FEMA Compliance

FEMA Compliance is the Foreign Exchange Management Act, which amends and regulates foreign exchange intending to carry out external trade & payments in India. It was introduced in 1999 to replace FERA (Foreign Exchange Regulation Act) and to align India's foreign exchange regulations concerning the Liberalization of the economy. That said, the former was brought into existence to streamline cross-cultural trade and solidify foreign trade and Investment, followed by international transactions. 

FEMA plays a significant role in ensuring the effective utilisation of Foreign Exchange resources while overseeing unauthorised transactions. As a result, within FEMA, the non-residents of India need to comply with the rules and regulations to carry out foreign-exchange transactions seamlessly. 

In non-compliance, you can be subjected to penalties and fines, which might put you in legal trouble if not adhered to. Therefore, you should comply with the rules and regulations to conduct international business smoothly. 

FEMA Regulations RBI

The Foreign Exchange Management Act comprises guidelines issued by the RBI, which empower them to comply with the specified instructions regarding payments or any activities associated with foreign exchange. The Reserve Bank of India has the authority to take action based on the following factors that necessitate-

• To ensure adherence to the Act's provisions, the Reserve Bank of India (RBI) directs the authority to issue rules, regulations, or directions, summoning authorised individuals to provide the requested information.
• If a person with authority disobeys the ruling of the Reserve Bank of India (as per the Act) and does not file the required returns after being given a chance to present their case, they may face a penalty of ten thousand rupees. In addition, if they violate any other ruling, they may be subject to an extra penalty of up to two thousand rupees per day for as long as the violation persists.

Therefore, you must comply with the FEMA RBI regulations to ensure effective implementation.

FEMA Compliance services can be availed by selective categories, out of which the following are of importance-

• Non-resident of India
• Foreign individuals 
• Companies 
• Foreign Investors 
• Proprietorship concern 
• Individuals with a high net worth

FEMA Compliance Checklist

FEMA Compliance Checklist consists of the following components, which are as follows-

For FEMA registration, apart from an individual following legal entity shall be required to get Registration and follow FEMA compliances, as required from time to time-

• Companies incorporated under the Companies Act, 2013
• A Limited Liability Partnership (LLP) registered as per the provisions of the LLP Act 2008;
• A legal entity recognised as a start-up that fulfils the criteria prescribed for recognising a start-up under the DPIIT Scheme under the Ministry of Commerce and Industry, Government of India.
• Therefore, the RBI, along with the Govt. of India, launched the FIRM's portal intending to simplify foreign Investment reporting under one master form under Single Master Form (SMF) through which the legal entity can report FEMA compliances and can complete foreign Investment reporting without having to acquire a digital signature certificate of the authorised signatory of the business entity.

Thus, The Foreign Investment Reporting and Management System (FIRMS) is a one-stop-shop for various reporting compliances under the provisions of FEMA and is available on a 24*7 basis.

The Foreign Exchange management market is deemed legislation that supervises the overall functioning of Foreign Direct exchanges. Now, let us look at the required documents for a FEMA License. 

• The Need for Incorporation Certificate
• An Affidavit that states all the provided information.
• The Memorandum of Association (MOA)
• The Article of Association (AOA)
• In the case of present ventures, a copy of the joint venture agreement shareholders' agreement/ technology transfer/trademark/brand assignment agreement (as applicable).
• Copy of Downstream Intimation.
• Copy of relevant past FIPB/SIA/RBI approvals connected with the current proposal. 
• The Resolution for the Board
• The Audited Financial Statement of the previous Financial Year
• List of Names, identification proof and addresses of all the foreign collaborators of the Investor entity or Company.
• Both the Pre and Post-investment pattern of the shareholding of the Investee Company.
• Relevant Foreign Inward Remittance Certificate (FIRC) where the Investment has already flowed in.
• The order of the High Court order in case of any arrangement scheme.
• The Valuation certificate has been accepted.

The FEMA Compliance process consists of the following process, which is as follows- 

• Step 1:- Connect with the Corpseed team

First, contact Corpseed as your one-stop solution provider. 

• Step 2:- Registration undertaken by our experts

Under this step, we will help you undertake FEMA registration by visiting the online portal and registering as a "New Business user" (Business user is the applicant authorised by the business entity for reporting transactions through FIRM's portal and shall be applicable concerning one entity only). 

• Step 3:- Filing of application

Then, Experts will file the FEMA Compliance with basic details such as business user, name, last name, business user address details, bank details, etc. After filling in all the details, we will recheck and apply discrepancies and errors carefully. 

• Step 4:- Verification with Authorised Dealer

Next, the Business user will be verified by the Authorised Dealer (AD) (a bank specifically authorised to deal in foreign exchange or foreign securities under the FEMA Act 1999 by the RBI) bank through its e-KYC procedure. The approval/rejection will be informed to the Business user through the provided e-mail address.

• Step 5:- Status of Application Issued By Registering Authority

As for the next step, the Registering authority will tell their binding decision, notifying the status as acceptance or rejection of the Registration. The reasons for the same are recorded in writing within seven days of the receipt of the application.

• Step 6:- Approval for FEMA

On getting approval for FEMA registration by the RBI, the applicant can access the FEMA portal by visiting their user workspace and can fill out necessary forms accordingly. 

Nonetheless, Team Corpseed is here to assist you in carrying out the processes of FEMA Compliance. We are just a call away!

The FEMA Compliance is equipped with Guidelines which assist you in understanding its associated features. Therefore, the key points of the same are as follows-

• FEMA applies to Indian residents (only). It does not apply to the Indians residing Abroad. It also mentions criteria or how an entity should be from India, especially during the previous financial year with at least 182 days or more. 
• FEMA even mentions the required fields, which require approvals and permissions from the Reserve Bank of India or the government that oversees foreign exchange. 
• FEMA mentions and classifies foreign exchange transactions, grouped under two categories: capital accounts and current accounts. Here, the capital account looks at adjusting the assets and liabilities of the individual residing in India to the ones residing outside. Therefore, with a shift or a change in the assets or liabilities overseas of an Indian residing outside or the performed transaction by an Indian resident overseas is counted under the capital account, whereas the other transaction fall under the current account. 

Penalties under FEMA Compliance

Suppose any person opposes the provision of this act regulation, direction and notification, as issued under this Act, or contravenes any of the conditions of the RBI. In that case, he will be liable to pay thrice the amount involved in the infringement, up to three lakhs, which is not quantifiable. And as per continued infringement, the penalty can be extended up to five thousand rupees each day, just after the first day, when the contravention continues.

At Corpseed, our team is fuelled by an indisputable commitment to help you achieve FEMA License. With years of experience and an extensive knowledge base, we are the go-to experts for all your needs. So why settle for anything less than the best? Trust the passionate team at Corpseed to handle all your trademark needs. Contact us today, and let us help you pave the way to a successful Foreign exchange process.