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FEMA Consultancy and Compliance

In this article, we shall discuss the Foreign Exchange Management Act (FEMA), 1999. FEMA Act regulates all foreign exchange transactions. The Reserve Bank of India (RBI) is the primary regulator for FEMA related matters. However, the Government of India also regulates certain parts, mainly related to capital receipts. The ‘Enforcement Directorate’ (ED) is the enforcing authority along with RBI.

FEMA replaced the erstwhile FERA in 2000. It has considerably liberalised the entire law pertaining to foreign exchange. FEMA has made offences and violations as civil rather than criminal.

FEMA Act and Rules classify transactions as current account or capital account transactions.

Usually the principle is that current account transactions are permissible unless specifically prohibited. Further, capital account transactions are prohibited unless specifically permitted. Gradually, over the years, RBI and the Government have liberalised many FEMA rules.

  • RBI administers FEMA using Master circulars and Directions to Authorised Dealer (AD) banks.
  • Central Government has issued the ‘FEMA Non- Debt Instrument Rules’ to replace the earlier FDI policies.

FEMA reporting/compliance has gone many changes in the recent past – from physical to E-biz reporting to the present RBI FIRMS reporting.

Forms for FEMA reporting are as follows:
   FC-GPR For intimating the Reserve Bank of India (RB) via Authorised Dealier (AD). Has to be done within 30 days of issue of Capital instruments like shares etc.

Earlier this was a two step process – Advance Reporting on receipt and FC-GPR on allotment. This has now been condensed in one step.

  FC-TRS Transfer of capital instruments between Resident to Non-resident or vice-versa. (within 60 days of receipt of consideration)
 

Form FDI-LLP (I)

LLP shall intimate RBI receipt of capital contribution by investment by non-resident within 30 days from the receipt of the consideration.
 

Form FDI –LLP (II)

Transfer of share in LLP from resident to non-resident or vice-versa within 60 days of such change.
Above four are generally subsumed under the Single Master Form (SMF).
  FLA Indian company / LLP who has received foreign investments has to file an annual return on Foreign Liabilities and Assets (FLA). This is mainly done for valuation of liabilities towards foreign investor.
FORM ESOP Indian company issuing ESOP to file Form ESOP within 30 days
    Form DI

 

Mainly for reporting indirect foreign investment.

An Indian entity or an investment Vehicle making downstream investment in another Indian entity which is considered as indirect foreign investment for the investee Indian entity shall file Form DI with the Reserve Bank within 30 days from the date of allotment of capital instruments.”

External Commercial Borrowings (ECB) forms:
Form ECB Eligible borrowers, prior to borrowing from Non-residents, have to file Form ECB. This is to obtain Loan Registration Number (LRN). This shall contain the proposed terms and conditions like the all-included cost, maturity period etc.
Form ECB-2 To be filed within 7 days of end of each month after obtaining ECB

Apart from the above, RBI also mandates compliance for branch office/ liaison office/ project office. These offices have to file annual returns with the Directorate General of Police (DGP) and the Authorised Dealers (AD).

 

Our experience and expertise:

The FEMA team at Entrecap Business Services has wide experience in matters relating to:

    • Assistance in establishing Branch and Liaison Offices.
    • Consultancy for matters pertaining to Foreign Direct Investment (FDI). This includes – eligible investment vehicles, eligible investors, valuation etc.
    • Post-allotment FEMA reporting including obtaining valuation certificates/ compliance certificates.
    • Consultancy on Outbound investments under FEMA
    • Advice on non-residents immigrating to India or residents moving abroad (including banking matters)
    • Consultancy pertaining to External Commercial Borrowings (ECB)
    • Obtaining Loan Registration Number (LRN) for ECB issue
    • Periodical compliance under ECB
    • Assistance in filing various Forms and Returns under FEMA & RBI Regulations
    • Form 15CA/ 15 CB relating to foreign outward remittance.
    • Transfer of shares from Indian resident to non-residents or vice-versa – valuation and compliance certificates.
    • All matters pertaining to export and import.
    • Compounding and Regularization of Offences or Non-compliances Assistance and Advisory on any Foreign Transaction entered by the client

We shall be glad to assist you in all your FEMA issues.

For other corporate compliances, please refer here.

For any queries, fill the form on the right or email to info@entrecap.in

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