REPORTING OF FOREIGN INVESTMENTS TO RBI UNDER SMF AND FIRMS

REPORTING OF FOREING INVESTMENTS TO RBI UNDER SMF AND FIRMS

Reserve Bank of India has issued a Circular dated June 7, 2018- introducing Single Master Form [SMF] with an objective of integrating the existing reporting norms for various types of foreign investment in India. Further, RBI vide notification dated August 31, 2018, has directed AD Banks that all the Foreign Investment reporting would be made on FIRMS RBI website in Single Master Form [SMF] w.e.f. September 1, 2018.

INTRODUCTION:

As per Regulation 2(xviii) of the FEMA 20(R) – ‘Foreign Investment’ means any investment made by a person resident outside India on a repatriable basis in capital instruments of an Indian company or to the capital of an LLP;

As per Regulation 2(xvii) of the FEMA 20(R) “Foreign Direct Investment? (FDI) means investment through capital instruments by a person resident outside India in an unlisted Indian company, or in 10 percent or more of the post-issue paid-up equity capital on a fully diluted basis of a listed Indian company;”

Single Master Form subsumed 9 reporting Forms, such as FCGPR, FC-TRS, Form LLP-I, Form LLP-II, Form ESOP, Form CN, Form ODI and Form InVi.

S.N0 Type of Form Full Form Applicability Form
01 Form- FC-GPR Foreign Currency – Gross Provisional Return Issue of capital instruments by an Indian company to a person resident outside India
02 Form- FC-TRS Foreign Currency – Transfer of Shares Transfer of capital instruments between a person resident outside India and a person resident in India
03 Form LLP-I Limited Liability Partnerships-I Foreign direct investment in an LLP through capital contribution and profit shares;
04 Form LLP-II Limited Liability Partnerships-II Disinvestment or transfer of capital contribution and profit shares in an LLP
05 Form ESOP Employees’ stock option Scheme Issue of employee stock options, sweat equity shares or shares against the exercise of employee stock options by an Indian company to an employee resident outside India
06 Form CN Convertible Notes Issue or transfer of convertible notes;
07 Form DRR Depository Receipts Issue or transfer of depository receipts;
08 Form DI Downstream Investment Reporting of downstream investment or indirect foreign investment in a company or an LLP; and
09 Form InVi Investment Vehicle Reporting of investment by a person resident outside India in an investment vehicle

 

Procedure to be followed for reporting of SMF

Step 1:  Register as Entity User

  • Creation of Entity Master is the first step towards reporting under Single Master Form.

The RBI portal for registration in Entity Master can be accessed herehttps://firms.rbi.org.in

  • To register on Entity Master, the reporting Indian entity must authorize a single person to act as Entity User?, by issuing an authority letter in his favor.
  • Please refer to the format of authority letter at the end of the User Manual. The Entity User will be solely responsible for the information reported and shall be the point of contact for RBI, w.r.t. foreign investment in the entity.

Step 2:  Register as Business User

  • The Business User will register itself on FIRMs and select the IFSC code of the bank which would approve the eKYC and the reporting would be made in SMF. In case the IFSC details are changed.e BU wishes to submit the reporting to another branch or another bank, the entity being the same, he/she needs to repeat the registration process for a Business user with the new IFSC code and obtain separate Login.
  1. Go to the FIRMS website at https://firms.rbi.org.in
  2. At the Login box, click on the Registration form for New Business User.
  3. Fill up the details in the popped up registration form for BU;
  4. Click Submit button. In case any error is displayed, rectify the same and click the Submit button.
  5. A Message “Record Saved Successfully” is displayed at the top of the Login box

DOCUMENTS REQUIRED TO BE ATTACHED TO THE SMF

S.NO Type of Form When to File Attachments Remarks
1 For FCGPR Within 30 days from the date of allotment a. FIRC File Size Allowed 1 MB
b. KYC File Size Allowed 1 MB
c. Valuation Report File Size Allowed 1 MB
d. CS Certificate Merge into one file & File size shall not exceed 1 MB
e. Board Resolution
f. Terms of CCPS & Shareholding Pattern
g. Declaration Letter-By authorized a representative of Indian Company
h. Reason for the delay- If any
i. Debit advice note or Swift Message- In case of Excess amount received
In case the inward remittance received from a different person [i.e from other than Investor]    following documents required to be attached : File Size Allowed 1 MB
(a) KYC reports of both the remitter and the beneficial owner.
(b) A no-objection certificate (NOC) from the remitter for issuing capital instruments to the beneficial owner mentioning their relationship.
(c) A letter from the beneficial owner explaining the reason for the remitter making remittance on its behalf.
(d) A copy of agreement/board resolution from the investee company for issuing capital instruments to a person other than from who the remittance has been received.
 
2 For FC-TRS Within sixty days of the transfer of capital instruments or receipt/ remittance of funds[ whichever is earlier.] a. FIRC File Size Allowed 1 MB
b. KYC File Size Allowed 1 MB
c. Valuation Report File Size Allowed 1 MB
d. Buyer Consent Letter Merge into one file & File size shall not exceed 1 MB
e. Seller Consent Letter
f. FEMA Declaration & Other attachments
g. Declaration by Auth Representative- i.e Director
h. Debit Authorization Letter if any
i. Declaration by the non-resident transferor or transferee
j. Reason for Delay – If any
 
3 Form LLP-1 within 30 days from the date of receipt of the amount of consideration a. FIRC File Size Allowed 1 MB
b. KYC File Size Allowed 1 MB
c. Declaration Letter-By authorized a representative of Indian Company File Size Allowed 1 MB
d. Other Relevant Attachments if any
 
4 Form LLP-2 within 60 days from the date of receipt of funds a. FIRC File Size Allowed 1 MB
b. KYC File Size Allowed 1 MB
c. Valuation Certificate File Size Allowed 1 MB
d. Declaration Letter-By authorized a representative of Indian Company File Size Allowed 1 MB
e. Other Relevant Attachments if any
 
5 Form CN within 30 days of issue/ transfer a. FIRC File Size Allowed 1 MB
b. KYC File Size Allowed 1 MB
c. Declaration Letter-By authorized a representative of Indian Company File Size Allowed 1 MB
d. Other Relevant Attachments if any
 
6 Form ESOP within 30 days from the date of issue a. CS Certificate File Size Allowed 1 MB
b. Declaration Letter-By authorized a representative of Indian Company File Size Allowed 1 MB
c. Other Relevant Attachments if any
 
7 Form DRR Within 30 days of close of the issue/ program. a. Declaration Letter-By authorized a representative of Indian Company File Size Allowed 1 MB
b. Other Relevant Attachments if any
 
8 Form DI Within 30 days from the date of allotment of capital instruments. a. Declaration Letter-By authorized a representative of Indian Company File Size Allowed 1 MB
b. Other Relevant Attachments if any

Delays in Reporting:

  1. a) The person/ entity responsible for filing the reports provided in Part IV of this Master Directionshall be liable for payment of late submission fee (LSF) for any delays in reporting.

(i) The LSF shall be applicable to the transactions undertaken on or after November 7, 2017.

(ii) The payment of LSF is an option for regularising reporting delays without undergoing the compounding procedure.

  1. b) Calculation and Payment of LSF:

(i) Where LSF is required to be paid, the reports shall be, wherever necessary, conditionally acknowledged subject to payment of the LSF. The final acknowledgment/ communication, wherever applicable, shall be given after the late submission fee is paid by the applicant.

(ii) The amount of LSF will be as per the following Matrix:

Amount involved in reporting Late Submission Maximum amount of LSF
(in Rs.) Fee (LSF) as % of Applicable
  amount involved *  
Up to 10 million 0.05 percent Rs.1 million or 300% of the
    amount involved, whichever
    is lower
More than 10 million 0.15 percent Rs.10 million or 300% of the
    amount involved, whichever
    is lower

* The % of LSF will be doubled every twelve months the floor (minimum applicable amount) for LSF will be Rs 100

 

(iii) For calculating the LSF amount, the period of contravention shall be considered proportionately {(approx. rounded off to next higher month ÷ 12) X amount for 1 year}.

(iv) For the purpose of calculation, “mnths” shall include Sundays/ Holiday

(v) For the purpose of calculation, the period shall begin from the day after the 30th day (from the date of receipt of funds/ allotment or transfer of shares) and end on the day preceding the day on which the transaction report is received in the Reserve Bank The date of reporting to the AD bank shall be deemed to be the date of reporting to the Reserve Bank provided the prescribed documentation is complete in all respects.

(vi) In case the reporting form (whether in physical or electronic form) is incomplete then the delay will continue till such time the form is received completely in all respects.

(vii) The applicant cannot claim a refund in any manner for the amount already deposited as LSF. It will, therefore, be in the applicant’s own interest to ensure compliance with the reporting norms and timelines.

The LSF may be paid by way of a demand draft drawn in favor of “Reserve Bank of India” and payable at the Regional Office concerned.

Courtesy : CSThukaram Jadhav

Leave a Reply

Your email address will not be published. Required fields are marked *