Received Remittance from a foreign company to start new business in India: Know the Compliances to follow

Foreign investors generally invest in India due to – availability of low-wage labor, accessibility of resources and the special policy privileges which government provides to entities in India Compared to other world economies, India is one of the top countries where foreign investors especially the bigfoot MNCs invest their funds and choose it as a profitable location to scale their business up with subsidiaries or with opening their franchises.

If you have received any remittance from any foreign entity to start a new business or expand their business in India, then the below guide will help you to make the best use of it without having any legal consequences.

Foreign Companies Investing in India

In India, a foreign company can conduct its business by incorporating a new company under the company’s act 2013, by forming joint ventures/wholly-owned subsidiaries or by opening liasoning offices/ branch offices or project offices with any existing entity.

FDI in Indian entities can be made by foreign investors only through two routes :

  • The Automatic Route: FDI Investments which does not require the approval of the government.
  • The Approval Route: FDI Investments which requires the approval of the government.

Remittances from Foreign Company as FDI: FEMA Compliances

As per the FDI policy and guidelines of RBI (Reserve Bank of India), foreign investment is an investment made by any person outside India in capital assets or capital structure of any entity in India on a repatriable basis.

FDI is an investment made by foreign entities or individuals in entities of India for more than 10% of their capital base as per OECD guidelines. So, FDI is a capital account transaction and all transactions under the FDI are reported under the FEMA Act.

For the receipt of FDI from any foreign investor under FEMA, confirmation of the investment with the following compliances has to be made as per RBI Master Regulations.

  • Proposal for acceptance of FDI has to be submitted with all required documents on Foreign Investment Facilitation Portal, at the following Url:
  • A Single Master Form for reporting the purpose, details of investor and all relevant information asked for in the form is to be filed
  • Form FC-GPR to be filed within 30 days for the issue of shares or securities to the investor against investment.
  • Form FC-TRS to be filed for reporting an actual transfer of shares to the investor within 30 days of remittance of fund or issue of securities to investors whichever earlier.

Remittances from Foreign Company as FDI: Companies Act, 2013 Compliances

For companies receiving FDI from foreign entities have to undergo an approval process based on standards and plans developed by DIPP. While in some cases, FDIs are permitted under automatic route which does not require the approval of government authorities.

Also, the investment made in any Indian company by any foreign national shall be against the issuer of any securities whether shares, debentures or bonds, etc.

For the receipt of FDI from any foreign investor, confirmation of the investment with the following compliances has to be made under the Companies Act, 2013:

  • Securities are to be issued to the investor only against investment by satisfying provisions of Section 42 – Private Placement Conditions.
  • Form ESOP has to be filed for the issue of securities to members of business or employees working with foreign investors making FDI.
  • Form FLA as the annual return of foreign liabilities and assets has to be filed before 15th July every year.
  • Form ECB to be filed for reporting the FDI investments received by way of external commercial borrowing.

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