We are witnessing massive amount of foreign funds coming into India especially through investments into Start-ups. The government is also encouraging foreign investment through different incentives like liberalising FDI limit in various sectors.
However, due to lack of awareness, often start-ups fail to comply with FEMA and RBI regulations with respect to Foreign investments and as a result, they end up paying late fees and penalties for delayed filing and contraventions.
One of such important compliance to be adhered to while receiving foreign funding in the form of Equity Instruments is filing of Form FC-GPR(Foreign Currency- Gross Provisional Return)with RBI
In this article, we shall explain about the process of filing FCGPR, timelines to be adhered, common mistakes made while filing FC-GPR and consequences of late filing and other contraventions.
When is FC-GPR required to be filed and its due date?
An Indian company issuing equity instruments to a person resident outside India and where such issue is reckoned as Foreign Direct Investment, defined under the rules, shall report such issue in Form FC-GPR within 30 days from the date of issue of equity instruments
Procedure for Filing:
Create the Entity user id and update entity master (Complete FAQ’S for the same are available on the https://firms.rbi.org.in/firms/ portal)
Register for Business user from FIRMS portal
Log into FIRMSà Navigate to SMF tab (Single Master Form) àChoose Form FCGPR
Fillthe required details and submit the form
List of documents required while filing FC-GPR:
FIRC- to be obtained from the bank where the funding is received
KYC- to be obtained from the bank where the fund is received
Memorandum of Association (MOA)- signed by the authorised director
Board Resolution- filed with ROC for allotment of shares
List of allottees- filed with ROC for allotment of shares
Valuation certificate- by SEBI registered valuer/ Chartered Accountant/ Cost Accountant
CS certificate- in format as specified in notification no. FEMA/20(R)/ 2017-RB
CA/ CS Declaration- on terms of Equity instruments issued
Declaration by the Authorized Representative (Director)
Points to remember:
Amount mentioned in FIRC shall match with the total consideration against which the shares are allotted, any excess amount received shall be refunded
Date of KYC should be after the date of remittance
Nature of issue shall becorrectly mentioned in the FIRC
The nature of allotment (e.g. private placement)shall be specified in the board resolution and CS certificate
The post-transaction foreign share holding pattern shall match with the actual shareholding pattern
Issue price shall be equal to or above value per share determined as per valuation report
Other Compliances to be adhered to:
Foreign Liabilities and Assets Annual Return (FLA Return) is required to be submitted by all the India resident companies which have received FDI and/ or made overseas investment in any of the previous year. The same has to be filed before 15thJuly of the next financial year
Statement of Specified Financial Transactions (SFT) is a required to be filed by companies receiving amount of more than Rs.10 lakhs against issue of shares. The statement needs to be furnished within 31st May of next year for the financial year in which the transaction occurs
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