The Reserve Bank of India (RBI) has introduced two new forms with the objective of simplifying and reducing the procedure related to reporting of foreign investment in Indian entities under the Foreign Exchange and Management Act, 1999 (FEMA). These two forms (Entity Master Form/EMF and Single Master Form/SMF) have been introduced on June 7th, 2018.
An online application interface named Foreign Investment Reporting and Management System (FIRMS) has been established by the RBI with the intent to facilitate the easy filing of EMF and SMF.
The reporting process on FIRMS will take place in two phases. In the initially phase – the contrivance for online filing of EMF will be made accessible to the applicants. During the second phase, the establishment for online filing of SMF would be open to the applicant with effect from August 1st, 2018.
Entity Master Form
All the Indian companies with existing foreign investment are directed by the Reserve Bank of India (RBI) to report data related to foreign investment in Entity Master of FIRMS by filing EMF.
Indian companies are obligated to report the information related to foreign investment in that company from the date of the incorporation.
12th July, 2018 is the closure date for the EMF reporting window which has already begun.
Indian entities with no foreign investment at the moment (but if such entities had foreign investment in its business at any time in the past) are mandated to report information related to such past foreign investment by filing the EMF.
It should be noted by the applicants that EMF Reporting is a one-time requirement. A detailed user manual in relation to EMF is issued by the RBI for the benefit of the applicant which manual will provide clear cut guidance on EMF online filing.
Single Master Form
With effect from August 1, 2018, RBI will introduce a Single Master Form (SMF) to facilitate all Indian entities to file online for reporting foreign investments in India – The same is reiterated by RBI in a notification (with respect to prospect of reporting of foreign investments by Indian entities with inclusion of foreign entities subsidiaries) dated June 7, 2018.
Further, all Indian entities (which have received foreign direct investments) will be provided with an interface to input data related to total foreign investment received in a specified format before the enforcement of the SMF.
As of now the Indian entities need to file two different applications (Advance Remittance Form (ARF) and Form for reporting foreign currency General Permission Route (Form FC-GPR) for reporting the foreign investment.
With the introduction of the SMF, the said two applications (ARF and Form FC-GPR) are merged into a single application as SMF.
The final form of SMF along with the user guide containing operational instructions will be soon made accessible to the applicants by the RBI.
Conclusion:
To conclude, failure to comply with the above mentioned pre-requisites by Indian entities within the prescribed deadlines will disqualify such entities from receiving further foreign investment (including indirect foreign investment). Such entities will be in default in complying with Foreign Exchange Management Act, 1999 and associated regulations.
Research and inputs by Paruchuri Baswanth Mohan