Funding is necessary while doing business, it is equivalent to the fuel in vehicle. Countries like India where capital is not readily available, FDI is important source of fund. When the funding is received from a source outside India, it is called Foreign Direct Investment (FDI) and the same is regulated by RBI through Foreign Exchange Management Act, 2000 (FEMA). Foreign Investment are growing these days considering the large business consumption capacity. All the MNCs are entering into India expecting a growth even the large investment groups are keen to interest in start-ups in India for Example SoftBank, Alibaba, Walmart, Amazon, Microsoft etc

Entities where investment can made by Foreign Investors, are as follows:

1. Companies Incorporated under Companies Act

2. Limited liability Partnership Incorporated under LLP Act

FDI can be done through Automatic Route where prior approval of RBI is not required and Approval route where the prior RBI approval is Required before investing. Majorly all the sectors are open to be invested through automatic route except few like Mining, broadcasting, Print Media, Satellites, private Security Agencies etc.

Although the RBI doesn’t stop you, but they keep on track of every investment made by Foreign investors in India. There are few FDI Compliance for SMEs required after receiving the fund and before Indian Company must fulfil the following conditions:

1. The Funds should be remitted from Investors Bank Account

2. The purpose of remittance should state as investment in Share Capital

3. KYC Details is to be completed

4. The Indian Company should obtain FIRC from the Bank

5. Check whether the securities offered are Shares, or Mandatorily Convertible Debentures or Preference Shares.

Compliances under FDI

Creation of Entity Master Form

As per the RBI Master Direction, Indian Company which has received the Foreign Investment is required to Register themselves on RBI-Firms portal through Entity Master Form and give all the details of FDI received till date on it. Further, they need to inform the RBI about all the fresh investment received by it through Single Master Form

Filing Form FC-GPR

Upon Receiving of Funds from a Foreign Investors the Indian Company is required to allot the shares in 60 days and within 30 days of allotment of shares, Indian Company needs to file FC-GPR on Firms portal.

Filing of Form FC-TRS

Reporting of FC-TRS is mandatory at the time of transfer of shares between a resident and non-resident. When the shares are being transferred, the resident transferee or transferor is required to report the same in FC-TRS.

Foreign Liabilities & Assets Return

Annual return on Foreign Liabilities and Assets (FLA return) is required to be filed by every Indian Company which has received the FDI or made ODI in any financial year including current year. The FLA return is required to be reported till 15th July every year.

Compliance Under Companies Act, 2013

At the time of issue of fresh Shares or allotment to the new or existing shareholders, Forms PAS-3 is required to be filed by the company within 30 days of allotment under Companies Act, 2013