarding monitoring
agency. Optionality clauses: Buy-back of securities 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 of one year. Issue of Non
convertible/ redeemable bonus preference shares or debenturesTo
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.FEMA & ValuationOnly Certificationby SEBI
registered Merchant Banker/Chartered Accountant
Valuation & Certificationby SEBI registered Merchant
Banker/Chartered AccountantPreferential Allotment Pricing Guideline
under SEBI (ICDR) Regulations 2009:Price not less than the higher
of Avg. weekly high and low closing price over a trailing six month
period, or a trailing two week period, from the "relevant date of
transaction.Relevant Date means date thirty days prior to the date
of GM of shareholdersPrice of shares shall not be less than the
fair value worked out as per any internationally accepted pricing
methodology for valuation of shares on arms length basisPrice of
shares shall not be more than the fair value worked out as per any
internationally accepted pricing methodology for valuation of
shares on arms length basisMarket Price as per SEBI Preferential
AllotmentInternationally accepted pricing Methodology for valuation
of shares on arms length basisListed CompanyUnlisted
CompanyFDIIssue of sharesTransfer of shares fromResident to
Non-ResidentTransfer of shares fromNon-Resident to
ResidentConvertible instruments:Based on conversion formula which
has to be determined / fixed upfront. Price at the time of
conversion should not be less than the fair value worked out, at
the time of issuance of these instruments.
NRIs on non-repatriation basis under Schedule 4 of FEMA 20: No
express provision for valuation
Pricing not applicable for transfers between two
Non-Residents
SEZs against import of capital goods into equity shares:
Committee of Development CommissionerNon-residents (including
NRIs): Subscription to its Memorandum of Association: Made at face
value subject to their eligibility to invest under the FDI
schemeISSUE OF INSTRUMENTSIssue of Right Shares equity, preference
& debenturesPricing of Right issueListed Price as determined
under SEBIUnlistedNot less than price at which the offer on right
basis is made to resident shareholdersAdditional allocation of
rights share by residents to non-residents Subject to sectoral
capIssue of Bonus SharesSubject to sectoral cap, Companies Act
& SEBIAcquisition of shares under Scheme of Merger/
Demerger/Amalgamation/Reconstruction of two or more Indian
companies Subject to sectoral capNot engaged in prohibited
activitiesThe transferee or the new company files a report within
30 days with the Reserve Bank giving full details of the shares
held by persons resident outside India in the transferor and the
transferee or the new company, before and after the
merger/amalgamation/reconstruction, and also furnishes a
confirmation that all the terms and conditions stipulated in the
scheme approved by the Court have been complied with.Issue of
shares under ESOP/Sweat equityIndian company may issue employees
stock option and/or sweat equity shares to its employees/directors
or employees/directors of its holding company or joint venture or
wholly owned overseas subsidiary/subsidiaries who are resident
outside India, provided that : a) The scheme has been drawn either
in terms of regulations issued under the Securities Exchange Board
of India Act, 1992 or the Companies (Share Capital and Debentures)
Rules, 2014 notified by the Central Government under the Companies
Act 2013, as the case may be. b) The employees stock option/ sweat
equity shares issued to non-resident employees/directors under the
applicable rules/regulations are in compliance with the sectoral
cap applicable to the said company. c) Issue of employees stock
option/ sweat equity shares in a company where foreign investment
is under the approval route shall require prior approval of the
Foreign Investment Promotion Board (FIPB) of Government of India.
d) Issue of employees stock option/ sweat equity shares under the
applicable rules/regulations to an employee/director who is a
citizen of Bangladesh/Pakistan shall require prior approval of the
Foreign Investment Promotion Board (FIPB) of Government of
India.Mode of payment
Inward remittance through normal banking channels
Debit to NRE / FCNR account of a person concerned maintained
with an AD category I bank
Conversion of royalty / lump sum / technical knowhow fee/
Legitimate due for payment or conversion of ECB, shall be treated
as consideration for issue of shares
Conversion of import payables / pre incorporation expenses /
share swap can be treated as consideration for issue of shares with
the approval of FIPB
Debit to non-interest bearing Escrow account in Indian Rupees in
India which is opened with the approval from AD Category I bank and
is maintained with the AD Category I bank on behalf of residents
and non-residents towards payment of share purchase
considerationEscrow AccountFor open offers / exit offers and
delisting of sharesAD Category I banks can open Escrow account and
Special account of non-resident corporate Non-interest bearing
Escrow accounts in Indian Rupees in India on behalf of residents
and/or non-residents, towards payment of share purchase
consideration and/or provide Escrow facilities for keeping
securities to facilitate FDI transactionsPermitted to open and
maintain, without prior approval of RBIEscrow accounts for
securities by SEBI authorised Depository ParticipantsPermitted to
open and maintain, without RBI approvalFund or non-fund based
facilities Not permittedIssue of fresh shares to the non-residents
ApplicableTransfer of shares from/to the
non-residentsApplicableValidity of Escrow AccountMaximum 6
monthsTerms of Escrow account Shall be laid down strictly in Escrow
agreement, Share purchase agreement, conditions of issue of
sharesPrior permission of the Reserve Bank(i) Transfer from
residents to non-residents by way of sale: Non-resident acquirer
proposes deferment of payment of the amount of consideration. In
case approval is granted for the transaction, the same should be
reported in Form FC-TRS to the AD Category I bank, within 60 days
from the date of receipt of the full and final amount of
consideration.
(ii)A person resident in India, who intends to transfer any
security, by way of gift to a person resident outside India. Gift
does not exceed 5 per cent of the paid-up capital of the Indian
company / each series of debentures / each mutual fund scheme;
Sectoral cap limit is not breached; The transferor (donor) and the
proposed transferee (donee) are close relatives as defined in
Section 6 of the Companies Act, 1956; Value of security to be
transferred together with any security already transferred by the
transferor, as gift, to any person residing outside India does not
exceed the rupee equivalent of USD 50,000 per financial year.
Transfer of shares from NRI to NR requires the prior approval of
the Reserve Bank of India.
Transfer is at a price which falls outside the pricing
guidelines specified by the Reserve Bank
e-FIPB___Revised filing procedureOnce the e-filing of the
application is completed, the application needs to file/courier
only SINGLE copy of the printed version of the online application,
along with the duly authenticated copy of the documents attached
with the application. Global Reach -Apply from anywhere in the
world! Access your status from anywhere in the world! Transact
while on a move!E-communication - communication between the
applicant, FIPS and other ministries/ departments is online.Quicker
communication- All the correspondence including updates/ decisions
are communicated through SMS/emails Quicker processing- FIPS
forwards the application online to the concerned ministries for
processing, queries are raised online eliminating physical delivery
and loss of time due to postal delays.Less Paperwork - Single
signed copy only needed (for record) instead of present multiple
sets of the application.SMS/email alert- Regular alerts are sent to
the applicants related to the queries raised by the administrative
ministries, inclusion of the proposal in the scheduled FIPS meeting
and decisions.Time saving- E-correspondence between applicant and
ministries and also between ministries themselves avoids delays
adding to speed and efficiency.Transparency and security: all
transactions and correspondences are recorded online and are
secure.Query module- Any doubts? A user can raise a query online
which shall be replied by the relevant ministry.
Important issues in reporting / compliance requirementsKYC and
documentation if funds received from entity/person other than
foreign investor KYC from both the entities, and letter of
confirmations from both the entities KYC in case of nominee if
funds received / not received from nomineeObtaining FIRC from AD
banks and description thereinTime taken by AD-Bank to peruse the
documentsDate of fair valuation certificate (sometime on format,
contents, etc.)Reconciling of shareholding pattern as per RBI
records: past issues / transfer of shares/ NR to NR
transferAppropriateness of main object clause in the Memorandum of
AssociationDetermining correct NIC Codes 2008Registered office
addressChanges in AD Bank post receipt of funds but before issue of
sharesInterpretation Sectoral aspects with AD-BanksConversion of
ECB whether interest due covered (Legitimate due)?
FormSupportingTime periodAction by Regional Office
concernedNon-complianceAdvance Reporting Form thru AD Bank for
shares/FCCD/FCPS/WarrantsFIRC/s/ Debit certificate evidencing
receipt of remittance KYC report on non-resident investorNot later
than 30 days from the date of receiptAllotment of Unique
Identification Number (UIN) for the amount reportedContravention
under FEMA
Attract penal provisionsRemittance received from entity other
than foreign investors - KYC and documentation: Investor name
matches with FIRC/ KYC: If different NoC from Remitter and
Investor, Nature of relationship between Remitter and Investor,
Letter form Investor, Board resolution of Investee CompanyNo KYC if
debit to NRE/ FCNR(B)AD Bank letter/ debit certificate for NRE/
FCNR(B) transfer: Name, account type, amount, date of debitAmount
in INR/FC matches with FIRC/Bank certificateCopy of approval letter
if under Approval RouteIn FIRC: Name of beneficiary; remitter bank;
remitter; date of credit; INR equivalent; Purpose of remittance
mentioned in FIRCFor each upfront/ call payment
Reporting of FDI InflowFDI NIC Codes Reporting under FDI
SchemeIndian companies are required to report the NIC Codes in the
FCGPR and FCTRS forms as per the NIC 2008 version, henceforth.A
uniform State and District code list for reporting of details of
foreign direct investment by Indian companies in Form FCGPR. The
list can be accessed on the RBI website (www.rbi.org.in - FEMA
State and District Code List).
Mapping of Activities/ Sectors by DIPP -
http://dipp.nic.in/English/acts_rules/Press_Notes/Mapping_NIC2008_05January2015.pdf.
Circular No. 6 dated July 18, 2014Reporting of FDI Inflow
Time frame for issue of shares
Equity/Capital instruments should be issued within 180 days
(subject to Companies Act 2013) from the date of receipt of the
inward remittance or by debit to the NRE/FCNR (B) account/ Escrow
accountElse refunded to non-resident investorNon-compliance will
attract contravention of FEMAIn execptional cases, RBI may permit
refund/allotment beyond 180 days on merit of each case
FIRC issuesAbstract from A.P. (DIR Series) Circular No.96 Dated
20th January, 2014Note should, however, be taken that KYC in
respect of the remitter, wherever required, is a joint
responsibility of the bank that has received the remittance as well
as the bank that ultimately receives the proceeds of the
remittance. While the first bank will be privy to the details of
the remitter and the purpose of the remittance, the second bank,
will have access to complete information from the recipients
perspective. Besides, the remittance receiving bank is required to
issue FIRC to the bank receiving the proceeds to establish the fact
the funds had been remitted in foreign currency.Abstract from
RBI/2010-11/315-DPSS (CO) EPPD No. 1309 / 04.03.01 / 2010-11 dated
December 13, 2010 Credit to NRE account through RTGS / NEFT /NECS /
ECS Issuance of Foreign Inward Remittance Certificate (FIRC):FIRC
should not be issued against remittance for credit to NRE
account.If the proceeds of inward remittance received are remitted
in foreign currency itself to the beneficiarys banker, then FIRC is
to be issued by the bank which has received the proceeds in foreign
exchange, i.e., the bank which converts the foreign currency into
rupees is required to issue FIRC.Customer's Request Letter cum
declaration & undertaking Form Receipt of the inward remittance
in foreign currencyDate: To,The Branch ManagerICICI Bank
Ltd.___________________Dear Sir/Madam, This is with reference to
your email/letter dated ____________ regarding receipt of the
inward remittance in foreign currency for an amount of
___________________ . We request you to credit the same to our
account as per the details given below.
Name & address of remitter/ investorAmount (in foreign
currencyPurpose of remittance Account Number Entry Route (Automatic
or under Govt. approval)* *In case the entry route is Government
approval route, copy of FIPB approval is being enclosed herewith.
We confirm that we have complied with all the applicable rules and
regulations issued under Foreign Exchange Management Act, 1999
(FEMA) by RBI from time to time on Foreign Direct Investment (FDI)
in India. We confirm that we are eligible to receive the funds
towards issue of equity shares or mandatorily & fully
convertible debentures or mandatorily & fully convertible
preference shares under FDI scheme under Automatic Route or
Government Route.We further confirm, declare and undertake
that:S/NFacet:Response [Please indicate Yes, No, or Not Applicable
(NA)]I.The overseas remitter/investor Mr. / M/s _____
______________ (name & address) is an eligible
remitter/investor under FDI scheme and is not a citizen and/or is
an entity registered in Pakistan & Bangladesh.:II.As the
overseas remitter/investor is either a citizen or an entity
registered in Bangladesh or Pakistan, a copy of approval of Foreign
Investment Promotion Board (FIPB) of Government of India is
enclosed herewith.:III.As overseas remitter/investor is an
erstwhile OCBs incorporated outside India, approval of the
Government of India (if the investment is through the Government
Route) or approval of the Reserve Bank (if the investment is
through the Automatic Route) is enclosed. Erstwhile OCB should
submit a certification from RBI that it is not in the adverse list
being maintained with the RBI.:IV.We are not engaged in any
prohibited activities/sectors listed as per current FDI Policy of
Government of India.:V.That the equity instruments shall be issued
within 180 days from the date of receipt of the inward remittance
or by debit to the NRE/FCNR (B) account of the non-resident
investor. In case, the equity instruments are not issued within 180
days from the date of receipt of the inward remittance or date of
debit to the NRE/FCNR (B) account, the amount of consideration so
received would be refunded immediately to the non-resident investor
by outward remittance through normal banking channels or by credit
to the NRE/FCNR(B) account (as the case may be).We know that
non-compliance with the above provision would be reckoned as a
contravention under FEMA and could attract penal
provisions.:S/NFacet:Response [Please indicate Yes, No, or Not
Applicable (NA)]VI.After issue of shares (including bonus and
shares issued on rights basis and shares issued on conversion of
stock option under ESOP scheme)/convertible debentures/convertible
preference shares, we shall file Form FC-GPR through you to the RBI
not later than 30 days from the date of issue of
shares.:VII.Foreign Direct investment in Partnership
Firm/Proprietary Concern (applicable only if the investee entity is
a Partnership Firm/ Proprietary Concern):We declare that the inward
remittance is by way of contribution to the capital of our
partnership firm/our proprietary concern on non-repatriation basis
and our partnership firm/ proprietary concern is not engaged in any
agricultural /plantation or real estate business (i.e dealing in
land and immovable property with a view to earning profit or
earning income there from) or print media sector. The existing
regulations issued by SEBI/RBI & FEMA regulations on Foreign
Direct Investment in India have been complied with.:We request you
to kindly issue FIRC for the above FDI remittance, and authorize
you to debit banks charges for issuance of FIRC. We enclose
herewith duly signed Advance Reporting Form (ARF) and request you
to report the above FDI remittance to the RBI along with KYC form
of the remitter and a copy of FIRC. Yours faithfully,For
____________
Authorized Signatory Name - Designation - Company Name Customer
letter to include below stated declarations and documents for FDI
through the following mode:Foreign investment towards issue of ADRs
/ GDRs We declare that the inward remittance is towards issue of
ADRs/ GDRs and we are eligible to issue ADRs / GDRs in accordance
with the Scheme for issue of Foreign Currency Convertible Bonds and
Ordinary Shares (Through Depository Receipt Mechanism Scheme ,1993
and subsequent guidelines issued by Ministry of Finance ,
Government of India. The existing regulations issued by SEBI, FEMA
and RBI Guidelines on the investment have been complied
with.Foreign investment towards issue of shares under ESOPs
(Employee Stock Option Scheme)We declare that the inward remittance
is towards issue of shares under ESOPs (Employee Stock Option
Scheme) .The existing regulations issued by SEBI FEMA and RBI
Guidelines on the investment have been complied with. ESOP is to be
submitted to Mr./Ms.______________ who is an employee (not resident
in Pakistan) of our firm ____________/of our JV/WOS firm
______________/ of our subsidiary firm______________ and the face
value of the shares to be alloted under the scheme to the
non-resident employee does not exceed 5 percent of the paid up
capital of the issuing company.For ____________Authorized
SignatoryFormSupportingTime periodAction by Regional Office
concernedNon-complianceForm FC-GPR duly filled up and signed by
MD/Director/Secretary of Company A certificate from Company
SecretaryA certificate from SEBI registered Merchant Banker or
Chartered Accountant for valuationNot later than 30 days from the
date of issueTaking on record the shareholding patternContravention
under FEMA
Attract penal provisionsReconciliation of shareholding pattern
at RBI end (Fresh issue, transfers, reduction, merger, transfers
from NR to NR etc.) Previous RBI Acks, duly approved Form
FC-TRSRouted through Bank; Latest format; FDI registration number
if existing company with FDI; State & District Code;
Constitution of NR/Address/ Date of incorporation; Surplus/
Shortage; UIN detailsInapplicable clauses duly authenticatedOn
conversion to equity, only plain paper reporting is to be made.Onus
of compliance with the sectoral/statutory caps on foreign
investment and attendant conditions, if any, shall be on the
company receiving foreign investmentReporting of Issue of
SharesReporting of Issue of Fresh Shares /Partly paid shares/Bonus
/Rights Shares /ESOP/ Convertible Debentures / Convertible
Preference Shares /Conversion of ECB / Royalty / Lumpsum Technical
Know-how Fee / Import of Capital Goods by SEZs
/Pre-operative/Pre-incorporation Expenses/Legitimate dues/
Amalgamation/ MergerConversion of shares other than
cash1/3TransactionNature of permissionConditions to be
fulfilledConversion of ECB due for payment or not into shares
/convertible debenturesGeneral permission Activity covered under
Automatic Route, or obtained FIPB approvalPost conversion equity
within the sectoral cap Pricing Guidelines adhered toAgainst lump
sum technical know-how fee, royalty into equity / preference
sharesGeneral permission Subject to entry route, sectoral cap &
Pricing Guidelines Compliance with applicable tax lawsShare Swap -
shares FIPB approvalIrrespective of the amount, valuation of shares
to be made by a Merchant Banker registered with SEBI or an
Investment Banker outside India registered with appropriate
regulatory authority in the host countryFIPB approval for Indian
leg of FDIConversion of shares other than cash 2/3Import of capital
goods/machinery/equipment (excluding second hand) intoequity shares
Import in accordance with Exim PolicyIndependent valuation by third
party entity, preferably by an independent valuer from the country
of import along with documents/certificates issued by the customs
authorities towards assessment of the fair-value of such
importsBeneficial ownership and identity of the Importer Company as
well as overseas entityConversions into FDI being done within 180
days from date of shipment of goodsSecond-hand machinery excluded
from the purview of this provisionPre-operative/pre-incorporation
expenses (including payments of rent etc.) into equity shares
Current Account Rules: Remittances exceeding five per cent of
investment brought into India or USD 100,000 whichever is higher,
by an entity in India by way of reimbursement of pre-incorporation
expenses FIRC for remittance for expenditure incurredVerification
and certification by statutory auditorPayments made directly to
company. Payments made through third parties citing the absence of
a bank account or similar such reasons not allowed Capitalization
within 180 daysUnder the Government/FIPB route Special resolution
of the company; and subject to pricing guidelines and appropriate
tax clearanceFDI - Issue of equity shares under the FDI Scheme
against Legitimate Dues . 3/3Issue of equity shares against any
other funds (Legitimate Dues) payable by the investee company,
remittance of which does not require prior permission of the
Government of India or Reserve Bank of India under FEMA, 1999 or
any rules/ regulations framed or directions issued thereunder,
provided that:i. The equity shares shall be issued in accordance
with the extant FDI guidelines on sectoral caps, pricing guidelines
etc. as amended by Reserve bank of India, from time to
time;Explanation: Issue of shares/convertible debentures that
require Government approval in terms of paragraph 3 of Schedule 1
of FEMA 20 or import dues deemed as ECB or trade credit or payable
against import of second hand machinery shall continue to be dealt
in accordance with extant guidelines;
ii. The issue of equity shares under this provision shall be
subject to tax laws as applicable to the funds payable and the
conversion to equity should be net of applicable taxes.
Circular No.31 dated September 17, 2014Conversion of ECB into
EquityIn case the ECB liability, denominated in foreign currency
and / or import of capital goods, etc. is sought to be converted by
the company, it will be in order to apply the exchange rate
prevailing on the date of the agreement between the parties
concerned for such conversion. Reserve Bank will have no objection
if the borrower company wishes to issue equity shares for a rupee
amount less than that arrived at as mentioned above by a mutual
agreement with the ECB lender. It may be noted that the fair value
of the equity shares to be issued shall be worked out with
reference to the date of conversion only.FEMAIt is under Automatic
Route no prior or post approvals required from RBI/FIPB.ECB, due
for payment or not, eligible to be converted into equity if ECB was
taken in compliance with ECB regulations.Equity shares can be
issued to the ECB Lender entity.To obtain consent from ECB lender
for such conversion; supported by Indian Companys Board
Resolution.A Chartered Accountant's Certificate complying with RBI
Pricing/Valuation guidelines. The actual issue price of shares
shall not be less than the price determined on the basis of
valuation report.A Chartered Accountant's Certificate certifying
the amount outstanding on the date of conversion.Reporting under
Form FC-GPR. No intimation for Inward Remittance Report required to
be furnished to RBI; as not applicable being conversion of ECB.For
full conversion: Reporting of the conversion of ECB into equity, in
ECB-2 Return. The words ECB wholly converted to equity should be
clearly indicated on top of the ECB-2 form. Once reported, filing
of ECB-2 in the subsequent months is not necessary.In case of
partial conversion of ECB, the company shall report the converted
portion in Form FC-GPR to the Regional Office concerned as well as
in Form ECB-2 clearly differentiating the converted portion from
the non-converted portion. The words "ECB partially converted to
equity" shall be indicated on top of the Form ECB-2. In the
subsequent months, the outstanding balance of ECB shall be reported
in Form ECB-2 to DSIM.Conversion of ECB into EquityCompanies Act
2013:Valuation Report by a an independent Chartered Accountant in
practice having a minimum experience of ten years who shall submit
a valuation report to the company giving justification for the
valuation. The actual issue price of shares shall not be less than
the price determined on the basis of valuation report.
To hold Board meeting to convene EGM for conversion of ECB.
To pass a Special Resolution in a general meeting. To hold
Extra-Ordinary general meeting of shareholders. To File with RoC
FormMGT.14 u/s 117(3(a).
After EGM, to hold Board meeting for allotment of shares by
means of resolutions passed at meetings of the Board; and not by
resolution by circulation section 179(3)(c).
To file with RoC FormMGT.14 u/s 179(3(c) read with section
117(3)(g).
To maintain a complete record of such offers and acceptances in
Form No. PAS-5.
File with RoC a Return of Allotment in FormPAS-3with list of
allottees stating their names, address, occupation, if any, and
number of securities allotted to each of the allottees and the list
shall be certified by the signatory of the FormPAS-3as being
complete and correct as per the records of the company; along with
the valuation report by independent chartered accountant in
practice having a minimum experience of ten years.Pledge of shares
of company incorporated in IndiaAny person being a promoter of a
company registered in India (borrowing company), which has raised
external commercial borrowing, may pledge the shares of the
borrowing company or that of its associate resident companies for
the purpose of securing the external commercial borrowing (ECB)
raised by the borrowing company
Shares of an Indian company held by the non-resident investor
can be pledged in favour of an Indian bank in India to secure the
credit facilities being extended to the resident investee company
for bona fide business purposes
Shares of the Indian company held by the non-resident investor
can be pledged in favour of an overseas bank to secure the credit
facilities being extended to the non-resident investor /
non-resident promoter of the Indian company or its overseas group
company.
Any person being a non-resident investor of a company registered
in India and listed on a recognised stock exchange/s in India
(resident investee company), may pledge the shares of that company,
in favour of a Non-Banking Financial Company in India, to secure
the credit facilities being extended to that resident investee
company for bonafide business purposes, subject to the AD bank
satisfying itself of the compliance of the conditions stipulated by
the Reserve Bank, from time to time, in this regard
FC-GPRReporting of issue of sharesForm FC-GPR has to be duly
filled up and signed by Managing Director/Director /Secretary of
the Company and submitted to the Authorised Dealer of the company,
who will forward it to the concerned Regional Office of the Reserve
Bank. The following documents have to be submitted along with Form
FC-GPR:(i) A certificate from our Company Secretary certifying that
(a) all the requirements of the Companies Act, 1956 have been
complied with;(b) terms and conditions of the Government approval,
if any, have been complied with;(c) the company is eligible to
issue shares under these Regulations; and(d) the company has all
original certificates issued by authorised dealers in India
evidencing receipt of amount of consideration in accordance with
paragraph 8 of Schedule 1 to Notification No. FEMA 20/2000-RB dated
May 3, 2000.
(ii) A certificate from SEBI registered Merchant Banker /
Chartered Accountant indicating the manner of arriving at the price
of the shares issued to the persons resident outside India.
(iii) Board resolution duly certified by Company Secretary:
Since the date of incorporation, the Company ______ Limited has not
carried out any activity which is not FDI compliant. Further the
Company is doing and in future also will do only such activity
which is allowed under FDI Policy issued by DIPP, Ministry of
Commerce and Industry, Govt. of India.
CERTIFICATE TO BE FILED BY THE COMPANY SECRETARY OF THE INDIAN
COMPANY ACCEPTING THE INVESTMENT:(As per Para 9 (1) (B) (i) of
Schedule 1 to Notification No. FEMA 20/2000-RB dated May 3, 2000)In
respect of the abovementioned details, we certify the following :1.
All the requirements of the Companies Act, 1956 have been complied
with.2. Terms and conditions of the Government approval, if any,
have been complied with.3. The company is eligible to issue shares
/ convertible debentures/others under these Regulations.4. The
company has all original certificates issued by AD Category I banks
in India, evidencing receipt of amount of consideration in
accordance with paragraph 8 of Schedule 1 to Notification No. FEMA
20/2000-RB dated May 3, 2000.Note: If the company doesnt have full
time Company Secretary, a certificate from practicing Company
Secretary may be submitted.(Name & Signature of the Company
Secretary) (Seal)
DECLARATION TO BE FILED BY THE AUTHORISED REPRESENTATIVE OF THE
LIMITED LIABILITY PARTNERSHIP:A certificate from the Chartered
Accountant/Cost Accountant/ approved valuer from the panel
maintained by the Central Government, indicating the manner of
arriving at the fair price of the capital contribution/profit
shares issued to the persons resident outside India.Branch document
checklist- Filing form FC-GPRTrack No:Key Customer:
Yes/NoProduct:Name of
customer:______________________________________________________Case
Ref No.: _____________________________________________Rating :
_______________________Branch: ___________________Sol
ID_________Sr. NoGuideline/Documentation
RequiredYes/NoRemarks1Customer request letter for filing of form
FC-GPR with signature verification2Completely filled up &duly
signed Form FC-GPR3A certificate from Statutory Auditors/ SEBI
registered Category I Merchant Banker/Chartered Accountant
indicating the manner of arriving at the price of share issued to
the foreign investor 4KYC report of the remitter/ investor as per
RBI format5Copy of FIRC for the funds received6Company secretary
certificate of the Indian party accepting the investment7Additional
Documents Required as per the nature of investment (Ref: annexure
127)8Debit authority letter from the customer for collecting AD
Bank charges9Certified copy of board resolution for allotment of
shares/authorised share capitalSignature of CSE/CSM/Branch official
responsible:FC-GPR-ScrutinyCompany Secretarys Certificate Submit in
original All the clauses in the certificate must be as per format/
any conditionality mentioned Registration number of Practicing CS
Indian companys name indicated? (if issued not as a continuation
page of FCGPR) If name of investor/s, the number of shares issued /
date of issue mentioned in the certificate, whether they tally with
FCGPRChartered Accountants certificate Submit in original Subscribe
to MoA/ Rights/ Bonus No CA valuation certificate Valuation based
on latest balance sheet and as per erstwhile CCI guidelines
(allotment < 7.4.2010) Valuation based on Discounted Free Cash
Flow (DCF) Method (allotment=> 7.4.2010) W.E.F 15.7.2014, for
unlisted Internationally accepted methodology Fair Value has to be
indicated clearly Indian companys name is appearing in the
certificate Valuation of equity share as on the date/ near to the
date of issue is required CCPS/ CCDs/ warrants Date of issue of CA
certificate be nearest to the date of issue of shares. ESOPs plain
paper reporting for stock options- at the time of issue shares
FCGPR within 30 days- not more than 5% of capital and scheme as per
SEBI guidelines Merger/ Amalgamation Court order - FCGPR (not to
exceed sectoral cap activity permitted as per FDI policy) ECB
conversion in to Equity CA certificate for outstanding ECB, copy of
ECB-2 returnsFCGPR-For checking and reporting to RBI (For Issue of
Shares)Documents required for initial reporting to RBI:Certified
copy of FIRC.KYC of the overseas remitter.Letter from customer
addressed to RBI for inward remittance received.Initial reporting
format duly filled.In case where customer failed to report receipt
of inward remittance to RBI through A.D., within 30 days from the
date of receipt of remittance, a separate request letter clarifying
the reason for delay and also requesting RBI to condone the delay
on account of late submission should be forwarded along with
subsequent intimation of inward remittance.
Documents required along with FC GPR Form Part A:
KYC of the overseas remitter (Certified Copy from Remitting
Bank.) as per the prescribed format mentioned in the
circular.Certified copy of FIRC.CA VALUATIONCS certificate for
application of funds.Certified copy of Board Resolution for
issuance of shares.Acknowledgment from R.B.I. for report of inward
remittance OR UIN LETTER ISSUED BY RBIIf the remittance is under
approval route, copy of the FIPB/DIPP approval.Companies failing to
Issue shares/ Convertible debentures within 180 days from the date
of receipt of consideration needs to return the consideration to
the foreign investors or seeks RBIs approval for extension of
period for issue of shares/debentures.MOA of the company
requiredReporting under ESOPs for allotment of equity sharesAn
Indian company issuing sweat equity shares / employees stock option
/ shares issued against exercise of stock option to its
employees/directors or employees/directors of its holding company
or joint venture or wholly owned overseas subsidiary/subsidiaries
who are resident outside India shall furnish to the Regional Office
concerned of the Reserve Bank of India under whose jurisdiction the
registered office of the company operates, within 30 days from the
date of issue of employees stock option or sweat equity shares, as
per the Form-ESOP (Annex -13 to Master Circular).Foreign Direct
Investment-Reporting under FDI Scheme on the e-Biz platformA.P.
(DIR Series) Circular No.77 Dated 12th February, 2015Advance
Remittance Form (ARF) - used by the companies to report the foreign
direct investment (FDI) inflow to RBI; andFCGPR Form - which a
company submits to RBI for reporting the issue of eligible
instruments to the overseas investor against the above mentioned
FDI inflow.The design of the reporting platform enables the
customer to login into the e-Biz portal, download the reporting
forms (ARF and FCGPR), complete and then upload the same onto the
portal using their digitally signed certificates. The Authorised
Dealer Banks (ADs) will be required to download the completed
forms, verify the contents from the available documents, if
necessary by calling for additional information from the customer
and then upload the same for RBI to process and allot the Unique
Identification Number (UIN). It has been decided that the ARF and
FCGPR services of RBI will be operational on the e-Biz platform
from February 19, 2015. The user manual for the two services is
Annexed to this Circular.It may be noted that for the present, the
online reporting on the e-Biz platform is an additional facility to
the Indian companies to undertake their ARF and FCGPR reporting and
the manual system of reporting as prescribed in terms of A.P. (DIR
Series) Circular No.102 dated February 11, 2014 would continue till
further notice.Steps for a Business User for Application Submission
on eBiz Steps for Processing of Application by AD Bank Advanced
Foreign Remittance Steps for Resubmission of Application Steps for
applicant to apply for refund approval Steps to process refund
approval request Steps for Processing of Application by AD Bank
FC-GPRTransfer of shares - includesBuyback, delisting, exit, open
offer/substantial acquisition/SEBI SAST, capital reduction scheme
1/2TransferorTransfereeNon-Resident (other than NRI and erstwhile
OCB)Non-Resident (including NRIs)By way of sale or gift
Pricing norms not applicable.Under Automatic Route.With FIPB
approval if sector under approval route. NRIsNRIsBy way of sale or
gift
Pricing norms not applicable.
Under Automatic Route.With FIPB approval if sector under
approval route.Non-ResidentPerson resident in IndiaBy way of sale
or giftPricing norms applicable.
Under Automatic Route. Transfer of shares
2/2TransferorTransfereeNRI and erstwhile OCBNon-Resident
Pricing norms not applicable.
By way of sale or giftPrior permission of RBI.With FIPB approval
if sector under approval route.ResidentNon-Resident including
NRIsPricing norms applicable.Activities falling under Automatic
Route. With FIPB approval if sector under approval route.Transfer
of Shares by Resident which requires Government approval: (i)
Companies engaged in sector falling under the Government Route.
(ii) Transfer of shares resulting in foreign investments in the
Indian company, breaching the sectoral cap applicable.Non-Resident
can sell shares on a recognized Stock Exchange in India through a
stock broker registered with stock exchange or a merchant banker
registered with SEBI. Form FC-TRS within 60 days from the date of
receipt of amount of consideration. Onus on transferor /
transferee, resident in India.Acquisition of shares under the FDI
scheme by a non-resident on a recognized Stock Exchange A non
resident including NRI may acquire shares of a listed Indian
company on the stock exchange through a registered broker under FDI
scheme provided that: i. The non-resident investor has already
acquired and continues to hold the control in accordance with SEBI
(Substantial Acquisition of Shares and Takeover) Regulations; ii.
The amount of consideration for transfer of shares to non-resident
consequent to purchase on the stock exchange may be paid as below:
(a) by way of inward remittance through normal banking channels, or
(b) by way of debit to the NRE/FCNR account of the person concerned
maintained with an authorised dealer/bank; (c) by debit to
non-interest bearing Escrow account (in Indian Rupees) maintained
in India with the AD bank in accordance with Foreign Exchange
Management (Deposit) Regulations, 2000; (d) the consideration
amount may also be paid out of the dividend payable by Indian
investee company, in which the said non-resident holds control as
(i) above, provided the right to receive dividend is established
and the dividend amount has been credited to specially designated
non interest bearing rupee account for acquisition of shares on the
floor of stock exchange.iii. The pricing for subsequent transfer of
shares shall be in accordance with the pricing guidelines under
FEMA;iv. The original and resultant investments are in line with
the extant FDI policy and FEMA regulations in respect of sectoral
cap, entry route, reporting requirement, documentation, etc;
FC-TRSTransfer of shares/ convertible debentures/ partly paid
shares/ warrants
From Resident to a Non-resident and vice versa
File form FC-TRS with RBI through authorised dealer within 60
days of receipt of consideration (in quardruplicate)In respect of
the transfer from resident to non resident, the declaration has to
be signed by the non resident buyer, and in respect of the transfer
from non-resident to resident the declaration has to be signed by
the non-resident seller.For any delay in submission, AD Bank to
approach RO, RBIIndian company can record transfer only post
approval of Form-FC TRS by AD-BankOnus on transferor / transferee,
resident in IndiaOnus on reporting for purchase on recognized stock
exchange will be on the Investee company Inward remittance subject
to KYC norms (KYC check to be carried by remittance receiving
bank)AD Bank shall certify FC-TRS as being in orderFC-TRS should
not be forwarded to RBI. Instead, AD Bank branch will submit two
copies to IBD/FED/Nodal Office of the Bank in Specified Proforma.
It in turn will consolidate all transactions reported by their
branched on monthly basis into two statements inflow and outflow
statement; which will be forwarded to CO, RBI in soft copy.On
receipt of certificate from AD Bank, Company may record transfer in
its books. If transfer already effected by Indian company?On
receipt of Statements, RBI may seek information from transferor/
transferee/ their agents
FCTRS- For checking and reporting to RBI (For the Sale of
Shares)Transfer of shares from Non -Resident to Resident.
Request Letter/ debit authority for making a remittanceForm A2
& FEMA Declaration as per Banks prescribed formatConsent letter
duly signed by the Seller.Board resolution from remiter if a
Company/POA to BrokerConsent letter from BuyerShare holding pattern
of the Indian company (pre & post buy-back)CA VALUATION OF
SHARES OR COPY OF BROKER'S NOTE IF SALE IS MADE ON STOCK
EXCHANGE.Copy of reporting done to RBI for obtaining the
approval.RBI registration no. stating that the shares held was on
repatriation basis.Form 15 CA & CBForm FC-TRS (4 sets signed by
non-resident)ID proof of person signing FCTRS form.POA or Board
resolution authorizing person to sign FCTRS form.
DECLARATION FROM THE BUYER TO THE EFFECT THAT HE IS ELIGIBLE TO
ACQUIRE SHARES / COMPULSORILY AND MANDATORILY CONVERTIBLE
PREFERENCE SHARES / DEBENTURES UNDER FDI POLICY AND PRICING
GUIDELINES HAVE BEEN COMPLIED WITH.FCTRS- For checking and
reporting to RBI (For the Sale of Shares)In case of shares
transferred from Resident to Non Resident
Request Letter cum debit authority for our vetting
charges.Consent letter duly signed by the Seller.Consent letter
from BuyerShare holding pattern of the Indian company ( pre &
post buy-back)CA VALUATION OF SHARES OR COPY OF BROKER'S NOTE IF
SALE IS MADE ON STOCK EXCHANGE.Form FC-TRS (4 sets signed by
non-resident)ID proof of person signing FCTRS form.POA or Board
resolution authorizing person to sign FCTRS form.
DECLARATION FROM THE BUYER TO THE EFFECT THAT HE IS ELIGIBLE TO
ACQUIRE SHARES / COMPULSORILY AND MANDATORILY CONVERTIBLE
PREFERENCE SHARES / DEBENTURES UNDER FDI POLICY AND THE EXISTING
SECTORAL LIMITS AND PRICING GUIDELINES HAVE BEEN COMPLIED WITH.
FIRC copyKYC of the Remitter
Disclose in Balance SheetAn Indian company taking on record in
its books any transfer of its shares or convertible debenture by
way of sale from a resident to a non-resident and a non-resident to
a resident shall disclose in its balance sheet for the financial
year, in which the transaction took place, the details of valuation
of share or convertible debentures, the pricing methodology adopted
for the same as well as the agency that has given/certified the
valuation. If Contravened?To bring the difference form the foreign
investor to comply with pricing guidelines and also to apply for
compounding for contravention of pricing guidelines?
Online filing of the Foreign Currency Transfer of Shares
(FCTRS)A.P. (DIR Series) Circular No.9 Dated 21st August, 2015The
design of the reporting platform enables the customer to login into
the eBiz portal, download the reporting form (FCTRS), complete and
then upload the same onto the portal using their digitally signed
certificates. The Authorised Dealer Banks (ADs) will be required to
download the completed forms, verify the contents from the
available documents and if necessary, call for additional
information from the customer and then upload the same for RBI to
process and allot the Unique Identification Number (UIN). The FCTRS
services of RBI will be made operational on the e-Biz platform from
August 24, 2015. The user manual for this service is Annexed to
this Circular.It may be noted that for the present, the online
reporting on the e-Biz platform is an additional facility to the
Indian residents to undertake their FCTRS reporting and the manual
system of reporting as prescribed in terms of A.P. (DIR Series)
Circular No.6 dated July 18, 2014 would continue till further
notice.The following are users and their roles in eBiz
application:Business User:Register on eBiz portal; Submit
application; Make Payment; Provide clarification sought by the
department; View status updates sent by departmentAD Bank
User:Process the application; Forward to RBI RO; Raise objection if
required; Update status; Issue certificateDepartment User:Process
the application; Raise objection if required; Provide approval;
Update statusDownstream InvestmentsInvestment by Foreign Owned and/
or Controlled Indian company into another Indian companyCovers
fresh investment and acquisition of existing shares Regarded as
Indirect FDIPricing guidelines applicable to Direct FDI will
equally apply Investment/ consideration for transfer > Fair
Value Compliance: Filing of intimation with SIA, DIPP and FIPB
within 30 days from date of investmentDownstream buy-backs also
covered by pricing guidelines Buy-back price < Current Fair
Value Valuation needs to be done by a Chartered Accountant or SEBI
Regd. Merchant Banker Anomaly: Downstream investment through
acquisition of shares from NR Indian company can record share
transfer only on receiving acknowledged Form FC-TRS Foreign
CoIndian CoDownstream Indian Co> 50%1% to 100%Indirect
FDI/ControlEarlier: A company is considered as Controlled by
resident Indian citizens if the resident Indian citizens and Indian
companies, which are owned and controlled by resident Indian
citizens, have the power to appoint a majority of its directors in
that company.
Revised: Control shall include the right to appoint a majority
of the directors or to control the management or policy decisions
including by virtue of their shareholding or management rights or
shareholders agreements or voting agreements.
A company is considered as Owned by resident Indian citizens if
more than 50% of the capital in it is beneficially owned by
resident Indian citizens and / or Indian companies, which are
ultimately owned and controlled by resident Indian
citizens.Aviation Sector: Substantial ownership and effective
control of which is vested in Indian nationals
SEBI: Right of first refusal and tag along rights do not amount
to change in CONTROL as per Takeover Regulations
In sector which are not prohibited (e.g. retail), Indian
operating companies owned & controlled by Indians, invest
downstream into retail businesses, whether multi-brand, single
brand or e-commerce. Indirect cases:Prohibited sectors: Not
permitted.
RBI Master Circular: The FDI recipient Indian company at the
first level which is responsible for ensuring compliance with the
FDI conditionalities like no indirect foreign investment in
prohibited sector, entry route, sectoral cap/conditionalities, etc.
for the downstream investment made by in the subsidiary companies
at second level and so on and so forth would obtain a certificate
to this effect from its statutory auditor on an annual basis as
regards status of compliance with the instructions on downstream
investment and compliance with FEMA provisions.
Indirect foreign investment via Indian Owned & Controlled
Company: Telecom, I&B, Print Media, Single brand retail
Trading, Multi Brand Retail Trading, Media, Pharmaceuticals,
Construction and development projects/Real estate
Downstream investments by Indian companies will be subject to
the following conditions: (i) Such a company is to notify SIA, DIPP
and FIPB of its downstream investment in the form available at
http://www.fipbindia.com within 30 days of such investment, even if
capital instruments have not been allotted along with the modality
of investment in new/existing ventures (with/without expansion
programme); (ii) Downstream investment by way of induction of
foreign equity in an existing Indian Company to be duly supported
by a resolution of the Board of Directors as also a shareholders
agreement, if any; (iii) Issue/transfer/pricing/valuation of shares
shall be in accordance with applicable SEBI/RBI guidelines; (iv)
For the purpose of downstream investment, the Indian companies
making the downstream investments would have to bring in requisite
funds from abroad and not leverage funds from the domestic market.
This would, however, not preclude downstream companies, with
operations, from raising debt in the domestic market. Downstream
investments through internal accruals are permissible.Certificate
from Statutory Auditor for Downstream InvestmentThe FDI recipient
Indian company at the first level responsible for ensuring
compliance with the FDI conditionalities like no indirect foreign
investment in prohibited sector, entry route, sectoral cap /
conditionalities, etc. for the downstream investment made by in the
subsidiary companies at second level and so on and so forth would
obtain a certificate to this effect from its statutory auditor on
an annual basis as regards status of compliance with the
instructions on downstream investment and compliance with FEMA
provisions. The fact that statutory auditor has certified that the
company is in compliance with the regulations as regards downstream
investment and other FEMA prescriptions will be duly mentioned in
the Directors report in the Annual Report of the Indian company. In
case statutory auditor has given a qualified report, the same shall
be immediately brought to the notice of the RBI, Foreign Exchange
Department (FED), Regional Office (RO) of RBI in whose jurisdiction
the Registered Office of the company is located and shall also
obtain acknowledgement from the RO of having intimated it of the
qualified auditor report. RO shall file the action taken report to
the Chief General Manager-in-Charge, Foreign Exchange Department,
Reserve Bank of India, Central Office, Central Office Building,
Shahid Bhagat Singh Road, Mumbai 400001.Annual Return of
Liabilities & AssetsA.P. (DIR Series) Circular No. 45 & 133
dated 15 March, 2011 & 20 June 2012, FAQs 18 June 2014 By
Indian Companies: Capture statistics relating to Foreign Direct
Investment, both inward and outwardTo be filed
electronicallySubmitted by July 15 of every year to the RBI,
MumbaiTo be submitted by all Indian companies which have received
FDI and/or made FDI abroad in the previous year(s) including the
current yearCoverage:Methodology for valuation of foreign
liabilities and foreign assetsNature of activities principal line
of business as %, with NIC code (NIC Codes in the FCGPR and FCTRS
forms as per the NIC 2008 version)Name & country of
non-resident investor under FDIFinancial derivatives, Money market
instrumentsTrade credits, loans, Currency & DepositsODI and
Portfolio investment overseasContingent foreign
liabilitiesDisinvestments in India and Abroad
The filled in Excel based FLA return should be forwarded through
the official email id of any authorized person like CFO, Director,
Company Secretary etc. AcknowledgementAnnual Return on Foreign
Liabilities & Assets (FLA Return) (1/2)Due date of filing FLA
Return July 15 every yearEligible CompaniesIndian companies which
have received FDI and/or made ODI in the previous year(s) including
the current year i.e. who holds foreign Assets or Liabilities in
their Balance Sheets as on 31 MarchNo outstanding investment in
respect of inward and outward FDI as on end-March of reporting
yearNed not submit FLA Return
If a company has received only share application money and does
not have any FDI/ODI outstanding as on end-March of the reporting
yearNeed not submit FLA Return
If the company has not received any fresh FDI and/or ODI in the
latest year but the company has outstanding FDI and/or ODIRequired
to submit FLA ReturnRegistered Partnership Firms (Registered under
Partnership Registration Act) or branches or trustees, having any
outward FDI outstanding as on end-March of the reporting
yearRequired to send a request mail to get a dummy CIN number which
will enable them to file the Excel based FLA ReturnFLA Return
(2/2)Is it required to submit Annual Performance Report (APR) for
ODI, where FLA Return has been submitted ?Yes. FLA Return and APR
are two different Returns as per different FEMA NotificationsWho is
responsible to file FLA Return? From whose mail ID, the FLA Return
should be e-mailed? Filled-in Excel based FLA return should be
forwarded through the official email ID of any authorized person
like CFO, Director, Company Secretary etc.Format of FLA
ReturnUpdated FLA return to be downloaded from RBIs website every
year by end of MayWhere accounts are not audited before July 15FLA
Return to be submitted based on unaudited (provisional)
accountRevisions from the provisional information given by company
after accounts get auditedRevised FLA Return based on audited
accounts can be filed by September endNon-filing of return before
due dateViolation under FEMA, Penalty or prosecution may be
initiatedPartnership Firm / Proprietary Firm By NRI and PIO: On
non-repatriation basis: (Not engaged in any agricultural/plantation
or real estate business /print media sector)
On repatriation basisSubject to prior permission of RBI in
consultation with the Government of India. Generally not permitted
by FIPBOther than NRIs/PIO:Subject to prior approval of RBI
inconsultation with the Government of India. Generally not
permitted by FIPBSchedule 4 of FEMA 20NRIs may without any limit,
purchase on non-repatriation basis, shares or convertible
debentures of an Indian company issued whether by public issue or
private placement or right issue
Other than chit fund or a nidhi company or is engaged in
agricultural/plantation activities or real estate business or
construction of farm houses or dealing in Transfer of Development
Rights
By way of inward remittance through normal banking channels from
abroad or out of funds held in NRE/FCNR/NRO account
Sale/maturity proceeds (net of applicable taxes) of shares or
convertible debentures shall be credited only to NRO account
Investment by NRIs under Schedule 4 of FEMA 20 will be deemed to
be domestic investment at par with the investment made by
residents. Press Note No.7 dated 3rd June, 2015
Non-Resident Indian (NRI) means an individual resident outside
India who is a citizen of India or is an Overseas Citizen of India
cardholder within the meaning of section 7 (A) of the Citizenship
Act, 1955. Persons of Indian Origin cardholders registered as such
under Notification No.26011/4/98 F.I, dated 19.8.2002, issued by
the Central Government are deemed to be Overseas Citizen of India
cardholders. Vide The Citizenship (Amendment) Act 2015 w.e.f. 06
January 2015 read PN7 dated 03 June 2015
FPIs & NRIsFPIsIndividual holdingBelow10% of the
capitalAggregate limit for FIIs 24% of the capitalAggregate limit
of 24% can be increased to the sectoral cap/statutory ceiling
Special Resolution of Shareholders Prior intimation to
RBICertificate from the Company Secretary stating compliance of
FEMA and FDI PolicyAggregate under FDI and Portfolio Investment
Schemewithin the above capsIPOs onlyPermitted NRIsNRIs through
designated ADsup to 5 % of the paid- up capitalAggregate limit of
10% can beraised to 24 per cent
Special Resolution of Shareholders Prior intimation to
RBICertificate from the Company Secretary stating compliance of
FEMA and FDI PolicyShares purchased under Portfolio Investment
Scheme cannot be transferred by way of sale under private
arrangementExcept NRIs can transfer shares acquired under PIS to
close relativesIndian Investee Company eligible to raise the
aggregate cap of 24% for RFPIAn Indian company can raise the 24 per
cent ceiling to the sectoral cap / statutory ceiling, as
applicable, by passing a resolution by its Board of Directors
followed by passing a Special Resolution to that effect by their
General Body. Indian company raising the aggregate RFPI investment
limit of 24 per cent to the sectoral cap/ statutory limit, as
applicable to the respective Indian company, should necessarily
intimate the same to the Reserve Bank of India, immediately, as
hitherto, along with a Certificate from the Company Secretary
stating that all the relevant provisions of the extant Foreign
Exchange Management Act, 1999 regulations and the Foreign Direct
Policy, as amended from time to time, have been complied with.The
Indian Company thus raising the aggregate cap for RFPI investment
should inform Reserve Bank of India, Foreign Exchange Department,
Central Office, Shahid Bhagat Singh Marg, Fort, and Mumbai 400001.
The intimation should necessarily be accompanied by (a) a
resolution passed by Board of Directors of the Company enhancing
the FII aggregate cap, (b) A special Resolution to the effect
passed by the shareholders of the Company (c) a certificate from
the Company Secretary stating that all the relevant provisions of
the extant Foreign Exchange Management Act, 1999 regulations and
the Foreign Direct Policy, as amended from time to time, have been
complied with, (d) a certificate from the Company Secretary stating
that all the resident shareholders of the investee company are
owned and controlled by residents.Indian Investee Company eligible
to raise the aggregate cap of 10% for Portfolio Investments by SEBI
registered NRI/PIOThis limit for investment by NRI/PIO under
Portfolio investment scheme can be increased by the Indian company
from 10 per cent to 24 per cent by passing a General Body
resolution. Indian company raising the aggregate NRI investment
limit of 10 per cent to 24 per cent, should necessarily intimate
the same immediately to Reserve Bank of India, Foreign Exchange
Department, Central Office, Shahid Bhagat Singh Marg, Fort, Mumbai
400001. The intimation should necessarily be accompanied by (a) a
resolution passed by Board of Directors of the Company enhancing
the FII aggregate cap, (b) A special Resolution to the effect
passed by the shareholders of the Company (c) a certificate from
the Company Secretary stating that all the relevant provisions of
the extant Foreign Exchange Management Act, 1999 regulations and
the Foreign Direct Policy, as amended from time to time, have been
complied with, (d) a certificate from the Company Secretary stating
that all the resident shareholders of the investee company are
owned and controlled by residentsLimited Liability Partnerships
(LLPs)FDI in LLPs: Prior approval from FIPB Sectors/activities
where 100% FDI allowed No FDI-linked performance related conditions
(such as Non Banking Finance Companies or Development of Townships,
Housing, Built-up infrastructure and Construction-development
projects, or Retail sector etc.)Only by way of cash
considerationIndian company having FDI (direct or indirect
irrespective of % of such foreign investment), permitted to make
downstream investment in LLP only if both the company as well as
the LLP is operating in sectors where 100% FDI allowed, through
automatic routeDesignated Partner Resident in India under LLP Act
and FEMA
Restrictions to LLPs with FDI:Not in agricultural/plantation
activity, print media or real estate businessNot eligible to make
any downstream investment Not permitted to avail
ECBsRFPIs/FIIs/QFIs and FVCIs not permitted to invest in LLPs
Conversion of a company with FDI, into an LLP, allowed only if
above stipulations are met and with the prior approval of FIPB
FDI in an LLPFDI in an LLP either by way of capital contribution
or by way of acquisition / transfer of profit shares, would have to
be more than or equal to the fair price as worked out with any
valuation norm which is internationally accepted/ adopted as per
market practice (hereinafter referred to as fair price of capital
contribution/profit share of an LLP) and a valuation certificate to
that effect shall be issued by a Chartered Accountant or by a
practicing Cost Accountant or by an approved valuer from the panel
maintained by the Central Government.Form FOREIGN DIRECT
INVESTMENT-LLP-(II)Declaration regarding transfer of capital
contribution/profit shares of an Limited Liability Partnership from
resident to non- resident / non-resident to residentCertificate
indicating fair value of shares from the Chartered Accountant/Cost
Accountant/ approved valuer from the panel maintained by the
Central Government.LLPReporting Requirements Receipt of
consideration for capital contribution or profit share Within 30
days Form Foreign Direct Investment LLP(I) Copies of FIRC KYC
report of non-resident investor RBI will allot UIN for each
remittance Transfer of capital contribution or profit share between
Non-Resident and Resident Within 60 days Form Foreign Direct
Investment LLP(II) Non-Resident to Non-Resident transfer FIPB
approval required No specific reporting specified
DateRemittanceSale proceeds of shares is remittance of asset
governed by The Foreign Exchange Management (Remittance of Assets)
Regulations 2000 under FEMA.
Bank can allow remittance of sale proceeds of a security (net of
applicable taxes) to the seller of shares resident outside India,
provided the security has been held on repatriation basis, the sale
of security has been made in accordance with the prescribed
guidelines and NOC / tax clearance certificate from the Income Tax
Department has been produced.
Repatriation of Dividend: Without any restrictions (net of
applicable taxes) being Current Account Transactions. The rate of
dividend on convertible preference shares issued under these
Regulations shall not exceed 300 basis points over the Prime
Lending Rate of State Bank of India prevailing as on the date of
the Board meeting of the company in which issue of such shares is
recommended. Dividend on shares pending FCGPR registration is
permitted.
Repatriation of Interest: Without any restrictions (net of
applicable taxes) being Current Account Transactions. Bench mark
ceiling applicable for Preference Shares apply to interest as
well.
Credit of sale proceeds of Foreign Direct Investments in India
to NRE / FCNR(B) accounts permitted
Form 15CA/15CB .. 1/2Form 15CB not required: Part A of Form
No.15CA, if the amount of payment does not exceed fifty thousand
rupees and the aggregate of such payments made during the financial
year does not exceed two lakh fifty thousand rupees.
Form 15CB also not required if remittance is covered by
SPECIFIED LISTSPECIFIED LIST where Form 15CA/15CB not required
2/2Form A-2 codeNature of paymentS0001Indian investment abroad -in
equity capital(shares)S0002Indian investment abroad -in debt
securitiesS0003Indian investment abroad -in branches and wholly
owned subsidiariesS0004Indian investment abroad -in subsidiaries
and associatesS0005Indian investment abroad -in real
estateS0011Loans extended to Non-ResidentsS0202Payment- for
operating expenses of Indian shipping companies operating
abroad.S0208Operating expenses of Indian Airlines companies
operating abroadS0212Booking of passages abroad -Airlines
companiesS0301Remittance towards business travel.S0302Travel under
basic travel quota (BTQ)S0303Travel for pilgrimageS0304Travel for
medical treatmentS0305Travel for education (including fees, hostel
expenses etc.)S0401Postal servicesS0501Construction of projects
abroad by Indian companies including import of goods at project
siteS0602Freight insurance - relating to import and export of
goodsS1011Payments for maintenance of offices
abroadS1201Maintenance of Indian embassies abroadS1 202Remittances
by foreign embassies in IndiaS1301Remittance by non-residents
towards family maintenance and-savingsS1302Remittance towards
personal gifts and donationsS1303Remittance towards donations to
religious and charitable institutions abroadS1304Remittance towards
grants and donations to other Governments and charitable
institutions established by the Governments.S1305Contributions or
donations by the Government to international
institutionsS1306Remittance towards payment or refund of
taxes.S1501Refunds or rebates or reduction in invoice value on
account of exportsS1503Payments by residents for international
bidding".Remittance on winding up/liquidation of Companies AD Bank
have been allowed to remit winding up proceeds of companies in
India, which are under liquidation, subject to payment of
applicable taxes. Liquidation may be subject to any order issued by
the court winding up the company or the official liquidator in case
of voluntary winding up under the provisions of the Companies Act,
2013. AD Category I banks shall allow the remittance provided the
applicant submits: i. No objection or Tax clearance certificate
from Income Tax Department for the remittance. ii. Auditor's
certificate confirming that all liabilities in India have been
either fully paid or adequately provided for. iii. Auditor's
certificate to the effect that the winding up is in accordance with
the provisions of the Companies Act, 2013. iv. In case of winding
up otherwise than by a court, an auditor's certificate to the
effect that there is no legal proceedings pending in any court in
India against the applicant or the company under liquidation and
there is no legal impediment in permitting the remittance.
Access of funds from abroad by Indian CompaniesExternal
Commercial Borrowings (ECB): Commercial loans in the form of bank
loans, buyers credit, suppliers credit, securitized instruments
(e.g. floating rate notes and fixed rate bonds, non-convertible,
optionally convertible or partially convertible preference shares)
availed of from non-resident lenders with a minimum average
maturity of 3 years
Automatic RouteApproval Route
Foreign Currency Convertible Bonds (FCCBs)
Preference shares
Foreign Currency Exchangeable Bond (FCEB) 7171COMPLIANCE WITH
ECB GUIDELINESCOMPLIANCE WITH ECB GUIDELINES Primary
responsibility: Borrower concernedDesignated AD bank; To ensure
that raising / utilisation of ECB is in compliance with ECB
guidelines at the time of certification.REPORTING ARANGEMENTS For
allotment of Loan Registration Number (LRN), borrowers are required
to submit Form 83, in duplicate, certified by the Company Secretary
(CS) or Chartered Accountant (CA) to the designated AD bank. Copies
of loan agreement and offer documents for FCCB are not required to
be submitted with Form 83. One copy is to be forwarded by the
designated AD bank to the Director, Balance of Payments Statistics
Division, Department of Statistics and Information Management
(DSIM), Reserve Bank of India, Bandra-Kurla Complex, Mumbai 400
051.Borrower can draw-down loan only after obtaining LRN from DSIM,
Reserve Bank. Borrowers are required to submit ECB-2 Return
certified by the designated AD bank on monthly basis so as to reach
DSIM, Reserve Bank within seven working days from the close of
month to which it relates. Dissemination of Information Information
with regard to name of borrower, amount, purpose and maturity of
ECB under both Automatic and Approval routes are put on Reserve
Banks website, on a monthly basis, with a lag of one month to which
it relates.Data on ECB/FCCB for the month of September 2015I
AUTOMATIC ROUTE*ECB/ FCCBBorrowerEquivalent Amount in
USDPurposeMaturity Period (Appx)Maturity Period (Appx)1ECBRose
Plastic India Private Limited3,93,199Working Capital7 Years 10
Months7 Years 10 Months 2ECBHindustan Petroleum Corporation Limited
#25,00,00,000Modernisation5 Years 3 Months5 Years 3 Months 3ECBCPF
(India) Private Limited2,00,00,000Import of Capital Goods5 Years5
Years 4ECBThe Great Eastern Shipping Campany
Limited2,94,00,000Refinancing of Earlier ECB8 Years 1 Month8 Years
1 Month5ECBIntelligent Pure Water Technologies Private Limited
#11,50,778Rupee Expenditure Loc.CG3 Years 1 Month3 Years 1
Month6ECBSaurer Textile Solutions Private Limited33,70,277New
Project9 Years 7 Months9 Years 7 Months 7ECBNippon Carbide India
Private Limited6,04,065General Corporate Purpose7 Years 1 Month7
Years 1 Month8ECBZydus Technologies Limited3,38,55,990Refinancing
of Rupee loans4 Years 8 Months4 Years 8 Months 54ECBSarla
Performance Fibers Limited40,00,000Overseas Acquisition5 Years5
Years Automatic Route Total1,13,45,56,703* Based on Form 83
submitted for allotment of Loan Registration Number# Confirmation
sought from the AD bank regarding compliance with ECB guidelinesII
APPROVAL ROUTE*1ECBGlobal Vectra Helicorp Limited87,00,000Import of
Capital Goods10 Years 1 Month10 Years 1 Month2ECBReliance
Industries Limited1,47,14,13,397Refinancing of Earlier ECB3 Years 7
Months3 Years 7 Months Approval Route Total1,48,01,13,397Grand
Total2,61,46,70,100DELEGATION OF POWERS TO AUTHORISED DEALERS
(AD)ECBs raised under the automatic or approval routes(a)
Changes/modifications in the drawdown/repayment schedule:
(Irrespective of the number of occasions) associated with change in
the average maturity period or not and / or with changes
(increase/decrease) in the all-in-cost.(b) Changes in the currency
of borrowing: Proposed currency of borrowing is freely
convertible.(c) Change of the AD bank: Subject to No-Objection
Certificate (NOC) from the existing designated AD bank and after
due diligence.(d) Changes in the name of the Borrower Company:
Subject to production of supporting documents evidencing the change
in the name from the Registrar of Companies.(e) Transfer of ECB:
From one company to another on account of re-organisation at the
borrowers level in the form of merger / demerger / amalgamation /
acquisition duly as per the applicable laws / rules after
satisfying themselves that the company acquiring the ECB is an
eligible borrower.(f) Change in the recognized lender: Subject to
ensuring that the original lender as well as the new lender is
recognised lender as per extant ECB guidelines, there is no change
in the other terms and conditions of the ECB. (g) Change in the
name of Lender: After satisfying themselves with the bonafides of
the transactions and ensuring that the ECB continues to be in
compliance with applicable guidelines. DELEGATION OF POWERS TO
AUTHORISED DEALERS (AD)(h) Cancellation of LRN: Directly approach
DSIM for cancellation of LRN for ECBs availed, subject to ensuring
that no draw down for the said LRN has taken place and the monthly
ECB-2 returns till date in respect of the LRN have been submitted
to DSIM. (i) Change in the end-use of ECB proceeds: Subject to
ensuring that the proposed end-use is permissible under the
automatic route as per the extant ECB guidelines, there is no
change in the other terms and conditions of the ECB, and the
monthly ECB-2 returns till date in respect of the LRN have been
submitted to DSIM. Change in the end-use of ECBs availed under the
approval route will continue to be referred to the Foreign Exchange
Department, Central Office, Reserve Bank of India, as hitherto. (j)
Reduction in amount of ECB: (Irrespective of the number of
occasions) with or without any changes in draw-down and repayment
schedules, average maturity period and all-in-cost. (k) Change in
all-in-cost of ECB: Changes (decrease/increase) in all-in-cost of
the ECBs irrespective of the number of occasions. Note: i. Subject
to ensuring that the revised average maturity period and or
all-in-cost is/are in conformity with the applicable ceilings /
guidelines and the changes are effected during the tenure of the
ECB and the ECB continues to be in compliance with applicable
guidelines. ii. The changes in the terms and conditions of ECB and
/ or any other changes allowed should be reported to the Department
of Statistics and Information Management (DSIM) of the Reserve Bank
through revised Form 83 at the earliest, in any case not later than
7 days from the changes effected. While submitting revised Form 83
to the DSIM, the changes should be specifically mentioned in the
communication. Further, these changes should also get reflected in
the ECB 2 returns appropriately.Form-83(Reporting of loan agreement
details under Foreign Exchange Management Act, 1999)To be submitted
in duplicate by the borrower to designated Authorised Dealer (AD)
for all categories and any amount of external commercial borrowing
(ECB). After examining conformity with the extant ECB guidelines,
the AD may provide requisite details in Part F of the Form and
forward one copy (within 7 days from the date of signing loan
agreement between borrower and lender) for allotment of Loan
Registration Number (LRN) to: The Director, Balance of Payments
Statistics Division, Department of Statistics and Information
Management (DSIM), Reserve Bank of India, C-8-9 Bandra-Kurla
Complex, Mumbai 400 051
Borrower has given written undertaking to AD to the effect that
it has been submitting ECB-2 Returns regularly to RBI in respect of
past ECB/FCCB loans)
We hereby certify that the particulars given above are true and
correct to the best of our knowledge and belief and no material
information has been withheld and/or misrepresented. Furthermore,
the ECB is in compliance with the extant ECB guidelines.Place:___
___________________________________________________(Signature of
the Authorised Official of the Company)Date: ___________ Stamp
Name: ______________________
Designation:______________Place:_____________
_____________________________________(Signature of Company
Secretary/ Chartered Accountant)Date:_______________ Stamp Name:
_________________________________________Registration
No.:______________________________For allotment of Loan
Registration Number (LRN), borrowers are required to submit Form
83, in duplicate, certified by the Company Secretary (CS) or
Chartered Accountant (CA) to the designated AD bank.ECB-2Reporting
of actual transactions of External Commercial Borrowings (ECB)
under Foreign Exchange Management Act, 1999 (for all categories and
any amount of loan) Return for the month of ___________Submitted
within 7 working days from the close of the month through the
designated Authorised Dealer to the Director, Department of
Statistics and Information Management (DSIM), Balance of Payments
Statistics Division, Reserve Bank of India, C- 8/9, Bandra-Kurla
Complex, Bandra (East), Mumbai-400 051. If there is no transaction
during a particular period, a Nil Return should be submitted.The
Company Secretary / Chartered Accountant must scrutinise related
original documents and ensure that the return is complete and in
order as per ECB guidelines issued by Government/RBI, before
forwarding it to RBI. Certificate from Company Secretary /
Chartered Accountant We hereby certify that the ECB availed in
terms of approval granted by Government or RBI or under approval
route / automatic route is duly accounted in the books of accounts.
Further, ECB proceeds have been utilised by the borrower for the
purpose of ____________________________________. We have verified
all the related documents and records connected with the
utilisation of ECB proceeds and found these to be in order and in
accordance with the terms and conditions of the loan agreement and
with the approval granted by GoI (MoF) or RBI or under approval
route / automatic route and is in conformity with the applicable
ECB Guidelines. Authorised Signatory :
____________________________Name & Address :
__________________________________ Place : _____________
Registration No. : __________________________________ Date :
_____________ [Stamp]
__________________________________________________________________________________Calculation
of Average Maturity- An IllustrationLoan Amount = USD 2 millionDate
of drawal/ repayment (MM/DD/YY)DrawalRepaymentBalanceNo. of Days**
balance with the borrowerProduct = (Col.4 * Col. 5)/ (Loan amount *
360)Col. 1Col. 2Col. 3Col. 4Col. 5Col.
611/05/20070.750.75240.025005/06/20070.501.25850.147631/08/20070.752.004771.325027/12/20080.201.801800.450027/06/20090.251.551800.387527/12/20090.251.301800.325027/06/20100.301.001800.250027/12/20100.250.751800.187527/06/20110.250.501800.125027/12/20110.250.251800.062527/06/20120.250.00Average
Maturity3.2851** Calculated by = DAYS360 (first date, second date,
360)79External Commercial Borrowings (ECB)Request LetterForm 83Loan
Agreement (Duly signed by both the parties).Memorandum Of
Association of borrowerCopy of latest audited balance sheet of
borrower.Copy of RBI registration no. issued for FC-GPR reporting
(applicable if lender has equity investment in borrower
company)Board Resolution for availing External Commercial
Borrowings.Letter from the Indian CompanyActivity of Indian
CompanyBreakup of End Use of ECB (Amount wise
description)Undertaking that loan amount will not be used for any
of the End Uses not permitted by RBI.Declaration that No regulatory
investigations either by state or central authorities is pending
against the company or any of its Promoters, Directors, Authorized
SignatoriesAverage maturity and All in cost calculationCertificate
from borrowerForm ECB ( For Approval Route)
On receipt of complied documents, the bank will approach Reserve
Bank of India for Loan Registration Number.
Outward RemittancesRequest letterForm A2Invoice copy / Agreement
copyFEMA declaration15 CA and CBRouting of funds raised abroad to
IndiaIt has come to our notice that some Indian companies are
accessing overseas market for debt funds through overseas holding /
associate / subsidiary / group companies. It has also been reported
that such borrowings are raised at rates exceeding the ceiling
applicable in terms of extant FEMA regulations and that the funds
so raised are routed to the Indian companies which accounts for
sole/major operations of the group. Different modalities/structures
are resorted to for channeling such funds for Indian operations
including investment in rupee bonds floated by the Indian
company.On a review of the matter in light of the existing
regulatory framework, it is clarified as under:i. Indian companies
or their AD Category I banks are not allowed to issue any direct or
indirect guarantee or create any contingent liability or offer any
security in any form for such borrowings by their overseas holding
/ associate / subsidiary / group companies except for the purposes
explicitly permitted in the relevant Regulations.ii. Further, funds
raised abroad by overseas holding / associate / subsidiary / group
companies of Indian companies with support of the Indian companies
or their AD Category I banks as mentioned at (i) above cannot be
used in India unless it conforms to the general or specific
permission granted under the relevant Regulations.iii.Indian
companies or their AD Category I banks using or establishing
structures which contravene the above shall render themselves
liable for penal action as prescribed under FEMA, 1999.
Circular No. 41 dated November 25, 2014Security for External
Commercial Borrowings...1/22. Under the extant ECB guidelines, the
choice of security to be provided to the overseas lender / supplier
for securing ECB is left to the borrower. With a view to
liberalising, expanding the options of securities and consolidating
various provisions related to creation of charge over securities
for ECB at one place, it has been decided that AD Category-I banks
may allow creation of charge on immovable assets, movable assets,
financial securities and issue of corporate and / or personal
guarantees in favour of overseas lender / security trustee, to
secure the ECB to be raised / raised by the borrower, subject to
satisfying themselves that: (i) the underlying ECB is in compliance
with the extant ECB guidelines, (ii) there exists a security clause
in the Loan Agreement requiring the ECB borrower to create charge,
in favour of overseas lender / security trustee, on immovable
assets / movable assets / financial securities / issuance of
corporate and / or personal guarantee, and (iii) No objection
certificate, wherever necessary, from the existing lenders in India
has been obtained. 3. Once aforesaid stipulations are met, the AD
Category-I bank may permit creation of charge on immovable assets,
movable assets, financial securities and issue of corporate and /
or personal guarantees, during the currency of the ECB with
security co-terminating with underlying ECB, subject to the
following: (a) Creation of Charge on immovable assets: i. Such
security shall be subject to provisions contained in the Foreign
Exchange Management (Acquisition and Transfer of Immovable Property
in India) Regulations, 2000. ii. The permission should not be
construed as a permission to acquire immovable asset (property) in
India, by the overseas lender / security trustee. iii. In the event
of enforcement / invocation of the charge, the immovable asset /
property will have to be sold only to a person resident in India
and the sale proceeds shall be repatriated to liquidate the
outstanding ECB. (b) Creation of Charge on Movable Assets In the
event of enforcement / invocation of the charge, the claim of the
lender, whether the lender takes over the movable asset or
otherwise, will be restricted to the outstanding claim against the
ECB. Encumbered movable assets may also be taken out of the
country. Security for External Commercial Borrowings...2/2(c)
Creation of Charge over Financial Securities i. Pledge of shares of
the borrowing company held by the promoters as well as in domestic
associate companies of the borrower will be permitted. Pledge on
other financial securities, viz. bonds and debentures, Government
Securities, Government Savings Certificates, deposit receipts of
securities and units of the Unit Trust of India or of any mutual
funds, standing in the name of ECB borrower/promoter, will also be
permitted. ii. In addition, security interest over all current and
future loan assets and all current assets including cash and cash
equivalents, including Rupee accounts of the borrower with AD
Category-I banks in India, standing in the name of the
borrower/promoter, can be used as security for ECB. The Rupee
accounts of the borrower/promoter can also be in the form of escrow
arrangement or debt service reserve account. iii. In case of
invocation of pledge, transfer of financial securities shall be in
accordance with the extant FDI/FII policy including provisions
relating to sectoral cap and pricing as applicable read with the
Foreign Exchange Management (Transfer or Issue of Security by a
Person Resident outside India) Regulations, 2000. (d) Issue of
Corporate or Personal Guarantee i. A copy of Board Resolution for
the issue of corporate guarantee for the company issuing such
guarantee, specifying name of the officials authorised to execute
such guarantees on behalf of the company or in individual capacity
should be obtained. ii. Specific requests from individuals to issue
personal guarantee indicating details of the ECB should be
obtained. iii. Such security shall be subject to provisions
contain
