What is Foreign Investment and FDI Compliance Service? Foreign Direct Investment (FDI) refers to an organizational transfer of funds from one country to another to make lasting interest. As per OECD (Entity for Economic Co-operation and Development), in case an entity holds at least 10% of voting power in any other organization, then a permanent interest is duly created. Foreign Direct Investment is not only limited to international capital movement. It also comprises the international movement of complementary elements of capital, including skills, systems, management and technology, etc. Foreign direct investment (FDI) can be concluded to be one of India's main sources of funds. Within Foreign Direct Investment (FDI), money or capital from individuals or foreign companies is invested in Indian start-ups and in existing companies. The Foreign direct investment policy is duly governed and regulated by the Reserve Bank of India (RBI) under the codified law Foreign Exchange Management Act, 2000 (FEMA) and an Investment of 10% or above from overseas is considered to be foreign direct investment (FDI) as per the OECD. FDI includes two kinds: Inward FDI (foreign direct investment) and Outward FDI compliance, which refers to the flow of money. Inward FDI refers to when foreign capital is invested in local resources, which results in tax breaks and low-interest rates. Meanwhile, the outward FDI is just the opposite of inward FDI compliance and is known as direct investment abroad. The net inflow is known as the stock of foreign direct investment, and it stands for the cumulative number for a given period. With concern related to foreign Direct investments, companies receiving foreign direct investment from abroad strictly adhere to the Foreign Direct Investment Policy, 2018, as issued by the Department of Industrial Policy and Promotions (DIPP). At Enterslice, Our FDI compliance service consulting professional experts have years of experience and expertise to resolve all your queries on foreign direct investments and will support you in FDI compliance services. Bodies constituted For FDI Compliances. Foreign Investment Promotion Board (FIPB) Foreign Investment Promotion Council (FIPC) Foreign Investment Implementation Authority (FIIA) Secretariat for Industrial Assistance (SIA) Foreign Direct Investment Routes (FDI) In India, foreign investment can be made through automatic or government-approved routes. The issuance of a foreign direct investment policy in India is to bridge the gap between the saving and investment of resources. This is the most effective and efficient way to bring the requisite technology and ideology from foreign ventures. The FDI Compliance policy specifies norms for the receipt of FDI by Indian companies using the following two ways- Automatic Route- In specific cases under FDI, where the attention of foreign Nationals is required, the Government of India offer relaxation to Indian Foreign companies to receive foreign direct investment (FDI) from abroad without having approval from the Reserve Bank of India or the Government of India. Approval Route- This approval route offers FDI receipts in the country by Indian companies by obtaining prior consent from certain government agencies such as the Reserve Bank of India, Foreign Investment and Promotion Board, Department of Economic Affairs, Department of Industrial Promotion and Policy, etc. The existing FDI Compliance policy allows all sectors entitled to FDI from abroad, excluding a few entities engaged in lottery/gambling business, chit funds, Nidhi companies, Transferable development rights, Real estate business and other disapproved business entities by government agencies. Entities Where FDI Compliance Service is allowed Incorporated companies Limited Liability Partnership Partnership Firm Foreign direct investment compliance in small-scale businesses. Registration of FDI Compliance Foreign direct investment (FDI) can be inward or outward. It is possible that an Indian company might make investments in any other country to settle its operations abroad or make further investments in better equity options within the foreign market. It can also get an inward pool of funds from any of the foreign investors. As per the Reserve Bank of India, an Indian entity that receives a foreign direct investment (FDI compliance) must register with the Entity Master Form. It is also with the companies, incorporated as public or private, listed or unlisted under section 8, or either for profit, Government or non-government needs to be listed within the Entity master form to receive or has received foreign direct investment under foreign direct investment (FDI compliance) under the specified rulings of Reserve bank of India. The Reserve Bank of India laid down two new forms (single master form and Entity master form) to enhance the reporting under the Foreign Exchange and Management Act, 1999 (FEMA). Certain FDI compliances are required to be followed within India, such as registration under the RBI guidelines for FDI receipts, filling FDI receipts returns to the Reserve Bank of India, FDI reporting, reporting for issue of shares/securities to the investor, adhere master directions of RBI, private placement provisions, requisite FDI conditions under the Companies Act, 2013, Secretarial compliances, Valuation and Investment Advisory, issue of offers, RBI compliances, Remittance flow reporting and Annual return filling with many more compliance. At Enterslice, our FDI Compliance Service consultants offer consultancy on all related FDI compliance required from the end of Indian entities. FDI Compliance on Indian Firms Foreign direct investments (FDI) in India facilitate low-interest rates and taxation breaks, while investments made abroad reduce the country's resources. To receive foreign remittances as FDI, FDI compliances are to be fulfilled by each and every company registered under the Companies Act, 2013, Limited liability partnership (LLP), partnership firms, and small-scale entities. At Enterslice, our experts are well versed with FDI Compliance Service and ensuring to deliver a fair deal and keep your business compliant with FDI compliances and customized solutions by understanding your business requirements. FDI Compliance under Master Directions Issued by RBI After receiving payment outside of India, an advance remittance Form ARC is mandatory to be filled within 30 days and inform the Reserve Bank of India about the payment receipt along with the KYC and FITC received from the recipient's bank. Within a period of 60 days from the receipt of money, shares are required to be issued to non-residents. FC-GPR form is mandatory to file online within a period of 30 days from the date of allotment of shares to non-residents. FDI Compliance under the Companies Act, 2013 Specific conditions of private placement as laid down in Section 43 of the Companies Act are mandatory to be complied with Section 42 under the Companies Act 2013 specifies the same time duration, including within a period of 60 days of receipt of money, shares are needed to be allotted. Within a period of 30 days from the date of share allotment, the return of private placement is mandatory to be filed with the ROC in Form PAS-3. Other required conditions within the Companies Act,2013 In case the shares are not issued within a period of 60 days, it becomes mandatory to return the amount within a period of the next 15 days. Otherwise, it may attract a 12% interest rate p.a., which musto be payable from the 61st day of allotment. Important FDI Compliance under FEMA Laws FEMA proved to be an important source within India for the growth and development of diverse sectors. FEMA facilitate and encourage International trade, balance payments, promote orderly growth and manage the Indian international exchange market space. A list of important compliance to be adhered to under the FEMA regulations, such as - Annual Returns on Foreign Liabilities and Assets It is mandatory for Indian companies to submit an FLA (foreign liabilities and Assets) return for those who received or have an outstanding foreign direct investment or ODI in the previous year, including the current year, by 15th July each year. Annual Performance Report (APR) An Indian resident person who makes an overseas direct investment (ODI) must apply to the AD bank on or before 31st December of each year. An annual performance report (APR) in Form ODI Part II with respect to each joint venture's wholly owned subsidiaries outside India. External Commercial Borrowings It is mandatory for borrowers to report to the Reserve Bank of India on a monthly basis using the AD category-1 bank in form ECB 2 regarding all the ECB transactions. Advanced Reporting Form (ARF) Suppose an Indian company receives an investment from abroad for the issue of shares or any other eligible securities under the foreign direct investments scheme. In that case, it is required to report the detailed amount of consideration to the concerned Reserve bank's Regional office within a period of 30 days from the date of issuance of shares using the AD Category 1 bank. Form FC-GPR Whenever any company receives foreign direct investment and allocate shares to such foreign investor against those investments, then it is a mandatory duty of the company to file allocation of shares with the concerned authority (Reserve Bank of India) within a period of 30 days, and the company is required to mention details on FC-GPR (Foreign Currency Gross Provisional Return) form to furnish necessary details to the RBI. Form FC-TRS It is certainly a process which is usually used by the Indian resident shareholders who live outside India or vice versa at the time when they transfer their shares. The FC-TRS form must be submitted to their designated dealer bank with the form FC-GPR, which must be furnished before the Reserve Bank of India. Form ODI Any Indian Party or resident investing overseas must send an ODI form. When they collect share certificates or some other necessary paperary evidence of investment in the international joint venture/WOS as proof of investments, they are required to send the same necessary papers to the appointed AD within a period of 30 days. Important FDI Compliance as per FEMA Compliance Particulars Details Compliance Due Date Important Points Annual Returns on Foreign Liabilities and Assets (FLA Return) Every Indian business receiving FDI or overseas direct investments in prior years, including the current year, must submit an FLA Return. Till 15th July each year The Indian firm is exempt from filing the FLA return if it has no outstanding foreign direct investment or overseas direct investment at the end of the reporting year. Submission is required by 15th July each year if applicable. ECB (External Commercial Borrowings) All external commercial borrowing transactions must be reported to the Reserve Bank of India monthly through an AD Category-1 bank using the ECB 2 Return. Every Month The ECB-2 return includes disclosure of hedging information in financial and natural categories. Specific items such as the annual percentage cost of financial hedge(s) for ECB, outstanding primary ECB amount and currency, notional value, and percentage of outstanding ECB amount of financial hedge(s) and natural hedge are required. APR (Annual Performance Report) For each joint venture (JV) or wholly owned subsidiary (WOS) outside India, an Indian party or resident individual making an overseas direct investment (ODI) must file an Annual Performance Report (APR) through Form ODI Part II to the AD bank. Before 31st December each year The audit of the Indian party must accompany the APR. For resident individuals, statutory auditor or chartered accountant certification is not mandatory; self-certification is acceptable. Single Master Form Combines reporting requirements for foreign direct investment within India, regardless of the method used for the investment. Form FC-GPR reporting for foreign direct investment under SMF must be completed within 30 days of allotment. For FC-TRS, with respect to individual filing, the transferor or transferee corporation in India must report in FC-TRS. After registering as business users, resident individuals need to report a transfer between individuals, with the authority letter reported in the individual's name. Issuance of share rights to individuals outside India and share issuance related to ECB conversion must be disclosed in Form FC-GPR. ODI Form Overseas financial commitments made to wholly owned subsidiaries and joint ventures. Required to provide obtained shares certificate or proof of participation in overseas joint ventures within 6 months from the date of investments. Sale proceeds from disinvestment need to be returned to India upon receipt or within 90 days after the date of sale of shares or securities. necessary paperary proof must be submitted to the RBI through the designated AD.