FEMA Consultant and Advisor in India
In India, Foreign Exchange Management Act (FEMA), 1999, and the Regulations made thereunder govern the foreign exchange market in India. Foreign exchange can be in the form of foreign investment, payments related to import and export of goods or services, loans, interests, donations, gifts, etc. Reserve Bank of India, which is also an apex bank of the country is the regulator for the foreign exchange market. Further, wherever applicable approval from the Department of Industrial Policy (DIPP) and various Ministries may also be required depending on the nature of the transactions.
Some major reporting requirements under FEMA include:
Reporting requirement for Liaison Office/ Branch Office/ Project Office
- Annual Activity Certificate (AAC): Branch Office (BO)/Liaison Office (LO)/ Project Office (PO) are required to submit an Annual Activity Certificate as of the end of March 31 along with the audited financial statements including receipt and payment account on or before 30th September of every year. The BO/LO needs to submit the AAC to the designated AD Category -I bank as well as Director-General of Income Tax (International Taxation), New Delhi whereas the PO needs to submit the AAC only to the designated AD Category -I bank.
- Annual Return on Foreign Liabilities and Assets (FLA Return): An Indian company that has received FDI or an LLP which has received investment by way of capital contribution in the previous year(s) including the current year should submit FLA Return to the Reserve Bank on or before the 15th day of July of each year. The Form is required to be filed online on RBI’s FLAIR system.
- Form Foreign Currency-Gross Provisional Return (FC-GPR): An Indian company issuing capital instruments to a person resident outside India and where such issue is reckoned as Foreign Direct Investment shall report such issue in Form FC-GPR within 30 days from the date of issue of capital instruments. The Form is required to be filed online via RBI’s SMF portal.
- Form Foreign Currency-Transfer of Shares (FC-TRS): Form FC-TRS is required to be filed in the following cases.
- Transfer of capital instruments between a person resident outside India holding capital instruments in an Indian Company on a repatriable basis and a person resident outside India holding capital instruments on a non-repatriable basis.
- Transfer of capital instruments between a person resident outside India holding capital instruments in an Indian company on a repatriable basis and a person resident in India.
The onus of filing Form FC-TRS is on the resident transferor/ transferee or the person resident outside India holding capital instruments on a non-repatriable basis, as the case may be. Form FCTRS shall be filed online on RBI’s SMF portal within sixty days of the transfer of capital instruments or receipt/ remittance of funds whichever is earlier.
- Form ESOP: An Indian company issuing Employees’ Stock Option (ESOP) to persons resident outside India who are its employees/ Directors or employees/ directors of its holding company/ joint venture/ wholly-owned overseas subsidiary/ subsidiaries shall file Form ESOP within 30 days from the date of issue of ESOPs. The Form is required to be filed online on RBI’s SMF portal.
External Commercial Borrowing (ECB):
ECB can be accessed either under Automatic Route or under Approval Route. The reporting requirement for ECB include:
- Form ECB: Application for raising ECB under Approval Route and for allotment of Loan Registration Number (LRN) for ECB
- ECB 2 Return: Reporting of actual transactions of ECB on a monthly basis so as to reach Department of Statistics and Information Management within 7 working days from the close of month to which it relates.
Overseas Direct Investment
Form ODI Part I: Application for allotment of Unique Identification Number (UIN) and reporting of Remittances/ Transactions
Form ODI Part II: Annual Performance Report (APR)
Form ODI Part III: Report on disinvestment by way of
- Closure/ Voluntary Liquidation/ Winding up/ Merger/ Amalgamation of overseas joint venture (JV)/ wholly-owned subsidiary (WOS);
- Sale transfer of the shares of the overseas JV/ WOS to another eligible resident or non-resident
- Closure/ voluntary liquidation/ winding up/ Merger/ Amalgamation of IP; and
- Buyback of shares by the overseas JV/ WOS of the IP/ RI.
Reporting requirement for Limited Liability Partnership
- Form FDI- LLP (I): A Limited Liability Partnerships (LLP) receiving the amount of consideration for capital contribution and acquisition of profit shares shall submit Form FDI- LLP (I) within 30 days from the date of receipt of the amount of consideration. The Form is required to be filed online on RBI’s SMF portal.
- Form FDI-LLP (II): The disinvestment/ transfer of capital contribution or profit share between a resident and a non-resident (or vice versa) shall be reported in Form FDI-LLP(II) within 60 days from the date of receipt of funds. The Form is required to be filed online on RBI’s SMF portal.
In addition to the aforesaid reporting requirements, our team of dedicated professionals can assist with the below mentioned compliance:
- Drafting of Subscription and Shareholders’ Agreement;
- Advisory on investment in capital instruments by a person resident outside India
- Advisory on the transfer of capital instruments between a person resident outside India and a person resident in India
- Advisory on External Commercial Borrowing and related issues
- Advisory on investment outside India by a person resident in India
- Advisory on investment in LLP
- Other compliances under various FEMA Regulations