FEMA COMPLIANCES ; COMPLIANCES
GET PROFESSIONAL SERVICES UNDER FEMA
THROUGH ePRO EXPRESS AT BEST PRICE
FEMA (Foreign Exchange Management Act, 1999), a name very often taken and heard of among the professionals, individuals and Corporate when it comes to cross border financial transactions and foreign funding or remittance. Over the years, the legal framework in India in respect of the above stated subjects has acted as a catalyst for the growth and development of various sectors 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. The enactment of FEMA was a development from the erstwhile FERA (Foreign Exchange Regulation Act, 1973) which was a restrictive law and tried to regulate the matters of foreign exchange whereas under FEMA, the idea was to move from a restricted and over regulatory mechanism to a management oriented mechanism which relaxed a lot of restrictions thereby encouraging the international trade.
The Reserve Bank, in the First Bi-monthly Monetary Policy Review dated April 5, 2018 announced that, with the objective of integrating the extant reporting structures of various types of foreign investment in India, it has introduced a Single Master Form (SMF) subsuming all the existing reports.In order to implement this announcement, the Reserve Bank has introduced an online application, FIRMS (Foreign Investment Reporting and Management System), which would provide for the SMF. The FIRMS Portal has two phases for registration, i.e. Entity Master (for information about the investee entity) and Business User (for filing of various returns and forms under SMF).
We, a team of experienced professionals at ePRO EXPRESS provide the professional services in the areas of practice under FEMA provisions in respect of Corporate Funding and Remittances. The areas under which ePRO EXPRESS deals in are as follows:
FOREIGN DIRECT INVESTMENT (FDI)
One of the very familiar term of raising funds by Corporate houses is through FDI. Under this kind of investment, the funds are raised by an Indian Company from foreign investors and in exchange of such funds, the Indian Company shall issue Equity Shares or such other Instruments which are Compulsorily Convertible into Equity Shares, Due to investment in Equity, there will be a Direct entry of the investor in the ownership of the Company and will also give rise to direct voting power at the General Body Meetings of the Company.
ePRO EXPRESS team will provide end to end support and carry out all the compliances on the behalf of the Company in respect of FDI, it shall include all the compliances under FEMA and Companies Act, 2013.
Scope of exposure under FDI:
Registration of the Indian Company under the FIRMS (Foreign Investment Reporting and Management System) Portal of Reserve Bank of India which will include both the Entity User Registration and Business User Registration.
Consultancy regarding the applicable Sectoral Cap on the desired industry of investment.
Application for approval of Reserve Bank when the investment is subject to approval route.
Monitoring the flow of funds from foreign investor through the prescribed banking channels and liasoning with the AD (Authorised Dealer Bank) for FIRC (Foreign Inward Remittance Certificate) which acts as the authentic proof and testimony for the receipt of funds in India.
Assisting in channelization of funds according to the status of the investor like NRI/ PROI/ FPI or FIIs etc.
Valuation of the securities to be allotted in accordance with provisions of FEMA and Companies Act, 2013.
Assistance in opening of Special Bank Accounts for the purpose of intended transactions.
Issuance of necessary Certificates intended for the purpose of FDI Reporting.
Filing of necessary returns and forms with the Registrar of Companies and RBI including FC-GPR, MGT-14, PAS-3.
Issue and stamping of the Certificate of securities so allotted.
Filing of Statement of Foreign Liabilities and Assets (FLA Return) on annual basis after completion of FDI.
EXTERNAL COMMERCIAL BORROWINGS (ECB)
External Commercial Borrowings (ECBs) are commercial loans raised by eligible resident entities from recognised non-resident entities and should conform to parameters such as minimum maturity, permitted and non-permitted end-uses, maximum all-in-cost ceiling, etc. Since the definition of ECB is kept very wide hence any kind of fund raising by an eligible resident entity which is not covered under the aforesaid FDI norms, it is de facto treated as ECB.
Borrowings from overseas have to be in compliance with the applicable ECB guidelines / provisions contained in the Foreign Exchange Management (Borrowing and Lending in Foreign Exchange) Regulations, 2018 issued vide Notification No. FEMA 3 (R)/2018-RB dated December 17, 2018, as amended from time to time.
Types of Instruments for raising ECBs
Loans including Bank Loans;
Fixed or Floating rate notes;
Bonds;
Debentures (Other than fully and compulsorily convertible instruments);
Trade Credits beyond 3 years;
Foreign Currency Convertible Bonds (FCCBs);
Foreign Currency Exchangeable Bonds (FCEBs);
Financial Lease;
Rupee Denominated Bonds to be issued overseas.
There are a set of rules and guidelines which deals with the eligibility of the borrower, overseas lender, maturity period, cost ceilings, end uses, exchange rate, parking of ECB proceeds, and various other regulatory filings to be made to RBI. All these provisions are to be simultaneously complied for raising ECBs.
ePRO EXPRESS team will provide end to end support and carry out all the compliances on the behalf of the Company in respect of raising funds by ECB, it shall include all the compliances under FEMA and Companies Act, 2013.
Scope of exposure under ECB:
Consultancy for the eligibility norms for the prospective ECB applicant;
Consultancy about the eligibility of the overseas lender;
Consultancy about the instrument to be used as a means for raising the ECB according the requirements and particulars of client;
Drafting of all the documents and assisting in execution of the loan agreement with the overseas lender;
Application to ECB Division of RBI through the authorised Authorised Dealer (AD) Bank;
Liasoning with the Authorised Dealer Bank and officials of RBI for Loan Registration Number and other information;
Filing of monthly return of ECB with RBI through designated AD Bank;
Consultancy and assistance in closing of the commercial loan;
Consultancy in conversion of the loan into any other instruments.
SETTING UP LIASON OFFICE IN INDIA
Setting up a Liason office is generally the first step taken by a foreign entity looking to establish business activities in India. The Liason office is meant for conducting market surveys, collection of data, promotion of the export-import, brand in prospective markets etc. It is prohibited to undertake any commercial activity and can only use the funds received from its parent company for its maintenance, it basically acts as a channel of communication between the head office abroad and parties in India.
For the purpose of setting up liason office in India, there are various regulatory compliances to be taken care of by the foreign entity, the professional team of ePRO EXPRESS will provide the requisite intellect, consultancy and end to end support through the entire process of setting up and operationalisethe Liason Office.
Scope of exposure under setting up of Liason Office:
Assessment of the areas or the industry in which the foreign entity is intending to carry on its business activities to check whether the areas are restrictive or not.
The areas where 100% FDI is allowed under Automatic Route needs RBI approval whereas where 100% FDI is not allowed under Automatic Route would need Government approval.
Assessment of the eligibility of the entity to set up the liason office, the entity must have profit making track record during three immediately preceding financial years in its home country and a net worth of not less than USD 50,000 or equivalent.
Preparation and submission of application in Form FNC on behalf of the client before the Reserve Bank through AD Category-1 bank along with requisite documents.
If the intended activity of the entity is to undertake insurance or banking/ financial activities, then additional approvals from IRDA and Department of Banking Regulation, RBI respectively shall be required.
After establishment of office, filing of initial report of the establishment to the Director General of Police of the State where the office is situated within five working days of the office becoming functional.
Filing of Annual Activity Certificate (AAC) certified by a Chartered Accountant along with Audited Balance Sheet for year ending on 31st of March every year upto 30th September annually through AD Category-1 Bank along with a copy to the Income Tax Department (DG of Income Tax, International Taxation).
SETTING UP BRANCH OFFICE IN INDIA
Setting up a Branch office by a foreign entity is generally the start of commercial activity in India before setting up an entity to carry out the full fledged business. Companies incorporated outside India and engaged in manufacturing or trading activities are allowed to set up Branch Offices in India with specific approval of the Reserve Bank. It is also a preferred route to start business India as the profits earned by the Branch Office in India can be freely remitted from India subject to payment of taxes. Although the Branch Office should engage in the same activities as are undertaken by the parent company however it is prohibited to carry out any retail trading activities, manufacturing or processing activities.
Permissible activities by a Branch Office in India:
Export/ Import of goods.
Rendering professional or consultancy services.
Carrying out research work, in areas in which the parent company is engaged.
Promoting technical or financial collaborations between Indian companies and parent or overseas group company.
Representing the parent company in India and acting as buying / selling agent in India.
Rendering services in information technology and development of software in India.
Rendering technical support to the products supplied by parent/group companies.
Foreign airline / shipping company.
For the purpose of setting up branch office in India, there are various regulatory compliances to be taken care of by the foreign entity, the professional team of ePRO EXPRESS will provide the requisite intellect, consultancy and end to end support through the entire process of setting up and operationalise the Branch Office.
Scope of exposure under establishment of Branch Office:
The areas where 100% FDI is allowed under Automatic Route needs RBI approval whereas where 100% FDI is not allowed under Automatic Route would need Government approval.
Assessment of the eligibility of the entity to set up the branch office, the entity must have profit making track record during five immediately preceding financial years in its home country and a net worth of not less than USD 1,00,000 or equivalent.
Preparation and submission of application in Form FNC on behalf of the client before the Reserve Bank through AD Category-1 bank along with requisite documents.
If the intended activity of the entity is to undertake insurance or banking/ financial activities, then additional approvals from IRDA and Department of Banking Regulation, RBI respectively shall be required.However, Foreign Banks need not obtain approval under FEMA for opening of Branch Office in India but approval of Department of Banking Regulation, RBI under Banking Regulation Act, 1949 shall be required.
After establishment of office, filing of initial report of the establishment to the Director General of Police of the State where the office is situated within five working days of the office becoming functional.
Filing of Annual Activity Certificate (AAC) certified by a Chartered Accountant along with Audited Balance Sheet for year ending on 31st of March every year upto 30th September annually through AD Category-1 Bank along with a copy to the Income Tax Department (DG of Income Tax, International Taxation).
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