FEMA-PROJECT PROFILE

Hi Jayanta,

This kind of mismatch in classification under FEMA forms can be tricky but here’s how you can approach it:

Issue:

• You reported both equity and redeemable preference shares (RPS) as equity in the original FC (Foreign Collaboration) form.

• Now you want to bring back (repay) the amount corresponding to RPS ("y" amount), but since it was recorded as equity, the AD (Authorized Dealer) is not processing your application.

• Also, this is blocking your APR (Annual Performance Report) and FLA (Foreign Liabilities and Assets) returns.

How to proceed:

1. Submit a rectification application to RBI via your AD bank:

   • Prepare a letter explaining the error in the original FC form (showing RPS as equity instead of separate classification).

   • Request rectification/change in the project profile with supporting board resolutions and share certificates showing nature of shares.

2. Provide supporting documents:

   • Copy of the original FC form.

   • Board resolution approving investment and terms of preference shares.

   • Share certificates clearly distinguishing equity shares and RPS.

   • Auditors certificate confirming classification.

3. Engage with AD bank and RBI:

   • Your AD bank can forward your application to RBI with their comments.

   • RBI may seek clarifications or require further documents.

   • Be prompt in providing any additional info.

4. Explain repatriation intention:

   • Clarify that the amount to be brought back is RPS (which may be redeemable) and hence treated differently from equity.

   • RBI often allows redemption of preference shares subject to FEMA limits and conditions.

5. Follow up regularly:

   • RBI processing can take time, but consistent follow-up through your AD bank is important.

   • Keep copies of all correspondence.

Additional tips:

• If the AD bank is not cooperating, you can escalate the issue to the regional RBI office or FEMA department.

• You may also seek help of a FEMA consultant or legal expert familiar with overseas investment regulations.

• Ensure future filings clearly distinguish between equity and preference shares to avoid issues.