rbi introduced mandatory fdi reporting through smf

RBI INTRODUCED MANDATORY FDI REPORTING THROUGH SMF

In a partial manner, notification is applicable to the existing FDI. It is expected from the company that the company provides all the details of existing FDI in the prescribed format and prescribed manner as available in this respective notification.

SMF gives the facility related to reporting of total foreign investment in an Indian entity and also provides facility related to investment in investment vehicle to the person outside India.

Before any implementation of this process, the Reserve Bank of India will provide a specific format from 28.06.2018 to 12.07.2018 to Indian entities for input the data of foreign investment.

Before the implementation of Single Master Form (SMF), RBI would provide an interface of specified format called Entity Master File (EMF) to Indian entities for input the data of total foreign investment. From 28.06.2018 to 12.07.2018 RBI will make available the interface on their website.

The Indian entities who will not qualify the pre-requisite requirement will not able to receive any foreign investment in India and those Indian entities will be considered as non-compliant in Foreign Exchange Management Act (FEMA), 1999, and regulations.

WHAT IS SMF:-

• RBI will introduce a SMF to fulfill the objective of integration of various reporting structure of foreign investment in India. The SMF is required to be filed online and also provide a facility to an Indian entities for reporting total foreign investment. Single Master File is a substitute of individual reporting currently done through “Form FC-GPR, FC-TRS, LLP-I, LLP-II, ESOP, CN&DRR”. However the requirement of submitting the annual statement of “foreign liabilities and assets” to RBI is to continue 15 July every year.
• The Single Master Form will be integrated reporting forms which will be event-based form helping the person residing outside India in reporting the total foreign investment.
• Entity Master Data (EMD) Annex-I : It is required to all Indian entities to provide all the details of foreign investment received by them till date called as Entity Master Data and the format of is given in Annex-I of said notification.
• SMF will also provide the facility of reporting total foreign investment in an Indian entity via company, LLP & other investment vehicles(REITs)/Infrastructure Investment Trusts(Invlts)/Alternative Investment Funds(AIFs).
• A SMF is the substitute of existing forms such as:
  • For issue & transfer of shares – FC-GPR & FC-TRS.
  • For foreign direct investment & foreign disinvestment/transfer of capital contribution in LLP – FORM LLP-I & II.
  • For issue of employee stock option plan – FORM ESOP
  • For issue or transfer of convertible notes – FORM CN
  • For issue or transfer of depository receipts – FORM DR

• Single Master Form will also compulsory in following:-
  • Reporting the Downstream Investment (Indirect Foreign Investment) in a company or LLP via FORM DI.
  • Reporting of investment by person residing outside India in an investment vehicle (including REITs, Invlts &AIFs) via FORM InVi

 

SUBSEQUENT INVESTMENTS IN ANNEX-2:-

For any subsequent foreign investments, an integrated reporting structure of various types of foreign investment introduced which will be called SMF.

The format of SMF is given in Annex 2 of said notification. While the format of the form has been provided as Annex 2 to the circular, RBI is yet to notify the form. Once notified, the form will be available in the master direction on reporting as well as on the website for the entities to file it as and when required.

CONSEQUENCES OF NON-COMPLIANT BY INDIAN COMPANIES CANNOT RECEIVE FDIS

The Indian entities who will not qualify the pre-requisite requirement will not able to receive any foreign investment in India and those Indian entities will be considered as non-compliant in Foreign Exchange Management Act (FEMA), 1999 and regulations.

FEMA requires observation of its provisions in letter and spirit and if any contravention may land in penalties on the erring company and individuals. There are some conditions and stipulations in case of FDI, ODI, investment by individuals in foreign shares, purchase of assets in foreign countries, extending guarantees, availing ECBs, supplier’s credit.

RJA comments

The integration of the extant reporting structures is a positive move made by RBI to simplify and rationalize reporting for foreign investment in India. This crucial amendment is in line with the SEBI circular which was issued for the listed companies for monitoring FDI limits.

There may be certain practical difficulties before implementation of the new form for the Indian entities to collate details on foreign investment, especially as the window for uploading such data on the RBI interface is open for only 15 days. Now severe consequences attached to non-filing, Indian entities having foreign investment must prepare to submit the information timely. 

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