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Reporting Requirement under FEMA (Part 2)

May 17, 2018     by Simratjeet Kaur

In continuation to the blog series on reporting requirements under Foreign Exchange and Management Act, 1999, Part 2 of the series covers prescribed reportings for not-so-common transactions, like, issue of sweat equity shares, Employee Stock Options, ADRs, GDRs, conversion of ECB etc.

Part 1 of the series, wherein forms prescribed for reporting very common transactions, like, inward remittance (ARF), issuance of shares (FC-GPR) and transfer of shares (FC-TRS) have been detailed. It is interesting to note that reporting of only these common transactions have been enabled online and  it’s mandatory to do so (through e-biz portal). Physical filing is not an option.

All other forms, as stated below are to be filed physically and online filing is not an option. They are to be filed with the Authorised Persons / Authorised Dealer banks Category – I Banks / Authorised Banks, as the case may be.

Summarised below are the transactions and related forms for the prescribed reporting.

 

1. REPORTING OF ECB TRANSACTIONS
Purpose Form Name To be filed with Timeline
To report actual External Commercial Borrowing  (ECB) transactions Form ECB-2 AD Category 1 Bank to Department of Statistics and Information Management (DSIM) Within 7 working days from the close of month to which the transaction relates

 

2. REPORTING OF CONVERSION OF ECB INTO EQUITY
Purpose Form Name Timeline
Conversion of ECB into Equity (Full and partial conversion) Form FC-GPR and

Form ECB-2

Within 7 working days from the close of month to which the conversion relates

Some pointers while filing ECB-2:

  1. In case of full conversion:
  2. the form ECB-2 should mention “ËCB wholly converted to equity”.
  3. Subsequent filing of form ECB-2 is not required.
  4. In case of partial conversion:
  5. the form ECB-2 should mention “ËCB partially converted to equity”.
  6. Subsequent filing of outstanding balance of ECB to be reported in form ECB-2.

 

3. REPORTING OF EMPLOYEE STOCK OPTIONS (ESOPs) AND SWEAT EQUITY SHARES.
Purpose Form Name Timeline
To report issue of sweat equity shares/ ESOPs/ shares issued against exercise of stock option to persons resident outside India who are:

  • its employees/ directors or
  • employees/ directors of its holding company/ joint venture/ WOS.
Employees’ Stock Option (ESOP): Within 30 days from the date of issue of such shares

Note: All FIRCs and KYC shall be filed as necessary documents along with form ESOP.

 

4. REPORTING OF ISSUE OR TRANSFER OF CONVERTIBLE NOTES
Purpose Form Name Details Timeline
On issue / transfer of Convertible Notes Convertible Notes (CN) To report:

a)  Issue of convertible notes by Indian Startup Company to a person resident outside India

 

b)  Transfer of such convertible notes by a person resident in India to a person resident outside India and vice versa.

 

a)  Within 30 days of such issue.

 

b)  Within 60 days of such transfer.

 

Note: Consolidated statements w.r.t. the issue and transfer of convertible Notes to be submitted by the Authorised Dealer Bank to the RBI.

 
5. REPORTING OF INVESTMENTS BY FPIs ON THE STOCK EXCHANGE
Purpose Form Name To be filed with Timeline
To report purchase (except derivative and IDRs)/ transfer of capital instruments by FPIs on the stock exchanges in India. LEC (FII) RBI No timeline specified

Note:  FPI is defined as investment made in capital instruments, by a person resident outside India in the following:

  1. Less than 10% of the post issue paid up share capital on a fully diluted basis of a listed Indian Company
  2. Less than 10% of the paid up value of each series of capital instruments of a listed Indian Company

Also, to note that 10% limit shall be applicable to each Foreign Portfolio Investor or Investor group.

 

6. REPORTING OF INVESTMENTS BY NRIs ON THE STOCK EXCHANGE
Purpose Form Name Timeline
To report purchase/ transfer of capital instruments by Non-Resident Indians or Overseas Citizens of India stock exchanges in India. LEC (NRI) No timeline specified

  

7. REPORTING OF DOWNSTREAM INVESTMENT
Purpose Form Name To be filed with Timeline
To report downstream investment in another Indian company or LLP which is considered as indirect foreign investment for the investee company in terms of FEMA 20(R) Regulations. Downstream Investment (DI) Secretariat for Industrial Assistance, DIPP Within 30 days of such investment

 

8. REPORTINGS FOR OVERSEAS DIRECT INVESTMENTS
Purpose Form Name Timeline
To report overseas investment ODI-Part I Within 30 days of making such investment
Annual Performance Reports ODI-Part II By 30th of June every year.
To report disinvestment by way of Sale or Transfer of Shares /Closure / Voluntary Liquidation /Winding Up/ Merger /Amalgamation of Joint Venture / Wholly Owned Subsidiary ODI-Part III Reporting to be made immediately on receipt of sale proceeds or within 90 days from the date of sale of the shares /securities and documentary evidence to this effect shall be submitted to the Reserve Bank through the designated Authorised Dealer.

 

Readers may also like to go through the following blogs:

  1. Transfer Of Shares Between Resident And Non-Resident (Private Limited Companies)
  2. FLA Return under FEMA : four important points
  3. Transfer of Shares between Resident and Non-resident: Six Steps FC-TRS
  4. Foreign Direct Investment (FDI) by a Non-Resident Indian (NRI)
  5. Single Master Form (SMF) And The New Filing Platform FIRMS

 

 

One thought on “Reporting Requirement under FEMA (Part 2)

  1. Dear Sir,
    Actually there is an Indian individual who has invested outside Indian company by way of acquiring Shares. So what are the FEMA Compliance that individual have to be done.
    Please reply soon

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