FEMA FDI Regulations

1. Analysis of Inbound Investment Regulations
CA Murali Krishna G
gmk@grandhiandassociates.in
Date: 28th April 2020

2. Agenda
 Introduction to the FEMA
 Key Definitions
 Rules and Regulations at glance
 FDI – Allotment of shares
 FDI – Transfer of Shares
 Other related matters
2

3. Act
Regulations
Master
Directions
AP (DIR) Series
Circulars
FAQs
Special
permissions
Rules Press Notes
Schematic flow of the Law
3

4. 4
Approach to Foreign Exchange Transactions
Anti Money-Laundering
Unregulated Deposits
Exchange Control Regulations
Corporate Laws
Income Tax Act
National Interest

5. FEMA Act – Introduction
 Rationale behind the Act
 Effective date of new Act
 Applicability of the Act
 Its size and nature
 49 Sections
 7 Rules
 28 Regulations
 Several Notifications
 Several AP (DIR Series) Circulars
 Several Press Notes
 Other related matters
5

6. Key Definitions (1/4)
 Authorized Person [2(c)]
 Capital Account Transaction [2(e)]
 a transaction which alters
 the assets or liabilities, including contingent liabilities, outside India of
persons resident in India
 or assets or liabilities in India of persons resident outside India,
 includes transactions referred to in sub-section (3) of section 6
6

7. Key Definitions (2/4)
 Current Account Transaction [2(j)]
 transaction other than a capital account transaction, and includes
 payments due in connection with
 foreign trade,
 other current business,
 services, and
 short-term banking and credit facilities in the ordinary course of business
 payments due as interest on loans and as net income from investments,
 remittances for living expenses of parents, spouse and children residing
abroad, and
 expenses in connection with foreign travel, education and medical care of
parents, spouse and children
7

8. Key Definitions (3/4)
 Foreign Currency [2(m)]
 Foreign Exchange [2(n)]
 Means foreign currency and includes
 deposits, credits and balances payable in any foreign currency
 drafts, travelers cheques, letters of credit or bills of exchange, expressed or drawn in
Indian currency but payable in any foreign currency
 drafts, travelers cheques, letters of credit or bills of exchange drawn by banks, institutions
or persons outside India, but payable in Indian currency
 Foreign Security [2(o)]
 Means any security
 in the form of shares, stocks, bonds, debentures or
 any other instrument denominated or expressed in foreign currency and
 includes securities expressed in foreign currency, but where redemption or any form of
return such as interest or dividends is payable in Indian currency
8

9. Key Definitions (4/4)
 Person[2(u)] – includes
 individual,
 HUF,
 company,
 firm,
 AOP or a BOI, whether incorporated or not,
 every artificial juridical person, and
 any agency, office or branch owned or controlled by such person
 Currency [2(h)]
 includes
 all currency notes, postal notes, postal orders, money orders,
 cheques, drafts, travellers cheques,
 letters of credit, bills of exchange and promissory notes,
 credit cards or such other similar instruments, as may be notified by the Reserve
Bank
9

10. Definition of Resident in India (2 (v)) (1/2)
a person residing in India for more than 182 days
during the course of the preceding financial year
A person who has gone out of India or who stays
outside India, in either case-
(a) for or on taking up employment outside India, or
(b) for carrying on outside India a business or
vocation outside India, or
(c) for any other purpose, in such circumstances as
would indicate his intention to stay outside India for
an uncertain period;
A person who has come to or stays in India, in either
case, otherwise than-
(a) for or on taking up employment in India, or
(b) for carrying on in India a business or vocation in
India, or
(c) for any other purpose, in such circumstances as
would indicate his intention to stay in India for an
uncertain period;
India
But does not
include
10

11. Definition of Resident in India (2 (v)) (2/2)
(ii) any person or body corporate registered or incorporated in India,
(iii) an office, branch or agency in India owned or controlled by a person resident outside
India,
(iv) an office, branch or agency outside India owned or controlled by a person resident in
India.
11

12. Definition of Non-Resident Indian/ PIO
 Non-Resident means a person resident outside India who is citizen of India;
 Person of Indian Origin (PIO) means a citizen of any country (other than Bangladesh or
Pakistan) who had:
(a) at any time held Indian passport or
(b) he or either of his parents or any of his grandparents was a citizen of India by virtue of the
Constitution of India or the Citizenship Act, 1955 or
(c) the person is a spouse of an Indian citizen or a person referred to in (a) or (b).
Note: Clause (c) above is excluded for the purpose of acquisition of immovable property
12

13. FEMA Trigger Points
 Transaction between person resident in India and Resident outside India
 Transaction by Resident in Foreign Exchange
 Transaction by Non-Resident in Rupees
 Transaction by Resident outside India
 Transaction by Non-Resident in India
13

14. Rules at Glance
14
Sl.
No.
O R No.
/ R R No.
(if any)
Rule Title Commonly referred as
1. 379/2000 FEM (Encashment of Draft, Cheque, Instrument and
Payment of Interest) Rules, 2000
Encashment Rules
2. 380/2000 FEM (Authentication of Documents) Rules, 2000 Authentication of Documents Rules
3. 381/ 2000 FEM (Current Account Transactions) Rules, 2000 CAT Rules
4. 382/2000 FEM (Adjudication Proceedings and Appeal) Rules,
2000
Adjudication and Appeal Rules
5. 383/2000 FEM (Compounding Proceedings) Rules, 2000 Compounding Rules
6. 677/2000 The Appellate Tribunal For Foreign Exchange
(Recruitment, Salary and Allowances and Other
Conditions of Service of Chairperson and Members)
Rules, 2000
ATFE Rules
7 3732/2019 FEM (Non-Debt Instrument) Rules, 2019 Non-Debt Instrument Rules (FDI
and Immovable Property)

15. Regulations at Glance (1/5)
Sl.
No.
O R No./ R R
No. (if any)
Regulation Title Commonly referred as
1 1/2000 FEM (Permissible Capital Account Transactions)
Regulations, 2000
Capital Account
Transactions
2 2/2000 FEM (Issue of Security in India by a Branch, Office or
Agency of a person resident outside India) Regulations,
2000
IDR Regulations
3 3/2000
3 (R)-2018 (RB)
FEM (Borrowing or Lending in Foreign Exchange)
Regulations, 2000
FEM (Borrowing and Lending) Regulations, 2018
(Revised w.e.f 17-12-2018)
ECB Regulations
4/2000 FEM (Borrowing and Lending in Rupees) Regulations,
2000
(Merged with 3/(R) above)
Rupee Borrowing
Regulations
4 5/2000/
5 (R) – 2016 (RB)
FEM (Deposit) Regulations, 2016 (Revised wef 01-04-
2016)
Deposit Regulations
5 6/2000/
6(R) – 2015 (RB)
FEM (Export and Import of Currency) Regulations, 2015
(Revised wef 29-12-2015)
Currency Regulations
15

16. Regulations at Glance (2/5)
Sl.
No.
O R No./ R R
No. (if any)
Regulation Title Commonly referred
as
6 7/2000/
7-(R) – 2015 (RB)
FEM (Acuisition and Transfer of Immovable Property
Outside India) Regulations, 2015 (Revised wef 21-01-
2016)
Foreign Assets
Regulations
7 8/2000 FEM (Guarantees) Regulations, 2000 Guarantee
Regulations
8 9/2000/
9 (R) – 2015 (RB)
FEM (Realisation, Repatriation and Surrender of Foreign
Exchange) Regulations, 2015 (revised wef 29-12-2015)
Forex Realization
Regulations
9 10/2000/
10 (R) – 2015 (RB)
FEM (Foreign Currency Accounts by a person Resident in
India) Regulations, 2015 (Revised wef 21-01-2016)
Foreign Currency
accounts Regulations
10 10A/2014 FEM (Crystallization of Inoperative Foreign Currency
Deposits) Regulations, 2014
Foreign Deposits
Regulations
16

17. Regulations at Glance (3/5)
Sl.
No.
O R No./ R R No.
(if any)
Regulation Title Commonly referred as
11 11/2000/
11(R) – 2015 (RB)
FEM (Possession and Retention of Foreign Currency)
Regulations, 2015 (Revised wef 29-12-2015)
Possession of Foreign
Currency Regulations
12 12/2000/
12(R) – 2015 (RB)
FEM (Insurance) Regulations, 2015 (Revised wef 29-
12-2015)
Foreign Insurance
Regulations
13 13/2000/
13(R) – 2016 (RB)
FEM (Remittance of Assets) Regulations, 2016
(Revised wef 01-04-2016)
Remittance of Assets
Regulations
14 14/2000/
14(R) – 2016 (RB)
FEM (Manner of Receipt and Payment) Regulations,
2016 (Revised wef 02-05-2016)
Receipt and payment
Regulations
15 20/2000/
20(R) – 2017 (RB)
FEM (Transfer or issue of security by a person
resident Outside India) Regulations, 2017 (Revised
wef 07-11-2017)
FDI Regulations
16 21/2000
21(R)-2018 (RB)
FEM (Acquisition and transfer of Immovable Property
in India) Regulations, 2018 (Revised wef 26-03-2018)
Acquisition of Immovable
Properties In india
All the Original Regulations are dated of 03/05/200017

18. Regulations at Glance (4/5)
Sl.
No.
O R No./ R R No. (if
any)
Regulation Title Commonly referred as
17 22/2000/
22(R) – 2016 (RB)
FEM (Establishment in India of Branch or Office or
other place of business) Regulations, 2016
(Revised wef 31-03-2016)
Branch Office Regulations
18 23/2000/
23(R) – 2015 (RB)
FEM (Export of Goods and Services) Regulations,
2015 (Revised wef. 12-01-2016)
Exports Regulations
24/2000 FEM (Investment in Firms or Proprietary concern
in India) Regulations, 2000
Investments into Firm or
Proprietary concerns
19 25/2000 FEM (Foreign Exchange Derivatives Contracts)
Regulations, 2000
Derivatives Regulations
20 71/2002 FEM (Off-shore Banking Units) Regulations, 2002 OBU Regulations
21 101/2003 FEM (Withdrawal of General Permission to
Overseas Corporate Bodies) Regulations, 2003
OCB Regulations
22 120/2004 FEM (Transfer or Issue of Any Foreign
Security)Regulations, 2004
ODI regulations
All the Original Regulations are dated of 03/05/200018

19. Regulations at Glance (5/5)
Sl. No. O R No./ R R
No. (if any)
Regulation Title Commonly referred as
23 10A/2014 FEM (Crystallization Of Inoperative Foreign Currency
Deposits) Regulations, 2014
Crystallization
regulations
24 339/2015 FEM (International Financial Services Centre)
Regulations, 2015
IFSC Regulations
25 348/2015 FEM (Regularization of Assets Held Abroad by a
Person Resident in India) Regulations, 2015
Black Money Regulations
26 389/2018 FEM (Cross Border Merger) Regulations, 2018 Cross Border Regulations
27 395/2019-RB FEM (Mode of Payment and Reporting of Non-Debt
Instruments) Regulations, 2019
Reporting of Non-Debt
Instrument Regulations
28 396/2019 FEM (Debt Instrument) Regulations, 2019 Debt Instrument
Regulations
19

20. Important Sections (1/2)
 Dealing in Foreign Exchange – Section 3
 Holding of Foreign Exchange – Section 4
 Current Account Transaction – Section 5
 Capital Account Transaction – Section 6
 Export of Goods and Services – Section 7
 Realisation & Repatriation of FE – Section 8
 Authorised Person – Section 10
 RBI Powers to issue Directions to AP – Section 11
 Powers to RBI for inspection of AP – Section 12
 Penalties – Section 13
 Enforcement of Orders of AA – Section 14
 Compounding of Offences – Section 15
 Appointment of AA – Section 16
20

21. Important Sections (2/2)
 Appeal to SD (Appeals) – Section 17
 Establishment of AT – Section 18
 Appeals and related procedures of AT – Section 19 to 33
 Bar of Jurisdiction of Civil Courts – Section 34
 Appeal to High Court – Section 35
 Directorate of Enforcement – Section 36
 Procedure related to ED – Section 37, 37A and 38
 Miscellaneous matters – Section 39 to 40
 Power of CG to give directions to RBI – Section 41
 Contravention by Companies – Section 42
 Power of CG to make rules – Section 46
 Power of RBI to make Regulations – Section 47
21

22. 22
FOREIGN DIRECT INVESTMENT (FDI)

23. Governing Regulations
2323
Provisions dealing with FDI in India
 Section 6 of FEMA 1999
 Foreign Exchange Management (Transfer or Issue of Security by a Person Resident Outside
India) Regulations, 2017 issued vide Notification No. 20R/2017-RB dated November 7, 2017
issued by RBI
 Master Direction No. 11/2017-18
 Foreign Exchange Management (Non-debt Instruments) Rules, 2019, issued vide notification no.
3732(E), dated 17/10/2019
Amendment
 Section 6 of FEMA was amended vide Finance Act 2015 but was notified in October 2019
 With above, the power to make regulations on FDI was shifted from RBI to CG
 CG notified FEM (Non-Debt Instruments) Rules, 2019 on October 17, 2019 replacing regulations
issued by RBI. However, these are yet to be implemented in practice through a circular by RBI

24. Types
FDI Route PIS Route
Types of ..
24

25. FDI Route
Automatic Route
Government
Approval (FIFP/SIA)
Types of FDI
25

26. Automatic Route
Without RBI
Approval
For all NRs other
than Erstwhile OCBs
With RBI Approval
Erstwhile OCB
investment*
Automatic Route
* in sectors
under Automatic
Route (existing
before 16-09-03)
26

27. Government Approval
(FIFP/ SIA)
Sectors reserved for Govt.
approval
The sectoral caps are
breached pursuant to the
investment
Government Approval (FIPB/SIA)
27

28. PIS Route
FPIs NRI/OCI QFI
PIS Route
10% /24%/ (Sectoral Cap
with approval of
Members)
Repatriable 5% / 10%/
(24% with approval of
Members)
10%/ (24% with approval
of Members)
Non Repatriable (without
any limit)
28

29. Non Resident
Investors
Automatic Route With Approval
Government
Approval
RBI Approval
Entities permitted to Invest in India
Any Non Resident (Other than citizen /
entity of Pakistan or Bangladesh and
erstwhile OCBs)
29

30. With Approval
Government
Approval
RBI Approval
 Citizen of Bangladesh or an entity in
Bangladesh
 Citizen of Pakistan or an entity in Pakistan*
 Erstwhile OCB (existing before 16-09-03) for
sectors not under automatic route
 Issue of capital against import of capital
goods/ preliminary exp or pre-op expenses
*other than defence,
space and atomic
energy and sectors/
activities prohibited
for foreign investment
Erstwhile OCB investment in sectors
under Automatic Route (existing
before 16-09-03)
Entities permitted to Invest in India
30

31. Instrument
s
Capital
Equity
(Fully paid/
Partly paid)
CCPS (w.e.f
01-05-
2007)*
ADR/GDR
Debt
CCD (w.e.f
07-06-
2007)
FCCB CP
Types of Instruments
*with optionality
clause for buy-back
(30-12-2013)
31

32. • Lottery Business including Government / private lottery, online lotteries etc.
• Gambling and Betting including casinos etc.
• Business of chit fund
• Nidhi Company
• Trading in Transferable Development Rights (TDRs)
• Real Estate Business, or construction of farm houses
• Agriculture (excluding Floriculture, Horticulture, Development of seeds, Animal Husbandry,
Pisciculture and cultivation of vegetables, mushrooms etc. under controlled conditions and
services related to agro and allied sectors) and Plantations (Other than Tea Plantations, coffee,
rubber, cardamom , palm oil tree and olive oil tree plantations)
FDI – Prohibited Sectors
32

33. • Manufacturing of Cigars, cheroots, cigarillos and cigarettes, of tobacco or of tobacco or of
tobacco substitutes.
• Activities / sectors not opened to private sector investment including Atomic Energy and
Railway Transport (other than Mass Rapid Transport Systems).
• foreign investment in any form, foreign technology collaboration in any form including licensing
for franchise, trademark, brand name, management contract is also completely prohibited for
Lottery Business and Gambling and Betting activities.
• Foreign investment in Trusts other than investment by SEBI registered FVCIs in domestic VCF
FDI – Prohibited Sectors
33

34. Board Approval
• Convening of Board Meeting to consider issue of shares to
Investor and calling of EGM for obtaining approval from
Members (Section 42 read with Rules made there under)
Process Flow
Valuation Report
• The company has to obtain valuation report from a Chartered
Accountant to arrive at the value of shares proposed to be
issued
• In case of listed company the valuation >= the value decided
under SEBI regulations
• In case of Unlisted Companies, the valuation has to be done as
per internationally recognized method of valuation (RBI A. P.
(DIR Series) Circular No. 4, dated 15/07/2014 and for
justification of issue price, pursuant to provision to Sub rule (2)
(a) of Rule 14 of Companies (Prospectus and Allotment of
Securities) Rules, 2014
34

35. Process Flow
Shareholders
Meeting
• The company needs to call General Meeting (EGM/AGM as the
case may be) to obtain the approval of members by way of
special resolution
• The company shall file the approved members resolutions with
ROC within 30 days of Shareholder approval in Form MGT-14
LOO
• The Board has to approve the Letter of Offer (in PAS-4) along
with share application (serially numbered) to be sent to the
investor(s). The number of proposed offer to the investors
cannot exceed 200 persons aggregate in a FY.
35

36. Process Flow
Filing of LOO with
ROC
• Company has to prepare the details/record of Letter of Offer
(LOO) in Form PAS-5. The value of such offer or invitation per
person shall be with a minimum investment size of Rs.20,000/-
of face value of the securities. This process is discontinued in
2018
Open Escrow bank a/c
• The company has to open separate bank account (escrow
account) to receive the proposed subscription and can adjust
such money only either for allotment of shares or for refund of
money.
36

37. Process Flow
Remittance
• The investor remits the amount into the
Company in eligible currency
KYC
• The company needs to facilitate the AD to
obtain KYC information of the remitter from
their counterpart bank
• The KYC format is prescribed vide Annexure III
of Circular 44 dated 30/05/2008 and updated
on 02/04/2011. The said annexure has been
attached as Annexure 6 to Consolidated FDI
Policy, 07/06/2016 and Annexure 7 to Master
Circular dated 01/07/2015, Part IV: Annex II to
Master Direction dated 01/01/2016
37

38. Process Flow
Allotment/ Refund
• The company shall allot Shares / CCPS / CCD within 60 days of the
remittance failing which the money shall be refunded with in 15 days
thereafter (Section 42 of Companies Act, 2013 read with rules made
there under)
• As per FDI, the allotment has to be made within 180 days (w.e.f. 29-11-
07)
PAS-3
• return on allotment is required to be filed with the ROC with in 30 days
in Form PAS-3, along with the prescribed details/information of the
Allottees [Filing pursuant to Sec. 42(9) and Rule 14 (4) of the
Companies (Prospectus and Allotment of Securities) Rules, 2014]
Form FC-GPR
• The company after allotting the shares/ CCPS/CCD shall file form FC-GPR
with AD who have received the remittance
• The intimation to be made through FIRMS portal (erstwhile Annexure I
of Circular 102 dated 11/02/2014). The said annexure has been attached
as Annexure 1 to Consolidated FDI Policy, 07/06/2016 and Annexure 1 to
Master Circular dated 01/07/2015, Part IV: Annex III to Master Direction
dated 01/01/2016
Intimation from RBI
• Upon receipt of the Form FC-GPR RBI after scrutiny of the form, allots
UIN for FC-GPR which shall be used at the time repatriation by the
investor38

39. Transfer of Shares / CCPS/ CCD
Transfer
NRI / OCI to NRI/ OCI
NR to NR (including
NRI / OCI)
Sale/ Gift
other than Financial
Services Sector
Automatic Route
The company is in
specified Financial
Services Sector
Govt Approval
NR to R
Gift
Automatic Route
R to NR
Gift
RBI Approval (Needs
to comply with
conditions specified)
Sale of Shares (Other
than specified
categories of
industries)
Automatic Route
Sale of Shares
(specified categories
of industries)
RBI Approval
39

40. Transfer of shares –Flow
Sale
• The seller and buyer enters into the agreement / arrangement to buy / sell the shares
Remittan
ce
• The Buyer makes the payment to the seller (Resident Seller / Non-Resident Seller)
Intimatio
n to RBI
• The resident party shall intimate to RBI through AD within 60 days of receipt / payment of consideration. The onus of
submission is on the party resident in India.
• The intimation to be made through FIRMS portal in form FC-TRS. The said form is attached as Annexure 1 to
Consolidated FDI Policy, 07/06/2016 and Annexure 8 to Master Circular dated 01/07/2015, Part IV: Annex IV to Master
Direction dated 01/01/2016
KYC
• The company needs to facilitate the AD to obtain KYC information of the foreign counter party from their counterpart
bank
• The KYC format is prescribed vide Annexure III of Circular 44 dated 30/05/2008 and updated on 02/04/2011. The said
annexure has been attached as Annexure 6 to Consolidated FDI Policy, 12/05/2015 and Annexure 7 to Master Circular
dated 01/07/2015, Part IV: Annex II to Master Direction dated 01/01/2016
40

41. Transfer of shares –Flow
Endorsement
by AD
• Upon receipt of Form FC-TRS through FIRMS portal, the AD remitting or receiving
the consideration has to issue e-Certificate for endorsing the Form FC-TRS
Noting by the
Company
• The company only upon receipt of the endorsed FC-TRS along with relevant share
transfer deeds / share certificate and any other relevant document, can record the
transfer in its Register of Members
Valuation of
Shares
• In case of listed company the valuation >= the value decided under SEBI regulations
• In case of Unlisted Companies, the valuation has to be done as per Internationally
recognised valuation method (w.e.f. 15/07/2014)
41

42. Transfer by R to NR as Gift under RBI approval route
 The proposed transferee (donee) is eligible to hold such capital instruments
 The gift does not exceed 5% of the PUC of the Indian company/each series of debentures/each
mutual fund scheme.
 The applicable sectoral cap limit in the Indian company is not breached
 The transferor (donor) and the proposed transferee (donee) are close relatives as defined in
Section 2 (77) of the Companies Act, 2013
 The value of capital instruments to be transferred together with any capital instruments already
transferred by the transferor, as gift, to any person residing outside India does not exceed the
rupee equivalent of USD 50,000 during the calendar year.
 Such other conditions as stipulated by Reserve Bank in public interest from time to time
42

43. Conversion of ECB/Lumpsum Fee/Royalty into Equity
 The activity of the company is covered under the Automatic Route for FDI or the company has
obtained Government approval for foreign equity in the company
 The foreign equity after conversion of ECB into equity is within the sectoral cap, if any
 Pricing of shares shall be as prescribed
 Compliance with the requirements prescribed under any other statute and regulation in force
 The conversion facility is available for ECBs availed under the Automatic or Government Route
and is applicable to ECBs, due for payment or not, as well as secured/unsecured loans availed
from non-resident collaborators.
43

44. Issue of securities – other cases
 Issue of shares/preference shares against lump sum technical know-how fee, royalty, under
automatic route or SIA/FIPB route, subject to pricing guidelines and compliance with
applicable tax laws
 Issue of Shares on Rights basis
 company listed on a recognized stock exchange in India, at a price as determined by the
company in compliance with SEBI (ICDR) Regulations, 2009
 company not listed on a recognized stock exchange in India, at a price which is not less
than the price at which the offer on right basis is made to resident shareholders.
 rights share to such erstwhile OCBs will have to take specific prior permission from RBI.
As such, entitlement of rights share is not automatically available to erstwhile OCBs.
 Existing non-resident shareholders are allowed to apply for issue of additional shares/
CCPS / CCD over and above their rights share entitlements subject to the sectoral caps.
44

45. Issue of securities – other cases
Capitalisation of various expenses (Govt Approval Route)
(Circular No.74, dt. 30/06/11 read with Circular No.55 , dt. 09/12/11 and circular dt.
08/05/2012)
• Import of Capital Goods (no second hand machinery)– Subject to Exim Policy compliance,
valuation by a third party of import country; capitalisation has to be completed within 180
days of shipment
• Pre-operative / Pre-Incorporation expenses – submission of FIRC, certification by statutory
auditor, within 180 days of incorporation
• Payments made by FI to the company/ through bank account opened in India by the FI
• Special Resolution by the applicant company
45

46. Pledge of Shares
 Person eligible
 promoter of a company registered in India (borrowing company) raised ECB ,
 Whose shares are eligible for pledge
 pledge the shares of the borrowing company or that of its associate resident companies
 Eligible Purpose
 securing the ECB raised by the borrowing company,
 Compliance required
 NOC from AD Bank
46

47. Pledge of Shares
 Conditions to be reviewed by AD for issue of NOC
 ECB is in line with the extant FEMA regulations
 the loan agreement has been signed by both the lender and the borrower,
 there exists a security clause in the Loan Agreement requiring the borrower to create charge
on financial securities, and
 the borrower has obtained LRN from the RBI
 Additional conditions to be fulfilled by the company
 the period of such pledge shall be co-terminus with the maturity of the underlying ECB;
 in case of invocation of pledge, transfer shall be in accordance with the extant FDI Policy and
directions issued by the RBI;
 the Statutory Auditor has certified that the borrowing company will utilize / has utilized the
proceeds of the ECB for the permitted end –use/s only
47

48. Investment in Limited Liability Partnership Firm
• Non-Resident Investor can invest on repatriation basis under automatic route where 100% FDI is
permitted and there are no FDI linked performance related conditions.
• Amount is invested by inward remittance or out of NRE/FCNR(B)/NRO account maintained with
AD/ Authorized banks.
• LLP is now eligible to make downstream investments
• Only by way of cash consideration
• LLPs not be permitted to avail ECBs
• The entity should not engage any prohibited activity
• Conversion of a company with FDI, into an LLP, engaged in sectors where there is no FDI linked
performance conditions, is permitted under automatic route
48

49. Investment in Firms/ Proprietary Concern/ AOP/BOI
 NRI / OCI can invest on non-repatriation basis under automatic route without any limit.
 Amount is invested by inward remittance or out of NRE/FCNR(B)/NRO account maintained
with AD/ Authorized banks.
 The entity should not engage any prohibited activity
 The contribution shall be received only by way of inward remittance or debit to NRE/FCNR(B)
or NRO account
 The sale proceeds shall be credited to NRO account only and not eligible for repatriation
abroad.
49

50.  Entity Master Form, Business User Registration and Single Entry Form
 Form ARF – Within 30 days of receipt of foreign inward remittance – Deleted w.e.f 1.9.18 and merged with
form FC-GPR
 Form FC-GPR - Within 30 days from the date of issue of capital instruments (including conversion of ECB
in to equity) - By the issuer of such capital instruments
 Form FC- TRS - Within 60 days from the date of transfer or receipt of sale proceeds, whichever is earlier –
By resident transferor or transferee
 Form DI – Downstream Investment - Within 30 days from the date of issue of capital instruments – By
entity making such downsteam investment
FDI – Reporting on FIRMS Portal
50

51.  History of FLA
 Part-B of Form FC-GPR [AP (DIR Series) Circular No. 40, dated 20/04/2007]
 FLA [AP (DIR Series) Circular No. 45, dated 15/03/2011]
 FLA – Excel format [AP (DIR Series) Circular No. 133, dated 20/06/2012]
 FLA – FLAIR Portal of RBI [AP (DIR Series) Circular No. 37, dated 28/06/2019)
 Company
 Every company having FDI/ODI need to submit the FLA [Para 9(2) of Schedule 1]
 LLP need to file FLA
 Notification No. FEMA.351 /2015 RB, 30th Sept, 2015
 LLP having direct or indirect FDI
 In Current year or Previous year(s)
 File FLA on or before 15th July, of every year
Filing of FLA on FLAIR Portal
51

52. 52
CA Murali Krishna G
M.Com, F.C.A., F.C.S.
PH: +91 9849992493
gmk@grandhiandassociates.in
Thank you!!!