The Government of India has introduced mandatory filing requirements for all Indian companies that have received foreign investment as a result of transactions with foreign investors. The first tranche of reporting needs to be completed by 12 July 2018. If an entity misses the filing deadline then its eligibility to receive foreign investments could be jeopardised. Non-compliance may also be prosecuted under the Foreign Exchange Management Act 1999 (FEMA).
The filing requirements apply to an Indian company, LLP or start-up (Entity) that has received direct or indirect foreign investment.
An Entity first needs to file an entity master form to declare all amounts of foreign investment it has received since its incorporation. The master form needs to be filed on the Reserve Bank of India’s (RBI) website. To initiate the process an Entity needs to appoint an entity user, as the sole authorised person designated to complete the filings on the RBI website. This needs to be done using a specific authorisation form.
Following the preliminary filing, a single master form (SMF) needs to be filed to self-declare further details of an Entity’s foreign investment limits.The information that will be required on the SMF has been set out in a draft form under Annex 2 of the RBI circular. The final version of the SMF is expected around 1 August 2018.The draft SMF indicates that detailed disclosures will need to be submitted in relation to an Entity’s business activities, and the total direct or indirect foreign investment received by it. In addition, detailed disclosures relating to any ESOP transactions, convertible notes and downstream investments will also be required. An Entity will also need to confirm if investments in it have an applicable sectoral or statutory ceiling limit and if they have been met, the type of capital instrument that was used to receive the investment (whether it was equity, preference shares or warrants etc.) and its issue price and consideration.
For transfers of capital instruments between persons resident outside India and persons resident in India, the nature of transfer (IPO, buyback, private placements etc.) and type of transfer (inbound or outbound) will need to be stated. Further details of the transfer arrangement including escrow and indemnity arrangements will need to be evidenced with relevant extracts of the agreements.
This filing requirement is additional to any other permissions or approvals required by applicable Indian laws.
A copy of the RBI circular can be found here.