Compliance Guide For Foreign Investment In India Through Share Capital (1)

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Compliance Guide For Foreign Investment In India
Through Share Capital
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Introduction
Foreign investment is one of the key drivers of
the economy in India. Foreign Institutional
Investors, Foreign Portfolio Investors, Venture
Capitalists as well as NRIs are allowed to hold
shares in Indian businesses. All such foreign
direct investment is subject to a few rules and
regulations that all associated entities have to
comply with. Lets go through the steps needed to
ensure adherence to all applicable laws.
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Submit The Advance Reporting Form
The form needs to be filled with the RBI within
30 days of receiving the money for shares. PAN
and other basic details of the investee and
investor are required. The form must be filled
manually on the central banks website.
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Handling The Share Application Money
The money received in lieu of shares must be
kept in a separate bank account. The funds
cannot be used unless shares have been issued to
the investors. Promoters and directors can be
penalized for violating this condition.
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Time-period For Allotment Of Shares
RBI states that shares must be allotted within
180 days of receiving the money. The Ministry
Of Corporate Affairs stipulates that stock must
be issued within 60 days. Convene a board
meeting to allot stocks to the investors.
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Filing The Foreign Investment Report
Submit the report through the Foreign Currency
General Purchase Register (FCGPR) form. The
report needs to be filed within 30 days from the
date of issuing of shares. The form is
submitted to the RBI and contains information
about the share capital investment.
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Submitting Another Form With The MCA
Submit Form PAS-3 with MCA within 30 days of
the allotment of the stock to the investors.
This document contains details about the capital
and debt structure of the company. The form
must be signed by a chartered accountant or a
company secretary.
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Other Compliance Requirements
Issue the share certificate within 60 days of
allotment of the stock. Pay the stamp duty on
the stocks according to the rate in your
jurisdiction. Make the entries about the funds
in relevant account books.
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