Re: [CharteredSecretaries] RE: [CS_yahoogroups) issue of shares on non-repatriation basis
yoganand l
1. we are discussing about permissible debits and not credits to the nre account. isnt it....
i didnot understand the reason behind highlighting the credits. kindly explain in detail.
2. in case shares are allotted on non repat basis, is there any separate formality of intimating that it is allotted as such. because i don't see anything in this regard either in the inflow report or in the fc.gpr
3. further, the relevant extracts of the regulations are contained in sch.I; Kindly note that the issue of shares on non repat basis is covered under sch.iv of the same regulations and not under sch.I
contrary views invited pls..
with regards,
yogan.
Dear Friends,
Reproduced below is the asked query:
An Indian Company has received funds towards share application money from a Non Resident Indian. The funds were released out of NRI’s NRE A/c. Is the company concerned required to file inflow report and FC-GPR?
Inflow Report
As per FEM (Transfer or Issue of Security by a Person Resident Outside India) Regulations, 2000, as amended from time to time:
An Indian Company shall report inflow of consideration amount (towards share subscription) within 30 days of such receipt with RBI
Reproduced below is clause 3 (specifying permissible credits to NRE A/c) of FEM (Deposit) Regulations, 2000 as amended from time to time:
3. Permitted Credits.
(a) Proceeds of remittances to India in any permitted currency.
(b) Proceeds of personal cheques drawn by the account holder on his foreign currency account and of travellers cheques, bank drafts payable in any permitted currency including instruments expressed in Indian rupees for which reimbursement will be received in foreign currency, deposited by the account holder in person during his temporary visit to India, provided the authorised dealer/bank is satisfied that the account holder is still resident outside India, the travellers’ cheques/drafts are standing/endorsed in the name of the account holder and in the case of travellers’ cheques, they were issued outside India.
(c) Proceeds of foreign currency/bank notes tendered by account holder during his temporary visit to India, provided (i) the amount was declared on a Currency Declaration Form (CDF), where applicable, and (ii) the notes are tendered to the authorised dealer in person by the account holder himself and the authorised dealer is satisfied that account holder is a person resident outside India.
(d) Transfers from other NRE/FCNR accounts.
(e) Interest accruing on the funds held in the account.
(f) Interest on Government securities and dividend on units of mutual funds, provided the securities/units were purchased by debit to the account holder’s NRE/FCNR account or out of inward remittance through normal banking channels.
(g) Maturity proceeds of Government securities including National Plan/Savings Certificate as well as proceeds of Government securities and units of mutual funds sold on a recognised stock exchange in India and sale proceeds of units received from mutual funds, provided the securities/units were originally purchased by debit to the account holder’s NRE/FCNR account or out of remittances received from outside India in free foreign exchange.
(h) Refund of share/debenture subscriptions to new issues of Indian companies or portion thereof, if the amount of subscription was paid from the same account or from other NRE/FCNR account of the account holder or by remittance from outside India through normal banking channels.
(i) 1[Refund of application/earnest money/purchase consideration made by the house building agencies/seller on account of non-allotment of flat/plot/cancellation of bookings/deals for purchase of residential/commercial property, together with interest, if any (net of income-tax payable thereon), provided the original payment was made out of NRE/FCNR account of the account holder or remittance from outside India through normal banking channels and the authorised dealer is satisfied about the genuineness of the transaction.]
(j) Any other credit if covered under general or special permission granted by Reserve Bank.
As can be seen, permissible credits are exclusively in the nature of inward remittance. Thus the company concerned is required to intimate RBI within 30 days of receipt of share subscription amount from NRE A/c of NRI.
Filing of FC-GPR
As per FEM (Transfer or Issue of Security by a Person Resident Outside India) Regulations, 2000, as amended from time to time:
Form FC-GPR is required to be filed with RBI within 30 days of issue/allotment of shares/convertible debentures by an Indian company to a PROI(includes NRI as well). The event necessitating filing of Form FC-GPR is allotment in PROI’s and is nowhere dependent upon mode of remittance of share subscription amount.
Thus the Company is required to file form FC-GPR within 30 days of allotment of shares in NRI’s favour on non-repatriation basis.
Regards
Rajiv Ranjan
From: company_...@yahoogroups.com [mailto:company_...@yahoogroups.com] On Behalf Of yoganand l
Sent: Sunday, January 17, 2010 12:55 AM
To: company_...@yahoogroups.com
Subject: Re: [CS_yahoogroups) issue of shares on non-repatriation basis
sir,
this is not giving that meaning.
can you explain in a detailed way..
yogan.
On Sat, Jan 16, 2010 at 12:25 PM, ram shukla <ramshu...@yahoo.co.in> wrote:
Hi Manan,
Sec 4 of the FEM (Transfer or Issue of Security by a Person Resident Outside India) Regulations, 2000 reads as follows;
___________________________________________________________________________
4. Restriction on an Indian entity to issue security to a person resident outside India
or to record a transfer of security from or to such a person in its books :-
Save as otherwise provided in the Act or Rules or Regulations made thereunder, an Indian entity shall not issue any security to a person resident outside India or shall not record in its books any transfer of security from or to such person:-
Provided that the Reserve Bank may, on an application made to it and for sufficient reasons, permit an entity to issue any security to a person resident outside India or to record in its books transfer of security from or to such person, subject to such conditions as may be considered necessary.___________________________________________________________________________
By the above section it nowhere clears that no complaince have to be done.
In plain reading it looks like that we have to comply with the regulation unless RBI have exempted you on the application made by you.
Please clarify, If I am wrong.
Thanks & Regards
Ramkrishna Shukla
From: Manan Bhavsar <mananbh...@yahoo.in>Subject: Re: [CS_yahoogroups) issue of shares on non-repatriation basis
To: company_...@yahoogroups.com
Date: Friday, 15 January, 2010, 3:42 PM
There is no compliance required i.e. neither to report to RBI for receipt of funds nor filing of FC-GPR.
You have to specify on the share certificates that "share are issued on non-repatriation basis".
Refer- Sc - 4 to FEM (Transfer or issue of secuity of PROI) Reg.
Manan Bhavsar
--- On Fri, 15/1/10, yoganand l <cs.yogan@gmail. com> wrote:
From: yoganand l <cs.yogan@gmail. com>
Subject: [CS_yahoogroups) issue of shares on non-repatriation basisTo: "company_secretary" <company_secretary@ yahoogroups. com>, charteredsecretarie s@yahoogroups. com, "csmysore" <csmysore@googlegrou ps.com>
Date: Friday, 15 January, 2010, 8:46 AM
hi all,
one fema query :
a company has received money under automatic route from an nri from
his nre account.
the comany wants to allot shares to the NRI on non repatriation basis.
this has been accpeted by the NRI as well.
now what reporting compliances are required to be followed.
- do we need to file inflow report within 30 days of the inward remittance
- do we need to file fc.gpr within 30 days of allotment
yogan.
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Prakash B
Dear Yogan,
Please find the attached FDI master circular, 2009.
Please refer page(s) No. 29-30, 33 & 70-80, which may assist you in this regard.
Regards
Prakash B
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yoganand l
From: CharteredS...@yahoogroups.co.in [mailto:CharteredS...@yahoogroups.co.in] On Behalf Of yoganand l
Sent: Monday, January 18, 2010 2:10 PM
To: CharteredS...@yahoogroups.co.in; company_secretary; csmysore; csch...@googlegroups.com
Subject: Re: [CharteredSecretaries] RE: [CS_yahoogroups) issue of shares on non-repatriation basis
dear sir,
1. we are discussing about permissible debits and not credits to the nre account. isnt it....
i didnot understand the reason behind highlighting the credits. kindly explain in detail.
We could have been discussing about permissible debits, if the question asked would have been “whether a NRI allowed to invest into shares/convertible debentures of an Indian company out of proceeds from his NRE A/c?”. Here you have asked that whether the company concerned required to report receipt of consideration towards share subscription if the same is received out NRE A/c of NRI. The reporting to RBI is to be done in case of foreign inward remittance of share subscription amount. Thus it becomes pertinent to examine the permissible credits to NRE A/c, i.e. to ascertain the source of amount lying in the NRE A/c, whether domestic or foreign inward remittance.
once the amount falls into NRE Account, it takes the shape of a convertible currency account. i don't see any differentiation made between a foreign source and an indian source (of the money that is currently present in an NRE Account). kindly refer a relevant circular / law which differentiates between an indian source and a foreign source.
2. in case shares are allotted on non repat basis, is there any separate formality of intimating that it is allotted as such. because i don't see anything in this regard either in the inflow report or in the fc.gpr
There is no such requirement. Only at the time of crediting the sale consideration of shares acquired on non repatriation basis following should ba taken care:
If purchased on non repatriation basis by NRI through stock exchange under portfolio investment scheme:
The net sale/maturity proceeds (after payment of taxes) of shares and/or debentures of an Indian company purchased by NRI under this scheme, may be allowed by the designated branch of an authorised dealer, to be credited to NRO account of the NRI investor where the payment for purchase of shares and/or debentures sold was made out of funds held in NRO account or where the shares and/or debentures were purchased on non-repatriation basis. Further the amount invested in shares or convertible debentures under this Scheme and the capital appreciation thereon shall not be allowed to be repatriated abroad.
If purchased on non repatriation basis by NRI other than through stock exchange under portfolio investment scheme:
The sale/maturity proceeds (net of applicable taxes) of shares or convertible debentures purchased under this Scheme shall be credited only to NRSR account where the purchase consideration was paid out of funds held in NRSR account and to NRO or NRSR account at the option of the seller where the purchase consideration was paid out of inward remittance or funds held in NRE/FCNR/NRO/NRNR account. Further the amount invested in shares or convertible debentures under this Scheme and the capital appreciation thereon shall not be allowed to be repatriated abroad.
so its the same form for both >>>???
if that is the case then how would rbi know whether it is under repat or non repat basis ??? this is so because if shares are allotted on non repat basis, some percentage caps are not applicable.!!!
further, if you see part.b of fc.gpr - there is no column even there too..
so do you feel that the shares allotted to nri.s on non repat basis have to be shown under nri category ???
3. further, the relevant extracts of the regulations are contained in sch.I; Kindly note that the issue of shares on non repat basis is covered under sch.iv of the same regulations and not under sch.I
Thanks for sharing this important information.
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yoganand l
yogan.
yoganand l
1. the extracts that you have reproduced are from the master circular. kindly note that the master circular has no legal sanctity whatsoever. so we request you to refer to the relevant extracts in the regulations pls..
2. my contention is that sch.i is itself not applicable. so the debate is on the applicability of sch.i for issue of shares on non repat basis and not the applicability of a particular clause in sch.i pls..
3. also examine this example --> a person acquires shares with indian money, then goes outside India and settles there. after getting nri status, he sells the shares. now :
- to which account this money can be credited - nre / nro ?
- before he sells the shares, where do we need to show his investment in col.5 of form.fc-gpr - nri quota / resident quota; if you show it in nri quota, then rbi would ask to show the reporting compliances for acquiring it. i have seen many companies showing it in resident quota.
4. can some one enlighten the group as to the concept of fdi in a broader way. whether the term fdi includes issue of shares on non repat also. i always had this doubt as to why rbi will be bothered if you allot shares on non repat basis... anyways money is not going to go out of india, if at all they are sold.. why would it ask you for issuing shares above the fair value price..why would it ask you to report to it when there is no point in analysing..
further i think the intetion behind asking companies to file annual return in (part.b of fc-gpr) to the statistical division is to know the foreign liability of India. if shares are issued on non repat basis, and if this shares are shown in nri category, it would spoil the analysis. i very well know that law and logic cannot be mixed. but then, i dont see any provision in fema without a logic..
contrary views invited pls..
yogan.
Mr. Yogan
Here reproducing the extract from Master Circular,2009, which doesn’t differentiate the repatriation or non-repatriation basis for reporting to RBI, its clearly mention that Indian company receiving FDI must report the RBI in three fold, either repatriation basis or non-repatriation basis.
18. Reporting of FDI
(i) Reporting of inflow
(a) 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 later than 30 days from the date of receipt
in the Advance Reporting Form enclosed in Annex - 6.
The form can also be downloaded from the Reserve Bank's website
http://www.rbi.org.in/Scripts/BSViewFemaForms
(iii) Reporting of issue of shares
(a) After issue of shares (including bonus and shares issued on rights basis) and
shares issued under ESOP)/fully and mandatorily convertible debentures / fully
and mandatorily preference shares, the Indian company has to file Form FCGPR,
enclosed in Annex - 8, not later than 30 days from the date of issue of
shares.
(d) Part- B of form FC-GPR should be filed on an annual basis by the Indian
company, directly with the Reserve Bank6. This is an annual return to be
submitted by 31st of July every year, pertaining to all investments by way of
6 Addressed to the Advisor, Balance of Payment Statistical Div
direct/portfolio investments/re-invested earnings/others in the Indian company
made during the previous years (i.e. the information in Part B submitted by 31st
July 2009 will pertain to all the investments made in the previous years up to
March 31, 2009). 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.
If we analyse your case
1. You have received money from a foreign investor and u intend to allot shares- this is the stage where
Your first stage reporting is attracted- filing of inflow report
2. As soon as you allot shares – second stage reporting is attracted- this again doesn’t deals with repatriation or non-Repatriatation basis..this u can see clearly see in the master circular of july 2009.Had the intention was to exempt any allotment Clear mention should have been made in this regard.
3. Again filing of part B of FCGPR is also mandatory as it talks about all investment.
The purpose of Mr Ranjan of highlighting credits was to give an understanding the status of money received –inward remittance.
Regards,
Dr. Dinesh Gupta
M.Com, LL.b, MBA(Fin.), ACA, FCS, DMS(Cyber Laws)
_______________________________________
Executive Director
BunenaVentura Corporate Advisory Private Limited
+ 91 11 476 20001 (DID)
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+ 91 11 4564 9617 (Fax)
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+ 91 93102 60956 (H/P)
Skype : inddlexiaconsulting
From: CharteredS...@yahoogroups.co.in [mailto:CharteredS...@yahoogroups.co.in] On Behalf Of yoganand l
Sent: Monday, January 18, 2010 2:10 PM
To: CharteredS...@yahoogroups.co.in; company_secretary; csmysore; csch...@googlegroups.com
Subject: Re: [CharteredSecretaries] RE: [CS_yahoogroups) issue of shares on non-repatriation basis
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yoganand l
yogan.
Dear Sir,
Please find below reply to your queries below, in green.
Regards
Rajiv Ranjan
From: CharteredS...@yahoogroups.co.in [CharteredS...@yahoogroups.co.in] On Behalf Of yoganand l [cs.y...@gmail.com]
Sent: Monday, January 18, 2010 4:59 PMCc: company_secretary; csmysore; csch...@googlegroups.com
Subject: Re: [CharteredSecretaries] RE: [CS_yahoogroups) issue of shares on non-repatriation basis
sir, my comments annexed....
From: CharteredS...@yahoogroups.co.in [mailto:CharteredS...@yahoogroups.co.in] On Behalf Of yoganand l
Sent: Monday, January 18, 2010 2:10 PM
To: CharteredS...@yahoogroups.co.in; company_secretary; csmysore; csch...@googlegroups.com
Subject: Re: [CharteredSecretaries] RE: [CS_yahoogroups) issue of shares on non-repatriation basis
dear sir,
1. we are discussing about permissible debits and not credits to the nre account. isnt it....
i didnot understand the reason behind highlighting the credits. kindly explain in detail.We could have been discussing about permissible debits, if the question asked would have been “whether a NRI allowed to invest into shares/convertible debentures of an Indian company out of proceeds from his NRE A/c?”. Here you have asked that whether the company concerned required to report receipt of consideration towards share subscription if the same is received out NRE A/c of NRI. The reporting to RBI is to be done in case of foreign inward remittance of share subscription amount. Thus it becomes pertinent to examine the permissible credits to NRE A/c, i.e. to ascertain the source of amount lying in the NRE A/c, whether domestic or foreign inward remittance.
once the amount falls into NRE Account, it takes the shape of a convertible currency account. i don't see any differentiation made between a foreign source and an indian source (of the money that is currently present in an NRE Account). kindly refer a relevant circular / law which differentiates between an indian source and a foreign source.
I have also said the same thing as you are trying to communicate/convince. The proceeds released from a NRE account to subscribe into shares/convertible debentures of an Indian company would treated be as "Foreign Inward Remittance", which in turn initiates the compliance requirement of intimating RBI of receipt of foreign inward remittance for subscription into shares/convertible debentures of the Company. I had tried to communicate the idea in a bit logical way, by looking into each "permissible credit transaction" to ascertain by oneself, whether there exists a reporting requirement in case share subscription amount is received out of NRE A/c. As has been already communicated by me, the reporting for inward remittance and for allotment as well, is required to be done.
2. in case shares are allotted on non repat basis, is there any separate formality of intimating that it is allotted as such. because i don't see anything in this regard either in the inflow report or in the fc.gpr
There is no such requirement. Only at the time of crediting the sale consideration of shares acquired on non repatriation basis following should ba taken care:
If purchased on non repatriation basis by NRI through stock exchange under portfolio investment scheme:
The net sale/maturity proceeds (after payment of taxes) of shares and/or debentures of an Indian company purchased by NRI under this scheme, may be allowed by the designated branch of an authorised dealer, to be credited to NRO account of the NRI investor where the payment for purchase of shares and/or debentures sold was made out of funds held in NRO account or where the shares and/or debentures were purchased on non-repatriation basis. Further the amount invested in shares or convertible debentures under this Scheme and the capital appreciation thereon shall not be allowed to be repatriated abroad.
If purchased on non repatriation basis by NRI other than through stock exchange under portfolio investment scheme:
The sale/maturity proceeds (net of applicable taxes) of shares or convertible debentures purchased under this Scheme shall be credited only to NRSR account where the purchase consideration was paid out of funds held in NRSR account and to NRO or NRSR account at the option of the seller where the purchase consideration was paid out of inward remittance or funds held in NRE/FCNR/NRO/NRNR account. Further the amount invested in shares or convertible debentures under this Scheme and the capital appreciation thereon shall not be allowed to be repatriated abroad.
so you mean to say that the fc.gpr doesnt differentiate between allotment of shares on repat or non repat basis ?? Yes
so its the same form for both >>>??? Yes
if that is the case then how would rbi know whether it is under repat or non repat basis ??? this is so because if shares are allotted on non repat basis, some percentage caps are not applicable.!!! Through AD Category I Bank which has handled the transaction.
further, if you see part.b of fc.gpr - there is no column even there too..
so do you feel that the shares allotted to nri.s on non repat basis have to be shown under nri category ??? Yes
3. further, the relevant extracts of the regulations are contained in sch.I; Kindly note that the issue of shares on non repat basis is covered under sch.iv of the same regulations and not under sch.I
Thanks for sharing this important information.
every schedule in my opinion will and should have a triggering point. otherwise it becomes invain. the triggering point for sch.iv is given in 5(3)(ii). so only sch.iv is applicable for issue of shares on non repat basis. the inflow report and other reporting compliances are not given in sch.iv
How schedule I is also applicable along with schedule IV had already been communicated by me in my previous mail on the subject.
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