Foreign Investment Reporting Requirements

Ankita Tiwari

17 May, 2023

The Reserve Bank of India (RBI) has reduced the burden for reporting foreign investments by introducing one form i.e. the Single Master Form (SMF) in place of different forms such as FC-GPR, FC-TRS, LLP (I) Form, LLP (II) Form, CN Form, DRR Form, ESOP Form, DI Form, and INVI Form. SMF was introduced vide A.P. (DIR Series) Circular No. 30 dated 7 July 2018 (FDI Circular. Now foreign investment reporting can be done without the digital signature certificates of the authorized signatories. By introducing the SMF, RBI dispensed the requirement of filing advance reporting forms by the Indian companies. The RBI also introduced an interface “Entity Master Form” (EMF) vide FDI Circular for the Indian entities to input details of the total foreign investment received by them as of the date of creation of an EMF account.

Pursuant to the introduction of the FDI Circular regarding reporting requirements, Indian entities are required to create an EMF account and SMF account on the Foreign Investment Reporting and Management System (FIRMS) Portal. The creation of an EMF account is the first step toward reporting foreign investments. EMF account is an entity-specific account i.e. an Indian entity can create only one EMF account on the FIRMS portal. After creating an EMF account, the Indian entity has to create an SMF account on FIRMS Portal^[1]. This account is an Authorized Dealer Bank-specific account. When different FDI transactions are carried out through different AD Banks, the Indian entity can create multiple SMF accounts to report the FDI transactions. The AD Bank has to accept or reject the application filed before it within 5 working days or forward it to SEBI in exceptional cases. With the introduction of EMF and SMF, the provision for clarification and re-submission of the application form has been done away with. The Indian entity will receive the approval or rejection of the application on its registered e-mail id. In cases where the application is rejected, the reasons for rejecting the application should be communicated through e-mail. This can be subsequently discussed and ratified by the Indian entity with its AD Bank before the submission of a fresh application for its timely closure.

Foreign Investment Reporting Requirements

Following are the foreign investment reporting that the Indian entities are required to complete on FIRMS Portal:

1. Foreign Currency- Gross Provisional Return (FC-GPR) Form – Form FC-GPR is required to be issued by an Indian company issuing equity instruments to a non-resident Indian within 30 days from the date of issuance of the equity instruments.
2. Foreign Currency-Transfer of Shares (FC-TRS) Form – Form FC-TRS is filed by the resident transferor or transferee or the non-resident Indian holding equity instruments on a non-repatriable basis, within 60 days from the transfer of equity instruments or receipt or remittance of funds, whichever is earlier.
3. Limited Liability Partnership (I) Form(LLP (I) Form) – The amount of consideration received by the LLP for capital contribution should be filed under LLP (I) Form. It should be filed within 30 days from the date of receipt of the amount of consideration.
4. Limited Liability Partnership (II) Form (LLP (II) Form) – This form is filed by the resident transferor or transferee within 60 days from the date of receipt of the amount of consideration for the transfer of capital contribution from a resident to a non-resident or vice versa.
5. CN Form – Any Indian Start-up Company which issues convertible notes to a person resident outside India should file CN Form. It should be filed within 30 days from the date of issuance of convertible notes. In addition to this, the resident transferor or transferee should file CN Form within 30 days from the transfer of convertible notes issued by an Indian start-up company from a resident to a non-resident or vice versa.
6. DRR Form – The domestic custodian on issuing or transferring depository receipts as per the Depository Receipt Scheme of 2014 should file its report in DRR Form within 30 days from the date of issue or transfer of depository receipts.
7. ESOP Form – Where an Indian company issues employees stock options to its employees or directors or employees or directors of its holding company or joint venture or wholly owned overseas subsidiary or subsidiaries who are resident outside India, then it should file an ESOP form within 30 days from the date of issue of employee’s stock option.
8. DI Form – An Indian entity making a downstream investment in another Indian entity which results in an indirect foreign investment for the investee Indian entity should file DI Form within 30 days from the date of allotment of equity instruments.
9. INVI Form – Any investment vehicle that has issued its units to a non-resident Indian should file an INVI Form within 30 days from the date of issue of units.

Any delay in reporting the above forms will attract Late Submission Fees (LSF) in a manner prescribed by the RBI from time to time. Only on payment of LSF will the application be considered approved.

Foreign Investment Reporting along with the timelines

The timeline for filing various reports regarding foreign investment is prescribed in a tabular form below for easy understanding:

Conclusion

The new reporting framework for reporting in a consolidated form and within a given time frame has eased the reporting of FDI transactions. However, there is one practical hindrance linked with the filing of SMF which is that only one application can be processed at a time across all SMF account(s) of an Indian entity. Till the time the application is under process i.e. neither approved nor rejected, the Indian entity cannot file another application on any of the SMF account(s).

Read our Article: Downstream Investments and its Reporting to DPIIT