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Reporting in Case of Issuance of Securities

Reporting in case of issuance of securities blog 1200 × 628 px 1

As per the Companies Act, 2013 and Foreign Exchange Management (Non-debt Instruments) Rules, 2019, on a repatriation /non-repatriation basis, whenever the company issues capital instruments to persons outside India, there are essential compliances to be adhered to by the companies.

Let’s discuss these compliances; there are two types of reporting compliances to be done by companies:

  • Reporting the compliances to the Ministry of Corporate Affairs (MCA)
  • Reporting to Reserve Bank of India (RBI).

Reporting to the Ministry of Corporate Affairs (MCA)
Form & Requirement: Whenever a company with a share capital makes any allotment of securities, it shall file a return of allotment in Form PAS-3 with the Registrar. The time limit of filing: Form PAS-3 is to be filed within 30 days from the issuance of securities.

Description & process in the form of PAS-3, we have to report the details such as:

  • Securities allotted for cash
  • Securities allotted for consideration otherwise than in cash
  • Type of Security allotted
  • The capital structure of the company before taking into account this issuance
  • Capital Structure of company after taking into account this issuance
  • Attached to the form must be a list of allottees, etc.

This e-Form should be mandatorily certified by a chartered accountant (in whole-time practice) or cost accountant (in whole-time practice), or company secretary (in whole-time practice) by digitally signing the e-Form. After preparing the form, we have to upload the form on the MCA website and file the same after payment of requisite fees.

Reporting to Reserve Bank of India (RBI)
Form & requirement an Indian company issuing capital instruments to a person resident outside India and where such issue is reckoned as Foreign Direct Investment, for these regulations, shall report such issue in form FC-GPRto the regional office concerned of the Reserve Bank under whose jurisdiction the registered office of the company.

Below are the modes of issuance of securities covered here:

  • Preferential allotment/ private placement/ private arrangement
  • Right issue
  • Bonus issue
  • Merger/ demerger /amalgamation
  • Conversion of convertible notes
  • Capital Instruments issued under schedule 7 of FEMA 20(R) to FVCIs
  • Shares issued upon exercise of ESOP
  • Issue of sweat equity shares
  • Issue of participating interest /rights in oil fields

The time limit of filing:Form FC-GPR is to be filed within 30 days from the issue of capital instruments. Description & Process: Let’s understand the process practically. To proceed with FC-GPR reporting, we have to first prepare logins on the Firms portal of RBI.

There are two types of logins to be created:

  • Entity User Login
  • Business User Login

Entity user login is basically for the creation/ registration of an entity with RBI. Business user login is for filing the various forms with RBI. Below mentioned are details required to be reported in form FC-GPR:

  • Details of issues such as date of issue, nature of issue, type of instrument, no of Instruments etc.
  • Foreign investor details such as name and address
  • Mode of payment
  • Fair value of shares
  • Shareholding pattern before and after issuance to be reported

Along with these details, several documents are required to be attached to this form. For instance:

  • A certificate by practicing company secretary
  • Board resolution duly passed by the company for allotment of shares
  • FEMA declaration by authorized representative of indian company
  • Declaration by non-resident company
  • Declaration of valuation/ valuation certificate, if applicable
  • List of allottees
  • FIRC & KYC of the foreign remittance received

The AD Bank, i.e. Authorized Dealer Bank, will deal with verifying this form and related documents on behalf of RBI. After verifying the form and documents, AD Bank will inform whether the form has been approved or rejected along with its remarks. If AD Bank has rejected the form, we have to prepare a fresh form again and submit it after considering the remarks/ requirements given by AD Bank.

At AJSH, we assist our clients in setting up their businesses in India and dealing with various corporate matters (Company incorporation, ROC Compliance, Company Winding up), bookkeeping, tax filings & assessments, payroll, auditing, trademark registration, business structuring etc. If you have any questions or wish to know more about reporting in case of issuance of capital instruments of securities, kindly contact us.


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