Checklist for Allotment of Foreign Shares in India

The Automatic Route: How to allot foreign shares in India

Foreign Direct Investment in India

This is a check-list of documents and procedures required to allot foreign shares to an Indian company after receiving foreign direct investment in India.
Many sectorsnow do not requiere special approval from the RBI and FDI is permitted up to 100% on the automatic routesubject to sectoral rules and regulations applicable.
To know more also read this article: Indian Investment Regulations: Automatic vs. Approval.




PHASE 1 

Steps to be taken before crediting of funds
Before an Indian company can receive foreign direct investment in India via a bank wire transfer from a foreign investor to their company bank account, the following documents need to be submitted to the Indian bank:


Step one >> Submit share capital declaration
Share Capital Declaration Form on the letter head of the company, signed by the authorised signatory. The format is in accordance to current master circular (India FDI Circular). 
It is important that the share capital declaration has the following details and format:
  • Registration no. of the company (as on the incorporation certificate)
  • The letter head should include the complete address & contact details of the Indian company
  • Company seal and authorised signature 
The share capital declaration has to be submitted in original to the bank before the foreign direct investment can be credited to the investees’ account. (*investee = the business entity in which an investment has been made).
Step two >> Know Your Customer report (intra-bank)
If the investor makes a first time foreign direct investment in India (into the investees’ bank account), then the Indian bank needs to know the details of the investor. The Indian bank receiving the FDI will require a KYC report (Know Your Customer reprot) from the remitting bank in the form of SWIFT message. This will be message will be send between the foreign and the Indian bank. Depending if the remitter is an individual or a company, the India bank needs to receive the following information from the remitters’ bank before crediting the amount the the Indian bank account:
If the remitter is an individual:
  • Passport No (or any other unique identification number with details of the document)
  • Permanent address 
  • A/c Number 
  • Periode of banking relationship with remitter
If the remitter is a non-individual:
  • Registered Name
  • Registration number 
  • Registered address 
  • A/c Number 
  • Periode of banking relationship with remitter
After the availablity of the above requirements the bank will credit the funds. Please note that the KYC will expire after one year, which means that if the investee company is receiving the foreign direct investment in India for a periode of over a year, the KYC will have to be renewed. 
PHASE 2
Post credit procedure for filing FDI in India
After the funds are being credited to the account the following steps need to be followed:
Step one >> Submit FDI intimation form 
Within 30 days the following documents need to be submitted to the  bank
  • Covering letter 
  • FDI intimation form  
  • FIRC in original (Foreign inward remittance certificate > the FIRC will be send by the bank to the receiving party after submitting the share capital declaration form)
Step two >> Submit FCGPR form 
Within 180 days of receiving the funds the FCGPR FORM is filed through the bank:
Note: If shares are not being issued within this stipulated time, share application has to returned back to remitter or RBI permission has to be sought for delay in issuance of shares along with share allotment plan. This is as per revised RBI guidelines regarding FCGPR filing and issue of shares vide circular (India FDI Circular).
Following documents are required for submission of FCGPR to the receiving bank (AD):
  • Covering letter (explanatory letter stating facts of shares issued and remittance received) 
  • Form FCGPR (Part A) 
  • Original FIRC 
  • A certificate from the Company Secretary of the company accepting investment from persons resident outside India. 
  • A certificate from Statutory Auditors or Chartered Accountant indicating the manner of arriving at the price of shares issued to the persons resident outside India (Share price to be calculated using Discounted Cash Flow Method)
  • Copy of letter of intimation forwarded to RBI regarding receipt of funds as per part 1 mentiond above. 
  • KYC Report of Remitting party through Swift msg should be sent by Remitting bank to Beneficiary bank. (Would be already with us by then : Refer point 2 of pre-credits)
  • RBI approval for taking on record shares if already issued to non-resident shareholders. 
  • MOA (Memorandum of Association)
  • Board resolution approving the foreign direct investment in India
Please note: RBI circulars and RBI formats for foreign direct investment in India are occasionally being updated. Ask your bank to send you the most recent:
  1. Share Capital Declaration Form
  2. FDI Intimation Form
  3. FCGPR FORM

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