FEMA Compliances For FDI/ODI

FEMA COMPLIANCE FOR FDI/ODI

Foreign Exchange Management Act(FEMA) is the legislation which directs the foreign currency in India.The importance of FEMA compliances is indispensable considering the fact there are penal consequences in case of non-compliances.In order to capture the statistics relating to FDI and ODI in a more comprehensive manner RBI has introduced the requirement to file Annual Return on Foreign Liabilities and Assets (‘FLA Return’) on or before 15 July every year.

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Foreign Exchange Management Act (FEMA) is the legislation which governs the foreign currency in India. The main aim of FEMA is to facilitate external trade, balance the payments, promote the orderly development, and maintain the foreign exchange market in India. Every Company who is receiveing Fund in India from outside India is required to follow the provisions of FEMA.

Annual Return on Foreign Liabilities and Assets (FLA Return):

FLA (Annual Return of Foreign Liabilities and Assets) Return is required to be compulsorily submitted by all the India companies which have received any FDI and/ or made ODI in any of the previous year(s), including current year Who holds foreign assets or liabilities in their financial statements as on 31 March on or before 15 July every year.If the Indian company does not have any outstanding investment in respect of FDI and/or ODI as on end of the reporting year, the Company need not submit the FLA Return. Similarly, if the Indian company has not ‘received any fresh FDI and/or ODI in the latest year but the company has outstanding FDI and/or ODI, then that company is still required to submit the FLA Return every year by 15 July.
Annual Performance Report (APR)

In respect of each Joint Venture (JV) / Wholly Owned Subsidiary (WOS) outside India, an Indian Party (IP) / Resident Individual (RI) which has made an Overseas Direct Investment (ODI) has to submit an Annual Performance Report (APR) in Form ODI Part II to the AD bank . An Indian Party (IP) / Resident Individual (RI) which has made an Overseas Direct Investment (ODI) is required to file on or before 31st December, every year. APR is required to be certified by the statutory auditor of the Indian Company. Certification of APRs by the Statutory Auditor or Chartered Accountant shall not be insisted upon in the case of Resident Individuals and self-certification is sufficient in such case.
External Commercial Borrowings

Borrowers are required to report all ECB transactions to the RBI on a monthly basis through an AD Category – I Bank in the form of ‘ECB 2 Return’. Borrowers are required to report all ECB transaction on monthly basis.The revised ECB 2 Return simplifies disclosure of hedging details into two ways – financial and natural and requires disclosure of only the following: 1. Outstanding principal ECB amount and the currency thereof; 2. Notional value and percentage of outstanding ECB amount of financial hedge(s) as well as natural hedge; and 3. Annualised percentage cost of financial hedge(s) for ECB.
Single Master Form {w.e.f. 30.06.2018} :

Integrates the reporting requirements for FDI in india, irrespective of the instrument through which foreign investment is made.Subsumes of FC-GRP, FC-TRS, LLP-I, LLP-II, CN, ESOP, DI, DRR forms into one single master form. 1. FDI reporting in Form FC-GPR under SMF has to be done within 30 days after the allotment.FC-TRS: Filing by Individual: Reporting in FC-TRS can be done by the transferor / transferee company resident in India. In case of transfer between individuals, reporting can be done by resident individual after registering as business user and in this case the authority letter must be in the name of the person who is reporting. 2. Reporting under FC-TRS under SMF has to be done within 60 days of transfer of capital instruments or receipt / remittance of funds whichever is earlier. 3. Form LLP-I & LLP-II is filed for reporting FDI & transfer of capital contribution or profit share in LLPs, respectively. 4. Reporting in respect of issue or transfer of Convertible Notes (CN) is done in Form CN within 60 days of such transfer.