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Procedure for Foreign Direct Investment (FDI) Reporting: Filing RBI Form FC-GPR

Foreign Direct Investment means an amount of money transferred in India by foreign investors for the purpose of holding share capital in an Indian company. Simply, FDI is an investment made by NR(Non-resident), Foreign Investor Individual, a Company or a Firm from one country to another to hold or acquire company ownership through holding a share. The process involved in the allocation of shares to the foreign investor is known as FDI reporting of filing of RBI Form FC-GPR.

Before discussing the procedure for FDI reporting, we need to get some knowledge of the different routes through which FDI is received in India. There are two types of such routes of Foreign Direct Investment in India which are as follows:

1. Automatic Route-In the Automatic Route, the funds are the first infused, and then the post-infusion RBI compliances come into the picture. In this form of Foreign Direct Investment in India, there is no approval required from RBI or Government for infusing the funds.
2. Government Route-In Government Route, the prior approval either from the RBI or Government is mandatory before infusing Foreign Direct Investment to India. Also, the company or firm is required to get permission from the RBI or in some cases, the Government, before receiving the money as well as after the funds are received.

This guide lays down the complete process of FDI Reporting in India of filing of Form FC-GRP online.

Procedure for Foreign Direct Investment(FDI)Reporting of Share Subscription and Allotment

FDI in sectors/activities to a certain extent which is permitted under the automatic route does not require any prior approval either by the Government or RBI^[1]. The investors are only required to notify the Regional office concerned of the RBI within 30 days of receipt of inward remittances and file the necessary documents online within 30 days of issue of shares to foreign investors.

The procedure for FDI reporting online in India begins with creating a Business and Entity user I.D. through the RBI’s website. The RBI has completely removed the manual filling and has issued AP (DIR Series) Circular No.40 dated 1^st February 2016 for online filling or reporting of Form FC-GPR along with the introduction of Circular for online filing of Form FC-GPR, making the process mandatory. For creating IDson the portal, the following documents are required:

• PAN of Authorized representative
• Letter of authorized representation on the letterhead of investing company
• PAN of Investing company

Due date for filing Form FC-GPR

There are three stages of due date for filing Form FC-GPR i.e.

• File Advance remittance Form(ARF) within 30 days of receipt of funds
• Allotment needs to be within 180 days of receipt of share
• Filing For FC-GPR within 30 days of allotment of shares.

Documents Required For FDI Reporting In India

Let’s discuss the documentation part of FDI reporting under RBI for subscribing and allotment of shares in the investing company. This is known as FC-GPR reporting. Receipt of funds, before crediting funds into an account, AD (Authorized Dealers) bank will request for Share Capital Declaration Form by the letterhead of the company.

1. Foreign Inward Remittance Certificate:

A Foreign Inward Remittance Certificate (FIRC) is a serves as proof of a foreign transfer to India and is issued by the bank. The document contains information such as:

• Name of the Remitter, i.e. foreign investor
• Name of the remitter bank
• Address of the remitter and remitter bank
• Name of the country
• Purpose of the remittance fund
• Date of remittance
• Amount of fund and conversion rate as well
• FIRC must endorse by bank authority.

2. KYC (Know your Customer) of Foreign Investor/ Remitter:

In this document, the necessary information of the remitter is included, such as:

• Registered name of the Remitter/Investor and in case of an investor, name of the individual.
• Registration Number/Passport Number or Unique Identification number, and in case of an investor, number of the individual.
• Registered Address or Permanent address if remitter Individual.
• Name of the remitter’s Bank.
• Remitter Bank account Number.
• Period of banking relationship with the remitter/foreign investor.

Further, this is issued and certified by the authorized dealer receiving bank. All the information provided by the overseas remitter bank of the non-resident investor and this document, i.e. KYC, is valid for one year from the date of issue.

Also, Read: FDI vs. FPI – Exhaustive Analysis of Foreign Investment.

3.Company Secretary Certificate:

It is issued as per the Schedule I of the Foreign Exchange Management (Transfer or Issue of Security by a Person Resident outside India) Regulation, 2017. The Company Secretary certifies the details of Subscriber, type of security, number of shares, Issue price, the purpose of FDI, date of allotment and date of receipt of remittance. Further, the Company Secretary must check that the companies have complied with all the requirements as per the Companies Act, 2013 and followed all the terms and conditions of the government approval, if any, including FEMA compliance.

4. Certificate from CA (Chartered Accountant):

This Certificate indicates the manner of arriving at the price of the shares. In case of allotment of share, a valuation report is issued and certified by the Chartered Accountant.

5. Appointment of Authorized Representative:

It is required for giving declaration and this declaration is given on the cover letter for submitting all the documents before the authority. The authorized representative of the businesses is required to provide this declaration on the letterhead of the company.

6. Letter for Debit Authorization:

This letter is for standard charges debited by bank.

7. Declaration for Excess Amount Utilization:

This is required when the excess amount is received, and there are 2 option left- the excess amount to be remitted back to the remitter’s country because additional money received in India has to be repatriated to the remitter. It should be updated in FIRC as well, or to further utilize the amount.

8. Incorporation documents of the investing company:

The company incorporation documents of the investing company are also required to file the Form FC-GPR. These documents include MOA (Memorandum of Association), COI(Certificate of Incorporation)& PAN details.

For allotment of Shares, the Indian company is also needed to convene a board meeting within 180 days from the date of credit of funds and for the subscription of shares, the incorporating Indian Company os required to hold a Board Meeting to subscribe shares to a foreign equity investor within 30 days from the date of credit of funds.

However, the document as mentioned above required to be submitted along with the Form FC-GPR Form in RBI firm’s portal and after providing the necessary information, the company is required to wait for the RBI’s approval or rejection.

In case of any delay in filing the RBI Form FC-GPR from the date of issue of shares and the date of credit of funds, the company is required to submit a reason for the delay on the letterhead of the company along with all the documents.

Penalty for Non-filling of Form FC-GPR

In case, the resident company doesn’t comply with the above rules of filing the Form FC-GPR, the RBI imposes a substantial penalty on non-compliance of regulations, commonly referred to as “compounding”.

The receiving company needs to complete the FDI Reporting in India by filling Form FC-GPR within 30 days of the above mentioned due date, and the penalty for non-filling of Form FC-GPR would include:

1. INR 5000 or
2. 1 % of the total amount of investment, which can up to a maximum of 5 lakh or
3. Part thereof for the first six months of delay and after that rate will be 2 times. This amount to be transferred into an RBI’s designated bank account.

See Our Recommendation: Foreign Direct Investment (FDI) Compliance Checklist.