OBLIGATIONS AND REPORTING REQUIREMENTS BY A PERSON RESIDENT IN INDIA UNDER OVERSEAS INVESTMENT REGULATIONS

OBLIGATIONS AND REPORTING REQUIREMENTS BY A PERSON RESIDENT IN INDIA UNDER OVERSEAS INVESTMENT REGULATIONS

A person resident in India be it an individual or an Indian Entity (Company or Limited Liability Partnership or registered Partnership Firm) making overseas investment must adhere to the Overseas Investment Regulations, 2022 as notified by Reserve Bank of India and Overseas Investment Rules, 2022 as notified by the Government of India.

The Regulations read together with Rules and Directions prescribe limits, conditions and restrictions applicable for making overseas investment be it in equity shares in a Company or by way of debt or guarantee or investment in real estate. The Regulation also prescribes Obligations and Reporting Requirements that the Person resident in Indian making overseas investment must comply with and failure to comply with the same may lead to imposition of penalty or other repercussions. Listed below are the Obligations and reporting requirements that must be complied with by a Person resident in India who has made overseas Investment.

OBLIGATIONS OF PERSON RESIDENT IN INDIA: A person resident in India is required to adhere to the following obligations under the ODI Regulations:

1. OBTAINING UIN: A person resident in India, through its designated AD bank, shall obtain a Unique Identification Number or “UIN” from the Reserve Bank for the foreign entity in which the ODI is intended to be made before sending outward remittance or acquisition of equity capital in a foreign entity, whichever is earlier.

1. DESIGNATING ONE AD BANK: A person resident in India making ODI shall designate an AD bank and route all future transactions relating to a particular UIN through such AD bank only. However, where more than one person resident in India makes financial commitment in the same foreign entity, all such persons shall route all transactions relating to that UIN through the same AD bank designated for that UIN.

1. SUBMITTING SHARE CERTIFICATE OR EVIDENCE OF INVESTMENT: To comply with the regulations, a person resident in India acquiring equity capital in a foreign entity and which is reckoned as ODI must provide the authorized dealer (AD) bank with share certificates or other necessary documents prescribed by the host country or jurisdiction as proof of the investment in the foreign entity. These documents must be submitted within six months from the date of remittance or the date when the dues to the person resident in India are capitalized (date of allotment of shares), or the date when the amount due was permitted to be capitalized, as the case may be.

1. REPATRIATION OF ALL DUES TO INDIA WITHIN 90 DAYS: A person resident in India having ODI in a foreign entity, wherever applicable, shall realise and repatriate to India, all dues receivable from the foreign entity with respect to investment in such foreign entity such as interest or dividend or salary or other receivables within ninety days of the same falling due. Further, in case of disinvestment, the amount of consideration received on account of transfer or disinvestment of such ODI and the net realisable value of the assets on account of the liquidation of the foreign entity as per the laws of the host country or the host jurisdiction, as the case may be, shall be repatriated to India within ninety days from the date of such transfer or disinvestment or the date of the actual distribution of assets made by the official liquidator.

REPORTING OBLIGATIONS FOR OVERSEAS INVESTMENT:

IN CASE OF OVERSEAS DIRECT INVESTMENT (ODI): A person resident in India who has made ODI or making financial commitment or undertaking disinvestment in a foreign entity shall report the following through the designated AD Bank and in a manner as may be stipulated in the Regulations and in a format as may be prescribed by Reserve bank of India:

1. ACQUIRING: to report whether the financial commitment by way of investment in Equity or debts or guarantee issued is reckoned towards the financial commitment limit or not, and such report to be submitted at the time of sending outward remittance or making a financial commitment, whichever is earlier;
2. DISINVESTING: to report disinvestment within thirty days of receipt of disinvestment proceeds;
3. RESTRUCTURING: to report restructuring within thirty days from the date of such restructuring.
4. ANNUAL PERFORMANCE REPORTING: A person resident in India acquiring equity capital in a foreign entity which is reckoned as ODI, shall submit an Annual Performance Report (APR) with respect to each foreign entity every year by 31st December and where the accounting year of such foreign entity ends on 31st December, the APR shall be submitted by 31st December of the next year. However, the APR reporting is subject to the following:
   1. The APR must be reported based on the audited financial statements of the foreign entity but however where the Person resident in India does not have control over the foreign entity and the host country does not require compulsory audit of the relevant foreign entity then the APR may be submitted based on unaudited financial statements certified as such by the statutory auditor of the Indian entity or by a chartered accountant where the statutory audit is not applicable
   2. in case more than one person resident in India have made ODI in the same foreign entity, the person holding the highest stake in the foreign entity shall be required to submit APR and in case of holdings being equal, APR may be filed jointly by such persons;

• the person resident in India shall report the details regarding acquisition or setting up or winding up or transfer of a step down subsidiary or alteration in the shareholding pattern in the foreign entity during the reporting year in the APR

Provided that no such reporting shall be required where holding is less than 10 per cent. of the equity capital without control in the foreign entity and there is no other financial commitment other than by way of equity capital or the foreign entity is under liquidation

1. ANNUAL RETURN ON FOREIGN LIABILITIES AND ASSETS: An Indian entity which has made ODI shall submit an Annual Return on Foreign Liabilities and Assets within such time as may be decided by the Reserve Bank from time to time, to the Department of Statistics and Information Management, Reserve Bank of India.

IN CASE OF OVERSEAS PORTFOLIO INVESTMENT (OPI): Except for an individual, a person resident in India making any Overseas Portfolio Investment (OPI) or transferring such OPI by way of sale shall report such investment or transfer of investment within sixty days from the end of the half-year in which such investment or transfer is made as of September or March-end:

Provided that in case of OPI by way of acquisition of shares or interest under Employee Stock Ownership Plan or Employee Benefits Scheme, the reporting shall be done by the office in India or branch of an overseas entity or a subsidiary in India of an overseas entity or the Indian entity in which the overseas entity has direct or indirect equity holding where the resident individual is an employee or director.

DELAY IN REPORTING: A person resident in India who does not submit the evidence of investment within the specified time or does not make any reporting or filing within the time specified under the regulation, may make such submission or filing, as the case may be, along with Late Submission Fee within such period as may be notified and at the rates and in the manner as may be directed by the Reserve Bank, from time to time. As per the present Direction, Late Submission Fee of Rs. 7500/- is payable in respect of delay in filing Form ODI Part-II/ APR, FLA Returns, Form OPI, evidence of investment or any other return which does not capture flows or any other periodical

Reporting. Additional Late Submission Fee of 0.025% of the amount involved shall be payable for each year of delay for late submission of Form ODI-Part I, Form ODI-Part III, Form FC, or any other return which captures flows or returns which capture reporting of non-fund based transactions or any other transactional reporting.

RESTRICTION ON FURTHER FINANCIAL COMMITMENT OR TRANSFER: A person resident in India who has made a financial commitment in a foreign entity in accordance with the Act or rules or regulations made thereunder, shall be prohibited in making any further financial commitment, whether fund-based or non-fund-based, directly or indirectly, towards such foreign entity or transfer such investment till any delay in reporting is regularised.