A Comprehensive Guide
Understanding FEMA compliance on the right issue is crucial for ensuring smooth operations and avoiding legal pitfalls. In this comprehensive guide, we will delve into the key aspects of FEMA compliance in the context of rights issues
When a legal entity gets foreign investment by investing capital, it allocates shares to a foreign investor. This transaction must be reported using the FC-GPR Form to the RBI. FC-GPR is used when a legal entity receives foreign investment and allots shares to foreign investors in return. If this occurs, the business must submit details of the share allocation to the RBI within 30 days from the date of allotment, following RBI guidelines for FDI compliance.
Inward Remittance of Foreign Direct Investments (FDI) by a person resident outside India is regulated by Foreign Exchange Management (Foreign Exchange Management (Transfer or issue of security by a person resident outside India) Regulations, 2019.
1. Copy of FIRC (Foreign Inward Remittance Certificate). `
2. Copy of the KYC (Know Your Customer) report for the beneficiary if the beneficiary and remitter are different entities.
3. CS Certificate: Certificate from a Practicing Company Secretary stating that all the requirements have been complied with as per the Companies Act, 2013.
4. Valuation Report by Chartered Accountant – The Valuation Report from a Chartered Accountant shall indicate the manner of arriving at the price of the shares issued to the person resident outside India, which is required only if the resident shareholder renounces their rights in favor of the shareholder resident outside India.
5. Board resolution for the Allotment of Securities.
6. Declaration by Authorized Representative.
7. Letter of Debit Authorization (if required by bank).
8. Declaration by the company that the right issue to a person resident outside India is not at a price less than the price offered to a person resident in India.
In case of any delay in submission, the RBI (Reserve Bank of India) or AD Bank may ask for any other documents if required. Once all the above documents are received, the FC-GPR form to be filed.
A penalty of flat INR 7500 is charged. This amount is to be transferred into the RBI’s designated bank account.
