Reporting of Foreign Direct Investment in India

Foreign Direct Investment (FDI) has been an important source of funds for companies in a country where capital is scarcely available. Under FDI, overseas money, either by an individual or entity, is invested in an Indian company. 

Modes of FDI

Investment in India can be made either under Automatic Route which does not require approval from RBI or under Approval Route which requires prior approval from the concerned Ministries / Departments via a single window - Foreign Investment Facilitation Portal (FIFB) administered by the Department of Industrial Policy & Promotion (DIPP), Ministry of Commerce and Industry, Government of India. 

Forms of Business for Foreigners

A Foreign business entity can enter India via a following number of alternatives, subject to general conditions mentioned in FDI Policy:

1. As an Indian Company either by setting up a wholly owned subsidiary or Joint Venture with an Indian entity/person.  
2. Operate as a Foreign Company and be registered with the Registrar of Companies, MCA. 

Liaison office - This type of office is only allowed to collect market information and liaison with the foreign company. They are not allowed to earn income from any activities.  

Branch Office - The scope of activities of BOs is much larger as compared to Liaison Offices. BOs are allowed to generate revenue by various providing professional services and technical support for products imported/assembled/manufactured by the parent/holding company. 

Project Office - Set up to execute specific projects, project offices are allowed in India if:

1. The foreign entity has secured a contract in India, which will be funded via inward remittance by either a bilateral or multilateral financing agency.
2. Loan has been sanctioned by a public financial institution or bank to the Indian company contracting the project. 

FDI in Limited Liability Partnership 

FDI in LLPs is allowed upto 100% under automatic route since 2015 provided LLPs are adhering to the specific sectoral limits. Foreign companies or individuals can be appointed as Partner or Designated Partner of LLP.  LLPs can make further downstream investment in another company or LLP. Earlier they were not permitted to make any downstream investments. Repatriation of capital is permissible with adherence of appropriate pricing guidelines and reporting requirements. 

FDI in Private Limited Company

An Eligible Indian Company can take foreign investment and issue shares and other convertible securities subject to the Companies Act, 2013, Foreign Exchange Management Act, 2000 and Consolidated FDI Policy.

Payment for Share and other specified securities

An India company issuing shares to a person resident outside India should receive the payment for the shares through one of the following routes:

• Inward remittance through normal banking channel.
• Debit to NRE/FCNR account of the person concerned maintained with an authorised dealer or bank in India.

RBI Compliances Post Allotment

Earlier, there was 2 stage reporting requirement i.e First reporting after receipt of money in Advance Reporting Form (ARF) and Second after allotment in form FC-GPR. Now, Only 1 reporting is required to be made i.e after allotment in form FC-GPR.

After receipt of Money, Investee Indian Company has to call Board Meeting and allot securities as per provisions of Companies Act, 2013. Investee Indian Company has to file e-form PAS-3 with the RoC within 30 days of Allotment.

Investee Indian Company has to additionally file form FC-GPR with the RBI in firms portal of RBI. The following are the steps required for reporting of foreign investment.

1. Creation of Entity User

Investee Indian Company has to create Entity Master if they are receiving foreign investment first time through this link: https://firms.rbi.org.in/firms/faces/pages/EntityUser.xhtml

Entity User is short form required to be filed by authorized representative of Investee Indian Company with the following details:

• His / Her Full name, Address, Email Id, PAN, Mobile No;
• User Name for Investee Indian Company;
• Name of Investee Indian Company/LLP, Address and its CIN/LLPIN;
• Jurisdictional Regional office of RBI;
• Authority Letter in a specified format.

Once Entity Master form is approved, you will get user id and password in your provided e-mail id. Login to https://firms.rbi.org.in/firms/faces/pages/login.xhtml and fill entity master details.

2. Creation of Business User

After successful filing of entity master details, Investee Indian Company has to create business user through this link:

https://firms.rbi.org.in/firms/faces/pages/RegistrationMaster.xhtml

Business User is short form required to be filed by authorized representative of Investee Indian Company with the following details:

• His/Her Full name, Address, Email Id, PAN, Mobile No;
• User Name for Investee Indian Company;
• Details of Authorized Dealer Bank to whom reporting is made;
• Name of Investee Indian Company, PAN and CIN;
• Authority Letter in a specified format.

Once Business User is created, you will get user id and password in your provided e-mail id. Login to https://firms.rbi.org.in/firms/faces/pages/login.xhtml. After login you can find Single Master Form (SMF) in left tab. You can click and select FC-GPR for reporting of foreign investment.

3. Filing of form FC-GPR for issue of shares

Form FC-GPR needs to be filled within 30 days from the date of issue of shares with the following documents:

• Copy of Foreign Inward Remittance Certificate received from AD Bank
• Copy of KYC of Foreign Investor received from AD Bank
• Certificate from the Company Secretary of the company accepting investment from persons resident outside India certifying that:
  • All the requirements of the Companies Act, 2013 have been complied with;
  • Terms and conditions of the Government approval, if any, have been complied with;
  • The company is eligible to issue shares under these Regulations; and
  • The company has all original certificates issued by authorised dealers in India evidencing receipt of amount of consideration;

• Certificate from Statutory Auditors or Chartered Accountant indicating the manner of arriving at the price of the shares issued to the persons resident outside India.
• Declaration from Director/Authorized Representative of Investee Indian Company in a specified format.
• Any other supporting documents like MOA in case of allotment towards subscription, Board / General Meeting Resolution in case of subsequent allotment etc.