Allotment of shares to FDI
A. Time period for Issue of Certificate:
• The capital instruments should be issued within 180 days from the date of receipt of the inward remittance received through normal banking channels including escrow account opened and maintained for the purpose or by debit to the NRE/FCNR (B) account of the non-resident investor.
• Refund in case of non Compliance: In case, the capital instruments are not issued within 180 days from the date of receipt of the inward remittance or date of debit to the NRE/FCNR (B) account, the amount of consideration so received should be refunded immediately to the non-resident investor by outward remittance through normal banking channels or by credit to the NRE/FCNR (B) account, as the case may be.
Exception: In exceptional cases, refund of the amount of consideration outstanding beyond a period of 180 days from the date of receipt may be considered by the RBI, on the merits of the case.
• Non-compliance with the above provision would be reckoned as a contravention under FEMA and would attract penal provisions.
B. Issue price of shares
Price of shares issued to persons resident outside India under the FDI Policy, shall not be less than –
Allotment of Shares:
i. Listed Shares: – The price worked out in accordance with the SEBI guidelines, as applicable.
ii. Non-Listed Shares:-
On Allotment of Shares: The fair valuation of shares done by a
SEBI registered Merchant Banker or
A Chartered Accountant as per any internationally accepted pricing methodology on arm’s length basis.
On Subscription of Shares on Incorporation:
Where non-residents (including NRIs) are making investments in an Indian company in compliance with the provisions of the Companies Act, as applicable, by way of subscription to its Memorandum of Association, such investments may be made at Face Value subject to their eligibility to invest under the FDI scheme.
C. [1] Reporting of FDI:
STEP-1
Reporting of Amount Consideration:-
An Indian company receiving investment from outside India for issuing shares/convertible debentures/preference shares under the FDI Scheme, should report the details of the amount of consideration to the Regional Office concerned of the Reserve Bank not later than 30 days from the date of receipt in the Advance Reporting.
Reporting of Receipt of Money:-
Indian companies are required to report the details of the receipt of the amount of consideration for issue of shares/convertible debentures, through an AD Category-I bank, together with a
• Copy/ies of the FIRC/s evidencing the receipt of the remittance along with
• The KYC report on the non-resident investor from the overseas bank remitting the amount.
STEP-II
Unique Identification Number-
The report would be acknowledged by the Regional Office concerned, which will allot a Unique Identification Number (UIN) for the amount reported.
STEP-III
Reporting of Issue of Shares-
After issue of shares the Indian company has to file Form FC-GPR, not later than 30 days from the date of issue of shares.
Condition of FCGPR:
Signing of FCGPR: Form FC-GPR has to be duly filled up and signed by Managing Director/Director/Secretary of the Company and submitted to the Authorized Dealer of the company, who will forward it to the Reserve Bank.
Documents to be Submit: The following documents have to be submitted along with the form:
a. Certificate from Company Secretary: [2] A certificate from the Company Secretary of the company certifying that:
– All the requirements of the Companies Act, as applicable, have been complied with
– Terms and conditions of the Government of India approval, if any, have been complied with
– The company is eligible to issue shares under these Regulations; and
– The company has all original certificates issued by authorized dealers in India evidencing receipt of amount of consideration
b. Valuation Certificate:
A certificate from SEBI registered Merchant Banker or Chartered Accountant indicating the manner of arriving at the price of the shares is Indiad to the persons resident outside India.
c. Proof of receipt of Consideration: The report of receipt of consideration.
d. [3] Submission of Form: Form FC-GPR have to be submitted by the AD Category-I bank to the Regional Office concerned of the Reserve Bank under whose jurisdiction the registered office of the company is situated.
D. Annual return on Foreign Liabilities and Assets:
• Annual return on Foreign Liabilities and Assets should be filed on an annual basis by the Indian company, directly with the Reserve Bank.
• This is an annual return to be submitted by 15th of July every year, pertaining to all investments by way of direct/portfolio investments/reinvested earnings/other capital in the Indian company made during the previous years (i.e. the information submitted by 15th July will pertain to all the investments made in the previous years up to March 31).
• The details of the investments to be reported would include all foreign investments made into the company which is outstanding as on the balance sheet date.
• The details of overseas investments in the company both under direct/portfIndiao investment may be separately indicated
[1] Reporting of Partly Paid up Shares- Explanation: An Indian company issuing partly paid equity shares, shall furnish a report not later than 30 days from the date of receipt of each call payment.
[2] For companies with paid up capital with less than Rs.5 crore, the above mentioned certificate can be given by a practicing company secretary
[3] An Indian company issuing partly paid equity shares shall file a report in form FC-GPR to the extent they become paid up
