India – FEMA Reporting – Single Master Form (SMF) For Reporting Of Foreign Investments.

 

3 August, 2018

 

 

In line with Indian Government’s continuing efforts to boost foreign investment and ease of doing business in India, the Reserve Bank of India (“RBI”) issued directions under the provisions of the Foreign Exchange Management Act, 1999 (via Circular A.P (DIR Series) Circular No.30 dated 7 June 2018 (“RBI Circular”)) to lay down the roadmap for implementation of an integrated online reporting system of foreign investments through a Single Master Form (“SMF”).

 

Presently the Foreign Exchange Management (Transfer or Issue of Security by a Person Resident Outside India) Regulations, 2017 provide for exhaustive reporting requirements for any foreign investment in India through 12 different forms. Reporting of foreign investments in Indian companies or limited liability partnerships can therefore be quite cumbersome for foreign investors as well as Indian entities. SMF would simplify most reporting requirements, irrespective of the instrument through which the foreign investment is made.

 

SMF would subsume the following forms for reporting of foreign investment:

 

• Form FC-GPR (Issue of capital instruments by an Indian company to a person resident outside India)
• Form FC-TRS (Transfer of capital instruments between a person resident outside India and a person resident in India)
• LLP-I (FDI in LLP through capital contribution and profit shares)
• LLP-II (Disinvestment/ transfer of capital contribution and profit shares in LLP)
• Form ESOP (Issue of ESOPs / sweat equity shares/ shares against exercise of ESOP by an Indian company to an employee resident outside India)
• CN (Issue or transfer of convertible note)s
• Form DRR (Issue/transfer of Depository Receipts)
• Form DI (Reporting of downstream investment (indirect foreign investment) in a company or LLP)
• Form InVi (Reporting of investment by a person resident outside India in an investment vehicle)

 

Prior to implementation of SMF, the RBI would provide an interface to all Indian entities which have foreign investment in specific format of Entity Master Form (“EMF”), to provide data in respect of the total foreign investment they have received so far. The interface was available on RBI website from 28th June 2018 to 12th July 2018. The EMF is in essence a diligence check being undertaken by the RBI on all Indian entities which have any form of foreign investment to ascertain whether they have complied with reporting requirements under FEMA till date.

 

All Indian entities which do not comply with this pre-requisite will not be permitted to receive any foreign investment (including indirect foreign investment) going forward and will be declared non- compliant with FEMA.

 

In order to comply with the timeframe, RBI has advised Indian entities that have received foreign investments (including indirect foreign investment through downstream investment), to be ready with the details to be provided in the Entity Master Form and SMF as per the formats prescribed.  

 

 

Lisbeth Lanvers-Shah, Partner, DS Avocats

lanversshah@dsavocats.com