Provisions for Filing of FC GPR and FC TRS

 FC TRS & FC GPR

Foreign investors caninvest in Indian companies by purchasing or acquiring existing shares from Indian shareholders or from other non-resident shareholders. General permission has been granted to non-residents or NRIs for acquisition of shares by way of transfer in the following manner.

1. Transfer of shares by a Person resident outside India
1. Non Resident to Non-Resident (Sale or Gift)
2. Non Resident to Resident(Sale or Gift)

Note: Transfer of shares from a Non Resident to Resident other than under SEBI regulations and where the FEMA pricing guidelines are not met would require the prior approval of the Reserve Bank of India.

2. Transfer of shares or convertible debentures from Resident to Person Resident outside India
3. Transfer of Shares by Resident which requires Government approval
4. Prior permission of the Reserve Bank in certain cases for acquisition or  transfer of security
5. Escrow account for transfer of shares

Reporting of FDI for Transfer of shares

1. The actual inflows and outflows on account of such transfer of shares shall be reported by the ADBranch in the R-returns in the normal course.
2. Reporting of transfer of shares between residents and non-residents and vice- versa is to be made in Form FC-TRS
3. The Form FC-TRS should be submitted to the AD Category (I) Bank, within 60 days from the date of receipt of the amount of consideration. The onus of submission of the Form FC-TRS within the given timeframe would be on the transferor or transferee, resident in India.
4. The sale consideration in respect of equity instruments purchased by a person resident outside India, remitted into India through normal banking channels, shall be subjected to a KYC check by the remittance receiving AD Category (I) Bank at the time of receipt of funds.
5. In case, the remittance receiving AD Category (I) Bank is different from theAD Category (I) Bank handling the transfer transaction, the KYC check should be carried out by the remittance receiving Bank and the KYC report be submitted by the customer to the AD Category (I) Bank carrying out the transaction along with the Form FC-TRS.
6. The AD bank should scrutinize the transactions and on being satisfied about the transactions should certify the form FC-TRS as being in order.
7. The transferee or his duly appointed agent should approach the investee company to record the transfer in their books along with the certificate in the Form FC-TRS from the AD branch that the remittances have been received by the transferor or payment has been made by the transferee. On receipt of the certificate from the AD, the company may record the transfer in its books.

In case of transfer of shares by way of sale from resident to non-resident or non-resident to resident, the resident transferor or transferee or Investee Company or NRI transferor or Non Resident transferor should file FC-TRS within 60 days from receipt of funds

In terms of Section 2 (ze) of Foreign Exchange Management Act, 1999 "Transfer" includes sale, purchase, exchange, mortgage, pledge, gift, loan or any other form of transfer of right, title, possession or

Prerequisites:-

Before reporting the transaction, applicant needs to obtain following documents in soft copy:

• Certificate indicating fair value of shares from a Chartered Accountant or SEBI registered Category I Merchant Banker.
• Copy of Broker's note if sale or purchase is made on Stock Exchange.
• Declaration from the NR buyer to the effect that he is eligible to acquire shares or compulsorily and mandatorily convertible preference shares or debentures or others under FDI policy and the existing sectorial limits and conditionality (such as minimum capitalization norms, etc.) and Pricing Guidelines have been complied with
• Declaration from the FII sub account to the effect that the individual FII Sub account ceiling as prescribed has not been breached
• Extracts of Share Purchase Agreement (SPA) containing:
• Name of the buyer and seller
• Name of the investee company
• No. of shares to be transferred
• Price at which they are transferred
• Mode of transfer
• Date of transfer
• Any other relevant information
• If the sellers are NRIs the copies of RBI approvals, if applicable, evidencing the shares held by them on repatriation or non-repatriation basis
• No Objection or Tax Clearance Certificate from Income Tax Authority or Chartered Accountant
• Approval letter from RBI or FIPB
• Power of attorney (if signatory is agent)

Payment Details:-

Applicant is asked to pay only a nominal transaction fee while submitting application form on.

Service Window:-

Applicant can apply for Reporting of FC-TRS at any time of the year.

FC GPR

Foreign Investment comes into India in various forms. Following the reforms path, the Reserve Bank has liberalized the provisions relating to such investments

• The Reserve Bank has permitted foreign investment in almost all sectors, with a few exceptions. Foreign companies are permitted to set up 100 %subsidiaries in India.
• In many sectors, no prior approval from the Government or the Reserve Bank is required for non-resident investing in India.
• Foreign institutional investors are allowed to invest in all equity security traded   in the primary and secondary markets. The total investment by all the foreign institutional investors put together should not exceed 24 per cent of the issued and paid up capital of a company which can be raised up to the level of the prescribed sectoral cap by the respective companies by passing a special resolution to the effect.
• Foreign institutional investors have also been permitted to invest in Government of India treasury bills and debated securities, corporate debt instruments and mutual funds. The NRIs have the flexibility of Investing under the options of repatriation and non-repatriation.

All foreign investment through any of the channels mentioned above is required to be reported to RBI under FEMA, 1999.

Any company or organization receiving foreign investment must report the transaction to the Reserve Bank of India in stipulated timeline. The reporting of the transaction must be done as illustrated in the figure below.

Timelines for Reporting FC-GPR

Allocation of Shares against the investment should be completed within 180 days of receipt of funds.

• The company should file the FC-GPR form within 30 days of allotment of shares to RBI.

Pre-requisites

Before reporting the transaction, applicant needs to obtain following:

• Unique Identification Number from RBI by reporting of Advanced Foreign Remittance.
• KYC report for the beneficiary if the beneficiary and remitter are different entities.
• CS certificate
• Certificate from SEBI registered Merchant Banker / Chartered Accountant indicating the manner of arriving at the price of the shares issued to the persons resident outside India
• Disclaimer Certificate
• Statutory Auditor Certificate
• Board resolution
• LRN(Loan Registration Number) allotted
• copy of FIPB approval (if required)
• Details of Transfer of shares if any
• No objection certificate from the remitter for the shares being allotted to the third party mentioning their relationship
• Letter from the foreign investor explaining the reason for making subscription to shares by the remitter on his behalf
• Copy of agreement/Board resolution from the investee company for issue and allotment of shares to the foreign investor, other than the remitter
• Reason for delay in submission (if required)

Payment Details

Applicant is asked to pay only a nominal eBiz transaction fee while submitting application form on eBiz portal.

Process

Application, once submitted will flow through following status before request is completed. Applicant can use this information to track status of his application.

1. Submitted
2. Resubmission Required
3. Resubmission complete
4. Registration number generated