FEMA

what is the procedure when  an foreign parent company, remits money to indian subsidiary company for issue of shares

Dear Member

Fema Compliances for FDI Reporting is as follows :

Foreign Investments in India is governed by Sub Section (3) of Section 6 of the Foreign Exchange Management Act, 1999 read with Notification No. FEMA 20/2000-RB dated May 3, 2000, as amended from time to time.  Company would be required to adhere to following compliances regarding FDI:

1. ALLOTMENT/REFUND

As per FEMA Notification no. FEMA 170/2007-RB dated November 13, 2007, Company receiving FDI in India should allot equity shares or refund the money within 6 (Six) months from the date of receipt of investment from outside India.

2. REPORTING OF FDI

A. Reporting of inflow:

Company would be required to report the details of the inflow to the Regional Office New Delhi of Reserve Bank of India within 30 days from the date of receiving investment from outside India for issuing shares under the FDI Scheme. Details to be reported are stated hereunder:

(i)         Name and address of the foreign investor/s;

(ii)        Date of receipt of funds in foreign currency and its rupee equivalent;

(iii)       Name and address of the Authorised Dealer through whom the funds have been received;

(iv)       Details of Government approval for the investment, if any; and

(v)       Foreign Inward Remittance Certificate (FIRC).

B. Reporting of issue of shares

After issue of shares, the company should file Form FC-GPR within 30 days from the date of issue.

Part A of Form FC-GPR has to be duly filled up and signed by the Authorised Signatory and submitted to the Authorised Dealer of the company, who will forward it to the Reserve Bank.

Along with Part A of FC-GPR, the following documents has to be attached by the company:

(i) A certificate from the Company Secretary of the company 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;

(ii) A 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. This certificate should be obtained before making allotment of shares in Board Meeting to ensure that allotment price adheres to pricing guidelines under FDI policy.

(iii) Certified True Copy of Board Resolution.

(iv) Foreign Inward Remittance Certificate (FIRC).

(v)  Know Your Customer Report issued by remittar foreign Bank about the investor.

C. Yearly Reporting

Company should file Part-B of FC-GPR on an annual basis with the Director, Balance of Payment Statistical Division, Department of Statistical Analysis & Computer Services, Reserve Bank of India, C9, 8th Floor, Bandra-Kurla Complex, Bandra (E), Mumbai – 400051.

This is an annual report to be submitted by July 31st every year, pertaining to all investments by way of direct investments/retained earnings in the company made during the preceding financial year (April to March).

3. ISSUE PRICE

Price of shares issued to Foreign Investor under the FDI Scheme should be done by a Chartered Accountant in accordance with the guidelines issued by the erstwhile Controller of Capital Issues.  Board of Directors should ensure that allotment price adheres to pricing guidelines under FDI Scheme.

Hope you find the same of some help.

Pls contact for further details

regards

CS Gaurav Jain

09212605990

waht are the procedure in respect of transfer of shares from NRI to NRI

Dear All,

i have a querry relating to foreign direct ivestment in India.

A 100% wholly owned subidiary set up india. to start the production raw material is required which is not available in india. overseas supplier put a advance payment condition for suuply of raw material. holding company make paymeny to the overseas supplier. indian company wants to issue shares to holding company in lieu of that payment becuase of insufficient funds.
Regards

No Its the responsibility of party to comply with FEMA.However if the party is not aware about the FEMA regulation ,he may hire outside consultant but ultimate liability /responsibility remains with party who received remittance