The Reserve Bank of India (RBI) has introduced new directions under the provisions of the Foreign Exchange Management Act, 1999 vide A.P. (DIR Series) Circular No. 30 notified on the 7 June 2018 (hereinafter referred to as 'RBI Circular') laying down the roadmap for implementation of the reporting of foreign investments through the Single Master Form (SMF).

The present system of reporting total foreign investment in India made by a person residing outside India through eligible capital instruments in the investee company or capital contribution in a Limited Liability Partnership (LLP) or investments in other investment vehicles, involves filing of numerous forms via various reporting platforms. This renders it as a disintegrated reporting structure.

The RBI circular focuses on integrating the foreign direct investment reporting system and has mandated reporting via following two new forms:

Name of the Form Points to be noted
Entity Master Form (EMF)
  • Prior to the implementation of SMF, RBI will provide a reporting interface called as EMF to Indian companies and LLPs that have existing foreign investment including indirect foreign investments, to provide data input on total foreign investment received till date by them.
  • The said interface will be available on RBI's website from 28 June 2018 to 12 July 2018, the format of which is attached as the Annexure 1 to the Circular on the website.
  • There are various details required to be filled in EMF, like identification number, registered office, foreign holding percentage, etc.
  • Indian entities not complying with this pre-requisite, i.e., filing of EMF, will not be able to receive foreign investment (including indirect foreign investment) and will be considered as non-compliant with FEMA and regulations made thereunder.
Single Master Form
  • The SMF will be an integrated reporting form which will be an event-based form aiding in reporting the total foreign investment in India made by a person residing outside India.
  • SMF would provide a facility for reporting total foreign investment in an Indian entity viz. company, LLP and other investment vehicles (Real Estate Investment Trusts (REITs)/Infrastructure Investment Trusts (InvIts)/Alternative Investment Funds (AIFs).
  • SMF will subsume the existing forms such as:

    • FC-GPR and FC-TRS for Issue and transfer of shares.
    • Form LLP-I & II for foreign direct investment in LLP and disinvestment/transfer of capital contribution.
    • Form ESOP for issue of employee stock option plan.
    • Form CN for issue or transfer of convertible notes.
    • Form DR for issue or transfer of depository receipts.
  • SMF will also be compulsory while:

    • Reporting the downstream investment (indirect foreign investment) in a company or LLP via Form DI – reporting of downstream investment (indirect foreign investment) in a company or LLP.
    • Reporting of investment in an investment vehicle, including REITs, InvIts and AIFs via Form InVi – reporting of investment by a person resident outside India in an investment vehicle.
  • While the format of the form has been provided as Annex II 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.

SKP's 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. It is also aimed at ensuring that there is consistency and accuracy of data on foreign investments reported.

There may be certain practical difficulties prior to 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.

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