Step-by-Step Guide to FC-GPR Filing for Issuance of CCPS to Foreign Investors by an Indian Company

CS Rupesh Khade

Mar 225 min read

Introduction

Foreign direct investment (FDI) serves as a vital catalyst for the expansion of Indian Companies, fostering innovation and facilitating access to global capital. When an Indian Company issues Compulsorily Convertible Preference Shares (CCPS) to a foreign investor, adherence to the Foreign Exchange Management Act (FEMA), 1999, and compliance with reporting obligations to the Reserve Bank of India (RBI) through the Foreign Currency-Gross Provisional Return (FC-GPR) form is imperative. Any failure in compliance may lead to regulatory scrutiny, monetary penalties, or legal ramifications under FEMA provisions.

This comprehensive guide delineates the FC-GPR filing process in a structured and legally compliant manner, ensuring that Companies fulfil their regulatory obligations seamlessly.

Understanding FC-GPR Filing

Form FC-GPR is an essential regulatory requirement under FEMA, stipulating that Indian companies must report any allotment of CCPS or equity instruments to foreign investors. The filing must be submitted through the FIRMS (Foreign Investment Reporting and Management System) portal within 30 days from the date of share issuance.

The objective of this regulatory mechanism is to ensure that foreign investments comply with RBI guidelines, are accurately recorded, and do not contravene India’s FDI policy. Non-adherence to these provisions may trigger penalties under FEMA.

Procedural Framework for FC-GPR Filing

Step 1: Procurement of Valuation Report

The Company must secure an independent valuation report from either a SEBI-registered Category I Merchant Banker or a Chartered Accountant (CA) employing internationally recognized pricing methodologies.
The valuation report must substantiate the issue price of CCPS, ensuring adherence to the RBI’s pricing norms.
The valuation date (i.e. the date as on which the valuation is arrived at/obtained) specified in valuation report, should not be earlier than ninety days from the date of transaction. This is very important point to consider, as you may get rejection for not following the valuation timeline.

Step 2: Board Resolution and Share Allotment

Convene a Board Meeting to authorise the allotment of CCPS to the foreign investor.
If required, pass a special resolution in accordance with the Companies Act, 2013.
File Form PAS-3 with the Registrar of Companies (ROC) within 30 days of share issuance.
Maintain comprehensive records of board proceedings, including resolutions and minutes.

Step 3: Acquisition of Foreign Inward Remittance Certificate (FIRC) & KYC Report

Ensure receipt of the investment remittance through authorized banking channels, compliant with RBI guidelines.
Obtain the Foreign Inward Remittance Certificate (FIRC) from the authorized dealer (AD) bank.
Secure the Know Your Customer (KYC) report from the investor’s remitting bank. The format for KYC is specified in the User Manual provided by the RBI.

Step 4: Registration on FIRMS Portal

If not previously registered, the Company must create an account on the FIRMS Portal (https://firms.rbi.org.in/) and update the Entity Master Form (EMF).
After creation of the Entity, the Company must create a business user account for accessing the Single Master Form (SMF).

Step 5: Submission of Form FC-GPR via FIRMS Portal

Log in to the FIRMS portal through business user login and access the Single Master Form (SMF) section.
Select FC-GPR Form and enter the requisite details:
- Company Profile: Corporate Identification Number (CIN), PAN, and principal business activity.
- Investment Particulars: Name, country of origin, and ownership structure of the foreign investor.
- Allotment Data: Number of CCPS allotted, face value, issue price, premium (if any), and aggregate consideration received.
- Valuation Data: Upload the valuation report and indicate the pricing methodology.
- Remittance Proof: Enter FIRC and KYC details.
Attach supporting documentation, including Board Resolution, Shareholding Pattern, FIRC, and KYC Reports.

Step 6: Regulatory Review and RBI Approval

The AD Bank will conduct a preliminary verification of the filing. Please note there is no provision for resubmission of form under the same reference number. If there are any discrepancies in the form, or the form is short of any information which the AD bank requires, the AD Bank will reject the form and the process has to be initiated again.
Upon successful verification, the AD Bank will escalate the submission to the RBI for conclusive approval.
The RBI retains the discretion to approve or reject the transaction.
If FC-GPR is not filed within stipulated time of 30 days, then an additional Late Submission Fee (LSF) has to be paid. The payment of LSF is directed by the corresponding Regional Office of RBI through an email.

Step 7: Post-Filing Compliance Measures

Maintain all regulatory records, including FC-GPR filings, share allotment documents, and investor agreements, for audit and compliance purposes.
Ensure the annual submission of the Foreign Liabilities and Assets (FLA) Return by July 15 of each year.
Any amendments in shareholding patterns or foreign investment structures should be promptly reported to the ROC and RBI.

Common Pitfalls and Compliance Oversights

Delayed filing: Non-compliance with the 30-day filing deadline may attract FEMA penalties in the form of Late Submission Fee (LSF).
Valuation inconsistencies: Non-adherence to the prescribed valuation methodologies may result in regulatory rejection.
Incomplete documentation: Missing requisite records such as FIRC, KYC, or valuation reports may hinder approval.
Incorrect sectoral classification: Inaccurate reporting of business activity may contravene FDI norms.
Failure to update the Entity Master Form: Non-updation may lead to rejection of FC-GPR filing.

Conclusion

Filing Form FC-GPR for the issuance of CCPS to foreign investors is a stringent regulatory requirement that Companies must adhere to under FEMA and RBI guidelines. By meticulously following the step-by-step compliance framework elucidated above, Companies can ensure a streamlined filing process, mitigate legal risks, and maintain seamless regulatory adherence.

FAQs

1. What is the statutory deadline for FC-GPR filing?

The FC-GPR must be submitted within 30 days from the date of CCPS allotment.

2. Can multiple foreign investors subscribe to CCPS?

Yes, provided the Company adheres to the prescribed FDI policy and FEMA guidelines.

3. Who is authorized to certify the valuation report?

A SEBI-registered Merchant Banker or a Chartered Accountant (CA) can provide valuation certification.

4. What if the investor is a non-individual (Company, LLP or any other form of Body Corporate)

An Ultimate Beneficial Ownership (UBO) declaration needs to be attached with the SMF.

5. What are other attachments that are required to be filed with the SMF?

a. Conversion ratio as to number of equity shares to be issued in case of conversion of preference shares.

b. Undertaking of pricing guidelines.

c. Undertaking of compliance of Foreign Exchange Management (Non-Debt Instrument) Rules, 2000.

6. What if there is a difference in amount received in the Bank Account and the amount of CCPS allotted?

If the amount received in the Bank Account is more than the number of CCPS are allotted, then a declaration to the effect that the excess amount shall be refunded or adjusted in the next round of allotment shall be attached along with the SMF.

7. What if there is a difference in amount received in the Bank Account due to rounding off of conversion rate?

If the amount received in the Bank Account differs on account of rounding off of the currency conversion rate, then a clarification letter explaining the difference shall be attached along with the SMF.

Disclaimer: This article is intended for educational and informational purpose only. It is recommended to seek the assistance of a Practising Company Secretary or consultant in India to file the FC-GPR for the FDI received.