Remittance of sale proceeds/ Remittance on winding up/ Liquidation of Companies:
Sale proceeds of shares and securities and their remittance is ‘remittance of asset’ governed by the Foreign Exchange Management (Remittance of Assets) Regulations 2000 under FEMA.
AD Category – I bank can allow the remittance of sale proceeds of a security (net of applicable taxes) to the seller of shares resident outside India, provided the security has been held on repatriation basis, the sale of security has been made in accordance with the prescribed guidelines and NOC/tax clearance certificate from the Income Tax Department has been produced.
REMITTANCE ON WINDING UP/LIQUIDATION OF COMPANIES
AD Category – I bank have been allowed to remit winding up proceeds of companies in India, which are under liquidation, subject to payment of applicable taxes. Liquidation may be subject to any order issued by the court winding up the company or the official liquidator in case of voluntary winding up under the provisions of the Companies Act, 1956. AD Category – I banks shall allow the remittance provided the applicant submits:
a. No objection or Tax clearance certificate from Income Tad Department for the remittance.
b. Auditor’s certificate confirming that all liabilities in India have been either fully paid or adequately provided for.
c. Auditor’s certificate to the effect that the winding up is in accordance with the provisions of the Companies Act, 1956
d. In case of winding up otherwise than by a court, an auditor’s certificate to the effect that there are no legal proceedings pending in any court in India against the applicant or the company under liquidation and there is no legal impediment in permitting the remittance.
Repatriation of Dividend: Dividends are freely repatriable without any restrictions (net after Tax deduction at source or Dividend Distribution Tax, if any, as the case may be). The repatriation is governed by the provisions of the Foreign Exchange Management (Current Account Transactions) Rules, 2000, as amended from time to time.
Repatriation of Interest: Interest on fully, mandatorily & compulsorily convertible debentures is also freely repatriable without any restrictions (net of applicable taxes). The repatriation is governed by the provisions of the Foreign Exchange Management (Current Account Transactions) Rules, 2000 as amended from time to time.
REPORTING OF FDI
Reporting of Inflow
i. An Indian company receiving investment from outside India for issuing shares/ convertible debentures / preference shares under the FDI scheme, should report the details of the amount of consideration to the Regional Office concerned of the Reserve Bank not late than 30 days from the date of receipt in the Advance Reporting.
ii. Indian Companies are required to report the details of the receipt of the amount of consideration for issue of shares/convertible debentures, through an AD Category – I bank, together with a copy/ies of the FIRC/s evidencing the receipt of the remittance along with the KYC report on the non-resident investor from the overseas bank remitting the amount. The report would be acknowledged by the Regional Office concerned, which will allot a Unique Identification Number (UIN) for the amount reported.
Reporting of issue of shares
i. After issue of shares (including bonus and shares issued on rights basis and shares issued under ESOP)/ fully, mandatorily & compulsorily convertible debentures/ fully, mandatorily & compulsorily convertible preference shares, the Indian Company has to file From FC-GPR, not later than 30 days from the date of issue of shares.
ii. Form FC-GPR has to be duly filled up and signed by Managing Director/Director /Secretary of the Company and submitted to the Authorized Dealer of the company, who will forward it to the Reserve Bank. The following documents have to be submitted along with the form:
a. A certificate from the Company Secretary of the company certifying that:
(A) All the requirements of the Companies Act, 1956 have been complied with;
(B) Terms and conditions of the Government’s approval, if any, have been complied with;
(C) The company is eligible to issue shares under these Regulations; and
(D) The company has all original certificates issued by authorized dealers in India evidencing receipt of amount of consideration.
Note: For companies with paid up capital with less than Rs.5 crore, the above mentioned certificate can be given by a practicing company secretary.
b. A certificate from Statutory Auditor or Chartered Accountant indicating the manner of arriving at the price of the shares issued to the persons resident outside India.
c. The report of receipt of consideration as well as Form FC-GPR have to be submitted by the AD Category-I bank to the Regional Office concerned of the Reserve Bank under whose jurisdiction the registered office of the company is situated.
d. Annual return on Foreign Liabilities and Assets should be filed on an annual basis by the Indian company, directly with the Reserve Bank. This is an annual return to be submitted by 31st of July every year, pertaining to all investments by way of direct/portfolio investments/reinvested earnings/other capital in the Indian company made during the previous years (i.e. the information submitted by 31st July will pertain to all the investments made in the previous years up to March 31). The details of the investments to be reported would include all foreign investments made into the company which is outstanding as on the balance sheet date. The details of overseas investments in the company both under direct / portfolio investment may be separately indicated.
e. Issue of bonus/rights shares or stock options to persons resident outside India directly or on amalgamation / merger/demerger with an existing Indian company, as well as issue of shares on conversion of ECB / royalty / lumpsum technical know-how fee / import of capital goods by units in SEZs, has to be reported in Form FC-GPR.
Reporting of transfer of shares
Reporting of transfer of shares between residents and non-residents and vice- versa is to be done in Form FC-TRS . The Form FC-TRS should be submitted to the AD Category — I bank, within 60 days from the date of receipt of the amount of consideration. The onus of submission of the Form FC-TRS within the given timeframe would be on the transferor / transferee, resident in India. The AD Category — I bank, would forward the same to its link office. The link office would consolidate the Form FC-TRS and submit a monthly report to the Reserve Bank.
Reporting of Non-Cash
Details of issue of shares against conversion of ECB has to be reported to the Regional Office concerned of the RBI, as indicated below:
i. In case of full conversion of ECB into equity, the company shall report the conversion in Form FC-GPR to the Regional Office concerned of the Reserve Bank as well as in Form ECB-2 to the Department of Statistics and Information Management (DSIM), Reserve Bank of India, Bandra-Kurla Complex, Mumbai — 400 051. within seven working days from the close of month to which it relates. The words “ECB wholly converted to equity” shall be clearly indicated on top of the Form ECB-2. Once reported, filing of Form ECB2 in the subsequent months is not necessary.
ii. In case of partial conversion of ECB, the company shall report the converted portion in Form FC-GPR to the Regional Office concerned as well as in Form ECB-2 clearly differentiating the converted portion from the non-converted portion. The words “ECB partially converted to equity” shall be indicated on top of the Form ECB-2. In the subsequent months, the outstanding balance of ECB shall be reported in Form ECB-2 to DSIM.
Reporting of FCCB/ADRJGDR Issues
The Indian company issuing ADRs / GDRs has to furnish to the Reserve Bank, full details of such issue in the PRESCRIBED Form , within 30 days from the date of closing of the issue. The company should also furnish a quarterly return in the Form prescribed, to the Reserve Bank within 15 days of the close of the calendar quarter. The quarterly return has to be submitted till the entire amount raised through ADR/GDR mechanism is either repatriated to India or utilized abroad as per the extant Reserve Bank guidelines.
SOURCE: MINISTRY OF FINANCE, GOVERNMENT OF INDIA.
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