Atul Mittal, Director Deloitte Touche Tohmatsu India Pvt. Ltd April, 2015
Contents FEMA FDI Policy ODI Regulations ECB Policy Contraventions and Compounding Discussion 2
FEMA Legislation Provisions with respect to foreign exchange and related transactions are governed by: Foreign Exchange Management Act, 1999 ( FEMA ); Regulations made there under; Press notes issued by DIPP, Ministry of Commerce; Amendments in the law are carried out through; Notifications/ AP Dir Circulars/Clarifications issued by RBI Notifications/ Clarifications issued by DIPP 3
FDI Policy- An Overview
Entity Options Foreign Company SP/PF/AOP Operates as a foreign company Establishes an Indian LLP* Establishes an Indian company Liaison Office Project Office Branch Office Joint Venture Wholly Owned Subsidiary * LLPs (after obtaining FIPB approval) are permitted to be engaged in activities that are currently eligible for 100% FDI under automatic route, without any FDI-linked performance conditions.
FDI Policy Overview (Illustrative list) Prohibited Restricted t Permitted Agriculture or plantation activity (some exceptions) Betting, Gambling (including casinos) & Lottery Chit funds & Nidhi company Real estate (except construction development) Retail Trading except SBRT/MBRT Tobacco products Trading in Transferable Development Rights Atomic Energy (other than permitted activities) Some Sectors FDI Cap Civil Aviation 49% Petroleum refining by PSU 49% Telecom services 100% Pharma 100% (Brownfield) Single brand retail trading 100% Multi brand retail trading 51% Teleports/DTH/Mobile TV/HITS 74% Cable Networks (Other MSOs) 49% FM Radio 26% Up-linking of News & Current Affairs TV Channels 26% Up-linking of Non-News & Current Affairs TV Channels 100% Down-linking of TV Channels 100% Defence 49% 100% FDI permitted under auto route in other Sectors 6
Inbound Investments- FDI Eligible Sector Reporting 30 days fund receipt, 30 days FC-GPR FC-GPR, 180 days issue of Shares or Refunds Dividend/Interest Winding up/liquidation Pricing SEBI /ALP for Issue n Transfer, Funding FIRC/NRE/NRO/ FCNR(B) Conversion of ECB/TKH/Royalty/LD Prohibited, Restricted or Automatic Route Eligible Entities Indian Companies; and LLP INBOUND INVESTMENT Eligible Investors PROI/Entity Incorporated o/s except Pakistan Bangladesh with permission of GOI, OCB by RBI/GOI NRI/FVCI/FPI Eligible Instrument ES/CMCPS/CMCD /Options/Warrants/ PPS FCCB/FCEB/ADRBonus/Right/ ESOP and M&A
Inbound Investment- Transfer Gift or Sale CR, Buy Back M&A and Restructuring Reporting FC-TRS 60 days by Resident Optionality p y ES/CCPS/CCD ES- ROE CCD/CCPSALP No Assured Return TRANSFER FIPB Approval Restricted Sector Breaches Sectoral Caps Pricing SEBI/ALP RBI Approval Deferred Payment; NRI to NR t NR Gift to Price relaxation
ECB Policy
Foreign Currency Loan: ECB Change in Name, Lender, Transfer of ECB, Currency Eligible Lenders Rescheduleme Eligible Borrowers nt, Currency, End Use Reporting Form 83, ECB2, FC- GPR ECB Permitted Use Obtaining LRN All in Cost Ceiling End Use Restriction
Outbound Investment
Outbound Investment- JV/ WOS- ODI Write off Disinvestment After lapse of 1 year, No Dues, M Money receipt i t in i 90 days Indian Party - ICos, PF, LLP Trust and Society Reporting ODI, Investment proof, 30 days reporting, APR OUTBOUND INVESTMENT Eligible Investment Equity RPS Equity-RPSCCPS Loan/ Guarantee Eligible Sector All Sectors except p Banking, g, Real Estate, FSS Sources of Funds FC/ADR/INR/ Share Swap / ECB/FCCB Capitalization of receivables Financial Commitment Valuation > U$ 5 Mm or < U$ 5 Mm 4 Times of Networth
Situation so far. I read all the sections and clarifications in detail but I can't make out if we are defaulting or compliant!
Compounding of Contraventions
Compounding of Contravention Compounding of Contraventions Means.. Settle an offence committed by the contravener through imposition of a monetary penalty without going in for litigation after the contravener acknowledges having committed the contravention.. Objective.. To provide comfort by minimizing transaction costs, while taking severe view of willful, malafide and fraudulent transactions. But it is not equal to withdrawal of a charge or a complaint but an agreement not to pursue the legal battle and spare the accused from further consequences.
Compounding Salient Features Voluntary No suo-motto investigation Time Bound completion (Within 180 days) No further proceedings for contravention so compounded Payment of sum of contravention (within fifteen days) Once the order is passed, no contravener seek to withdraw the order or to hold it as void or request a review of the order No appeal against the Order Non payment shall be deemed as no application is made No compounding before expiry of 3 years of previous order for similar contravention No Compounding of cases where approval of any statutory authority/govt. etc. was required unless such approvals has been sought
Contraventions & Penalties at a glance Contravention Application for Condonation Application for compounding Adjudication proceedings Penalty/ Confiscation Quantifiable offence - Upto 3 times Non quantifiable offence - Upto Rs. 200,000 Continuing penalty - Rs. 5000 per day Imprisonment if penalty not paid within prescribed time
Discussion Atul Mittal, Director Deloitte Touche Tohmatsu India Pvt. Ltd. 9810065744 2014 Deloitte Touche Tohmatsu India Private Limited 18