The various formalities involved in the Intimation to Reserve Bank of India in respect of the equity brought in 100% subsidiary to an Indian Company by a foreign company has always remain a matter of clarification for many people. I am writing this article from my practical experience as in one of our clients case there was delay in filling the same. I hope you will gain good understanding of the matter from the write-up.
The Requirement and the flow of events is as follows in simple terms and have been explained point-wise later:
1. Share Application money is brought by the foreign company in its Indian Subsidiary.
2. Within 30 days of introducing the money the company should intimate to RBI about the receipt of funds.
3. Once the Intimation is send to the AD i.e Authorized dealer through whom the funds were received in India and the AD Intimates to RBI after verification of certain details.
4. AD forwards the application to RBI and Gets the Unique Identification Number which shall be quoted in the future correspondence with the RBI and Authorized dealers.
5. The Allotment of shares shall be done for share application money and Filling of FCGPR shall be filled within 180 days of the receipt of the funds.
6. In case the allotment is not done and intimated to RBI the funds shall be send back to the Holding company immediately.
7. The for FC-GPR Shall be filled with RBI within 30 days of allotment of shares to RBI through AD.
8. The FCGPR shall be filled along with a valuation certificate from a CA and a compliance certificate from the Company Secretary.
9. Once the FCGPR is filled all the formalities are completed and RBI will approach for any discrepancies or doubts if they have any.
Elaborating the above points in Details and various situations
1. Share application money should be brought in the account of the subsidiary company or it may be brought into the account of the agent of the foreign company and than transferred to the account of the subsidiary company. But every thing should be done through proper banking channels.
2. The Intimation shall be done in 30 days, In case it is not done still the same shall be filled with the AD as delay and the reason for the delay shall be mentioned in the covering letter.
3. The Intimation shall be filled with the Authorized dealer i.e if the funds have come to the subsidiary companies account that with the same authorized dealer. If the funds have come to the account of agent of the holding company than with the banker of the agent i.e authorized dealer of the agent. Some times this might happen that the funds have comes in an account which is no more operative or closed by closed by the company even is such cased the intimation shall be filled the authorized dealer with whom the funds have come and it's the responsibility of the authorized dealer to accepts the intimations.
After receipt of this intimation the internal procedure of the AD is that they have to send a swift massage to the remitting bank in order to confirm the remittance once it is confirmed form the foreign remitting bank that the funds were remitted by the same bank the intimation will be forwarded to RBI for allotment.
4. Once the application is forwarded to RBI , After processing it RBI issued a Unique Identification Number. Generally allotment of UIN number may take long time in such case further document and forms can be filled with the RBI based on the acknowledgment of the Intimation filled previously.
5. The allotment of share shall be done immediately; In case delay is made and the period is expired the same shall be filled along with a letter for condemnation of delay and giving the reason for the delay.
6. In the absence of completing the formalities within 180 days the requirement is to remit back the money. The companies can remit back the whole funds and again ask for the share application money for its holding company. But this procedure is very tedious. Hence as a alternation an effort can be made by filling the further FCGPR forms and awaiting from RBI for any show cause notice and Filling a genuine reply for the delay.
7.The FCGPR shall be filled within 30 days of allotment of share , there may be delay in filling the same as the client may wait for the allotment to get approved from ROC which sometimes takes higher time. Still the FCGPR shall be filled with the reason for delay.
8. FCGPR shall be filled along with the valuation certificate from CA, the valuation shall be less than the value of issue of share. In case the issue price is less than the actual valuation as per CA certificate it is treated as loss of foreign exchange by the government of India. Further compliance certificate shall also be taken from the company secretary that all the legal formalities for allotment of shares have been done properly.
9. Filling of FCGPR along with the above details completes the procedure and the assignment is over. If we receive any clarification from RBI same shall be answered accordingly.
Rakesh Parik, Chartered Accountant by profession and a Business setup Consultant for India. Looking at the complex legal framework in India Rakesh decided to start a business setup advisory company in order to provide a relief to the foreign investors in setting up there business in India. Primarily focusing on the SMEs. With his consultancy company he has tried to provide a phenomenal environment to the foreign investors and made an effort to make their Indian setup an easy process.
The Requirement and the flow of events is as follows in simple terms and have been explained point-wise later:
1. Share Application money is brought by the foreign company in its Indian Subsidiary.
2. Within 30 days of introducing the money the company should intimate to RBI about the receipt of funds.
3. Once the Intimation is send to the AD i.e Authorized dealer through whom the funds were received in India and the AD Intimates to RBI after verification of certain details.
4. AD forwards the application to RBI and Gets the Unique Identification Number which shall be quoted in the future correspondence with the RBI and Authorized dealers.
5. The Allotment of shares shall be done for share application money and Filling of FCGPR shall be filled within 180 days of the receipt of the funds.
6. In case the allotment is not done and intimated to RBI the funds shall be send back to the Holding company immediately.
7. The for FC-GPR Shall be filled with RBI within 30 days of allotment of shares to RBI through AD.
8. The FCGPR shall be filled along with a valuation certificate from a CA and a compliance certificate from the Company Secretary.
9. Once the FCGPR is filled all the formalities are completed and RBI will approach for any discrepancies or doubts if they have any.
Elaborating the above points in Details and various situations
1. Share application money should be brought in the account of the subsidiary company or it may be brought into the account of the agent of the foreign company and than transferred to the account of the subsidiary company. But every thing should be done through proper banking channels.
2. The Intimation shall be done in 30 days, In case it is not done still the same shall be filled with the AD as delay and the reason for the delay shall be mentioned in the covering letter.
3. The Intimation shall be filled with the Authorized dealer i.e if the funds have come to the subsidiary companies account that with the same authorized dealer. If the funds have come to the account of agent of the holding company than with the banker of the agent i.e authorized dealer of the agent. Some times this might happen that the funds have comes in an account which is no more operative or closed by closed by the company even is such cased the intimation shall be filled the authorized dealer with whom the funds have come and it's the responsibility of the authorized dealer to accepts the intimations.
After receipt of this intimation the internal procedure of the AD is that they have to send a swift massage to the remitting bank in order to confirm the remittance once it is confirmed form the foreign remitting bank that the funds were remitted by the same bank the intimation will be forwarded to RBI for allotment.
4. Once the application is forwarded to RBI , After processing it RBI issued a Unique Identification Number. Generally allotment of UIN number may take long time in such case further document and forms can be filled with the RBI based on the acknowledgment of the Intimation filled previously.
5. The allotment of share shall be done immediately; In case delay is made and the period is expired the same shall be filled along with a letter for condemnation of delay and giving the reason for the delay.
6. In the absence of completing the formalities within 180 days the requirement is to remit back the money. The companies can remit back the whole funds and again ask for the share application money for its holding company. But this procedure is very tedious. Hence as a alternation an effort can be made by filling the further FCGPR forms and awaiting from RBI for any show cause notice and Filling a genuine reply for the delay.
7.The FCGPR shall be filled within 30 days of allotment of share , there may be delay in filling the same as the client may wait for the allotment to get approved from ROC which sometimes takes higher time. Still the FCGPR shall be filled with the reason for delay.
8. FCGPR shall be filled along with the valuation certificate from CA, the valuation shall be less than the value of issue of share. In case the issue price is less than the actual valuation as per CA certificate it is treated as loss of foreign exchange by the government of India. Further compliance certificate shall also be taken from the company secretary that all the legal formalities for allotment of shares have been done properly.
9. Filling of FCGPR along with the above details completes the procedure and the assignment is over. If we receive any clarification from RBI same shall be answered accordingly.
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