Introduction:

Reserve Bank of India, being apex Bank of country do regulate, manage, supervise, monitor and guide the foreign direct investment flow in the country via its dedicated department called Foreign Exchange Department as implementing agency on movement of Foreign Direct Investment through various forms. Reporting of foreign direct investment is mandatory and failure to do so is against the law, results the compounding and penal provision for the receiving entity. Hence entity receiving the foreign direct investment should report the inward foreign remittance under FDI in Single Master Form at FIRM's portal.

Read Our Blog: How to Get Foreign Direct Investment (FDI) In NBFC

Single Master Form (SMF): It is master form with available 9 forms viz., FC-GPR, FC-TRS, LLP-I, LLP-II, CN, DRR, ESOP, DI, InVi for the reporting of it for foreign investment started from 1st Sept 2018 phase-wise but by end of 5th Feb 2019 now all 9 forms are actively available for reporting by entity received such investment from abroad.

Foreign Investment Reporting and Management System (FIRMS): It is an online reporting platform for reporting of foreign investment in India in SMF. It provides a one-stop shop, 24*7 online reporting facilitate for the applicant.

What is Foreign Direct Investment?

It is cautions to understand first capital instrument then only the terms Foreign Direct Investment can be understood. Capital instrument is terminology against which Indian company is permitted to receive foreign investment from the investor. Namely capital instruments refer to equity shares, debentures, preference shares and share warrants, all together.

Foreign Direct Investment (FDI) is defined as an investment in an Indian corporation through a capital instrument by a person who is not a resident of India, or in the case of a listed Indian company, an investment limit of 10% or more of the post-issue paid-up equity capital on a fully diluted basis.

Importance of Reporting:

It is regulatory mandate for every entity to provide timely reporting accurately of every foreign investment to Reserve Bank of India (RBI). Failure to do report the such transaction result the penal provision under the Foreign Exchange Management Act, 1999 by Regional Foreign Exchange Department of Reserve Bank of India. More precisely unless the same been not reported and approved by respective regional foreign exchange department, the fund could not be materializing in account of client and further usage be restricted. 

Types of Form:

There are several forms for various entity as per the capital instrument issued against which the investment is received by Indian entity. 

a) Foreign Currency -Gross Provisional Return (FC-GPR): It is an instrument of reporting the foreign direct investment received by Indian Company against the issuance of equity instruments to a person resident outside India. It shall be filed and reported not later than 30 days from the date of issue of the equity instrument.

b) Foreign Currency -Transfer of Shares (FC-TRS): As name suggest, it is instrument to record, report and update the transfer of equity instrument to Foreign Exchange Department of Reserve Bank of India.

c) LLP-I: Limited Liability Partnerships (LLPs) receiving amount for capital contribution and acquisition of profit shares person outside India is required to submit report in Form LLP-I within 30 days from the date of receipts of the amount of consideration. 

d) LLP-II: This form is used by LLPs to report disinvestment/transfers of capital contributions or profit-sharing between residents and non-residents (or vice versa) within 60 days of receiving funds.

e) CN: It stands for Convertible Notes. CN form is used for both issue or transfer of Convertible Notes in Single Master Form of FIRMS Portal, exclusive window for reporting of foreign investment to Foreign Exchange Department. It is an instrument used by a Start-up company for collecting the debt from abroad providing the option to debt provider, to get it back with returns or convert same into equity shares of Start-up company within period of 5 years. A Start-up business must file Form CN within 30 days of offering convertible notes to a person residing outside of India.

f) DRR: In case of reporting of ADR/GDR Issue, Form DRR is required to file by domestic custodian for reporting issue/transfer of sponsored/unsponsored depository receipts as per prescribed rules within 30 days of close of the issue/program.

g) ESOP: An Indian Company issuing employee stock option plan (ESOP) or Sweat Equity Shares to person resident outside India shall file ESOP within 30 days from the date of issue of ESOPs.

h) DI: It is form to record downstream investment of an Indian entity or an investment vehicle which at upfront received the foreign direct investment from person resident outside India. If such entity does make investment in another Indian entity which is also considered as Indirect foreign investment is known as Downstream Investment shall require to file Form DI. The timeline for filing form is 30 days from the date of allotment of equity instruments.

i) InVi: An investment vehicle which has issued its units to a person resident outside India in terms of given schedules of Non-debt Instrument Rules, 2019 shall file Form InVi to Regional Foreign Exchange Department of Reserve Bank of India within 30 days from the date of issue of units.

Registration on Portal

Reserve Bank of India via Foreign Exchange Department implemented the new filing portal since 2018 against the existing reporting format. The forms are same but procedure has changed for reporting. Instead of existing formality, the amendment is to built one stop solution of reporting forms as far as foreign direct investment is concern irrespective of receiving entity and based on purpose of foreign investment or its transfer and disinvestment. 

It has simple dedicated user interface of getting itself registered into online portal called FIRMS [https://firms.rbi.org.in/firms/faces/pages/login.xhtml]. In this portal, the reporting entity should first registered business user and then entity user. In fact, entity receiving the foreign investment first should register itself on FIRMS portal under the caption “New Entity User”. In case of already registered entity then again registration is not required, simply with login id credential entity can report its foreign direct investment. 

On the other hand, the person should be authorised as “Business User” to file application of reporting the investment in various forms. But one business user can file for only one entity, to file for next entity the user needs to take another business user ID for reporting the transaction in FIRMS portal on entity requirement.

Once registered the entity and business user then secured login id password credentials will be communicated to mail id. From which the person can get access of portal on which select the form as required and attach the documents as per checklist then complete the filing. As soon as scrutiny is completed from Foreign Exchange Department of Regional Reserve Bank of India (RBI), the task is done for particular foreign investment materialization.

Requirement of Filing

Based on nature of transaction and entity, the application form does generally have different requirements for filing a form. The required checklist of documents can be obtained from the Master Direction on Foreign Exchange Reporting. 

Checklist

The checklist that we discuss on this write-up is to take registration with FIRM's portal on which the basic details as follow is required to have upfront and fill accordingly to complete the registration process.

• Authority Letter
• Bank Account and IFSC Code
• Certificate of Incorporation, Memorandum of Association, and Article of Association
• Purpose of Reporting
• PAN and Aadhar Card of Authorised User
• Mail and Mobile/Contact Number of Authorised User

With these basic details, the business user and entity can be registered which refers ready to go filing live as per the mandate. 

Timeline 

Taking the registration on FIRMS portal is dedicated one day task, and by the end of day hopefully the login ID and password will be communicated to registered user. Further the reporting of specific form is determined by the availability of required checklist of documents in hand or not. If the required documents are ready to file position then the same can be completed in same day else by the nest day the reporting assignment can be completed. However, the approval or rejection or amendment notification is based on the service of AD-I Bank and RBI, how speedily the AD-I Bank response the matter to FED of RBI regarding the transaction details of such foreign investment in its Bank. Else on an average the approval or rejection will be given by a month period.

Conclusion

On this write up, the concluding remarks can be definition of foreign direct investment, importance of reporting foreign direct investment and consequence, process of reporting the transaction, where to report, how to report and nature of form and its time line to report. In fact, conclusive writeup for overall investment reporting structure and platform of Foreign Exchange Department, Reserve Bank of India.