INTEGRATED REPORTING
STRUCTURE: FOREIGN INVESTMENT ISSUED BY RBI: “SINGLE MASTER FORM”
BACKGROUND:
This article
is in regards to the newly introduced reporting structure (“Single Master Form herein referred
thereafter SMF “) by Reserve Bank of India (herein referred
thereafter RBI) for the reporting of all Foreign Investments so received by “Indian
Entities”
Before
moving forwards, let’s begin with terminology like “Foreign Investments”.
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Foreign Investment[1] in India is regulated in terms of clause (b) sub-section 3 of section
6 and section 47 of the Foreign Exchange Management Act, 1999 (FEMA) read
with Foreign Exchange Management (Transfer or Issue of a Security by a Person
resident Outside India) Regulations, 2017 issued vide Notification No. FEMA 20(R)/2017-RB
dated November 7, 2017. Where, investments can be made in shares,
mandatorily and fully convertible debentures and mandatory and fully
convertible preference shares of an Indian company by non-residents,
subject to the pricing guidelines / valuation norms and reporting
requirements amongst other requirements as prescribed under FEMA Regulations.
Further any
Indian Entity receiving foreign investments were required to report such
transactions to RBI which was Regulated by Regulation 13 of the Foreign
Exchange Management (Transfer or Issue of Security by Person Resident Outside
India) Regulations, 2017 presently prescribes twelve (12) different types of forms for
FDI reporting including Advance Remittance Form, Form FC-GPR, Form
FC-TRS, Annual Return on Foreign Labilities and Assets, Form ESOP, Form DRR,
Form LLP (I), Form LLP (II), Form Convertible Notes, Downstream Investment
Form, Form LEC (FII) and Form LEC (NRI).
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As the
present “Reporting Structure” is not in integrated resulting in different and
various forms for different type of foreign investments , RBI has introduced “Integrated
Reporting Structure” in form of “Single Master Form” vide a RBI Circular[2], notified
on the 7 June 2018 with the aim of simplifying reporting under the Foreign
Exchange and Management Act, 1999 (FEMA). Further On June 27th, 2018, RBI released a User Manual for Entity Master – FIRMS
(User Manual)[3] which provides detailed
instructions and the process for filing the Entity Master Form.
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IMPLEMANTATION:
For the implementation
of the above dated circulars; RBI has announced an “ONLINE APPLICATION-FIRMS” (Foreign
Investment Reporting and Management System) which will available in Two Phases:
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IN THE
FIRST PHASE, THE FIRST MODULE
ENTITY
MASTER FORM
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ü The Entity Master, would be made available online
ü Will be available to the public for data entry between June 28 (at 1:00 pm) and July
12, 2018.
ü seeking identification details of Indian entities, specifically
seeks information pertaining to foreign direct investment, foreign portfolio
investment and the indirect foreign investments received by the Indian
entities till date
ü Any Indian entity which
does not comply WILL BE LIABLE FOR PENALTY: COMPLETE PROHIBITION ON RECEIVING
ANY FORM OF FOREIGN INVESTMENT IN FUTURE.
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IN THE
SECOND PHASE, THE SECOND MODULE
SINGLE
MASTER FORM
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ü The Single Master form will made available online
ü will be available to the public for data entry from 01st August, 2018
ü It has merged eight (8) of
the above twelve (12) earlier reporting requirements, along with an additional
obligation of reporting in case of investment by person resident outside
India in an Investment Vehicle.
ü Four (4) forms that may remain outside the framework of SMF, and
may likely continue to be filed in the manner they are currently filed with
the RBI, are Advance
Remittance Form, Annual Return on Foreign Labilities and Assets, Form LEC
(FII) and Form LEC (NRI)
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Note: As the “Single
Master Form” will be available from 01st August, 2018; the FAQs in
regards to the form will be articulated in next series
IMPORTANT POINTS: TO BE CONSIDERED;
ENTITY MASTER FORM
[AVAILABLE FROM 28TH
JUNE TO 12TH JULY, 20118]
[WEBSITE: Uniform Resource
Locators (URL) of the application is https://firms.rbi.org.in]
Who is
entity; under “Entity Master Form”?
Entities
will be those, which are eligible for receiving “investments” in India, which
can issue: shares,
mandatorily and fully convertible debentures and mandatorily and fully
convertible preference shares.
Entity here will be any of the following:
A company within the meaning of
section 1(4) of the Companies Act, 2013
A Limited Liability Partnership
(LLP) registered under the LLP Act, 2008
A start-up which complies with
the conditions laid down in Notification No. G.S.R 180(E) dated February 17,
2016 issued by Department of Industrial Policy and Promotion, Ministry of
Commerce and Industry, Government of India.
Who will
fill the form?
All the
entities aforesaid, being the artificial person,
will authorise a person who will be sole person (only
one person to be authorised for one entity)
However one person can act as
authorised for multiple entity
To add/update the foreign
investment details of an Entity in the Entity Master
He will be entirely responsible
for the data entered.
Authority letter[4]
will be required
issued by entity for authorising personnel for such transaction.
Authority Letter submitted by the
entity user will be verified by RBI and after RBI’s approval
While filling the Entity User
Registration Form: The user should provide their own PAN No. (not the PAN
No. of the company)
Creation of
Entity Master Form[5]:
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STEP I
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Click on Registration form for New Entity
User & Filed Description & generate LOGIN id
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STEP II
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Logging on to Entity Master incorporate
following Details:
Entity Details Tab(Master Data)
Particulars Tab(Registered office Details,
etc)
Foreign Investment in Company / LLP Tab.
Foreign Investment Info tab (Enter all
Foreign Investment received by the entity since the date of incorporation) |
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STEP III
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Declaration
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STEP IV
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Submissions
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Points to be
noted; while incorporating details: In Foreign Investment in Company / LLP Tab.
Enter ALL FOREIGN INVESTMENT RECEIVED by the
entity since the date of incorporation: All present (as on
date received) & past (any in previous year) have to be filled ne after the other
ALL
FOREIGN INVESTMENT, irrespective of the fact that
the regulatory reporting to RBI for the same has been made or not or whether
the same has been acknowledged or not.|
STRUCTURE
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TYPES OF INSTRUEMENTS
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In case of
Company
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Paid-up
Capital of the company on a [fully diluted basis][6]
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In case of
LLP
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Total
Capital contribution in LLP (in INR)
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In case of
start-ups
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convertible
notes
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ALL
FOREIGN INVESTMENT, weather
direct or indirect foreign investments details; needs to be incorporated:
“The Indian companies who have made
downstream investment in another Indian company for which it is considered as
indirect foreign investment in terms of Regulation 14 of Foreign Exchange
Management (Transfer or issue of security by a person resident outside India)
Regulations, 2017 dated November 7, 2017 and as amended from time to time,
shall inform the same to the Indian investee company for the purpose of
providing details of indirect foreign investment in Entity Master.”
Details of each Issue / transfer (and not investor
wise)
have to be filled in this page, one after the other. After entering the details of one issue user; add the details of the next issue / transfer.
i.
Description of the
allotment/transfer (whether Rights / Bonus / Share Swap / Merger / Demerger /
ESOP/ NR to R transfer/ R to NR transfer etc).
ii.
In
case of Company: Equity Shares, CCPS, CCDs,
Share Warrants, Partly Paid up Shares
iii.
In
case of LLP: Capital Contribution or Profit Share
iv.
In
case of start-ups
– Convertible Notes.
Number
of Instruments / Percentage of capital contribution
i.
In
case of company, number of capital
instruments issued to the foreign investors to be provided
ii.
In
case of LLP, percentage of capital contribution
received from the foreign entity to be provided.
Disclaimer:
Appreciate your support and so happy to have you as reader.
This article is only knowledge sharing
initiative and is not intended to be a part of any advertising. The information
contained therein is of general nature and the entire contents of this document have been developed based
on relevant information and are purely the views of the authors. Though the
authors have made utmost efforts to provide authentic information however, the
authors expressly disclaim all or any liability to any person who has read this
document, or otherwise, in respect of anything, and of consequences of anything
done, or omitted to be done by any such person in reliance upon the contents of
this document . READER SHOULD SEEK APPROPRIATE COUNSEL FOR YOUR OWN
SITUATION. AUTHOR SHALL NOT BE HELD LIABLE FOR ANY OF THE CONSEQUENCES DIRECTLY
OR INDIRECTLY
GORSIA & ASSOCIATES
ANJALI J.
GORSIA Mobile:
8408964411
Mumbai Off:
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[1] Foreign Investment’ means any investment
made by a person resident outside India on a repatriable basis in capital
instruments of an Indian company or to the capital of an LLP;
Explanation:
If a declaration is made by persons as per the provisions of the Companies Act,
2013 about a beneficial interest being held by a person resident outside India,
then even though the investment may be made by a resident Indian citizen, the
same shall be counted as foreign investment.
Note:
A person resident outside India may hold foreign investment either as Foreign
Direct Investment or as Foreign Portfolio Investment in any particular Indian
company.
[5] Important Notes for Entity Master
All details
must be provided in one go.
Only when all the mandatory fields have been
filled, the submit button is enabled.
The RESET
button will reset the complete form.
Once the
details have been submitted the Entity user can modify the details.
The onus of
the integrity of the data entered is on the Entity user.
[6] Fully diluted basis means the total number
of shares that would be outstanding if all possible sources of conversion are
exercised. It includes:
1.
Equity shares: As equity shares
2.
CCDS/ CCPS: Equivalent Equity shares. (If the conversion ratio is not fixed
upfront, the company may enter the maximum number of equity shares possible
upon conversion in compliance with the pricing guidelines)
3.
Share warrants: Equivalent Equity shares considering 100% exercise upfront
4.
ESOPs: Equivalent Equity shares considering 100% exercise upfront
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