Clarification for ODI for Initial Subscription

“Overseas Direct Investment (ODI)” means (i) acquisition of any unlisted equity capital or subscription as a part of the Memorandum of Association of a foreign entity, or (ii) investment in 10% or more of the paid-up equity capital of a listed foreign entity, or (iii) investment with control where investment is less than 10% of the paid-up equity capital of a listed foreign entity.

Explanation: Once an investment in a foreign entity is classified as ODI, the investment shall continue to be treated as ODI even if such investment falls below 10% of the paid-up equity capital or the investor loses control in the foreign entity.

Acquisition or transfer by way of deferred payment.

• AD bank shall verify the bona fides of the transactions from the underlying agreement/documents in case of deferment of payment of consideration in accordance with regulation 7 of OI Regulations. The period of deferment shall be defined upfront. In case the remittance towards acquisition of equity capital is to be made post subscription to Memorandum of Association, the period within which such remittance is to be made shall be defined in the underlying agreement/documents/applicable laws else the remittance shall be made on or before acquisition of/setting up of the foreign entity.
• The part of the payment towards consideration deferred by the person resident in India shall be treated as non-fund based financial commitment by such person and shall be reported accordingly. Subsequent payments towards deferred consideration shall be reported in Form FC as conversion of non-fund based financial commitment to equity. The valuation in accordance with pricing guidelines, wherever applicable, shall be done upfront.

Reporting

•  All reporting with respect to overseas investment by a person resident in India shall be made in accordance with regulation 10 of OI Regulations through the designated AD bank as per the revised reporting forms and instructions contained in the “Master Direction – Reporting under Foreign Exchange Management Act, 1999”. The reporting forms can be downloaded from Reserve Bank’s website www.rbi.org.in. Any incomplete filing shall be treated as non-submission.
• Any acquisition of foreign securities through conversion of Indian Depository Receipts (IDRs) shall be duly reported as ODI or OPI, as applicable.
• The Annual Performance Report (APR) shall be certified by a chartered accountant where the statutory audit is not applicable, including in case of resident individuals. It is also clarified that where APR is required to be filed jointly, either one investor may be authorised by other investors for filing APR, or such persons may jointly file the APR.
• A resident individual making overseas investment must comply with the reporting requirements as provided under the OI Regulations and reporting shall also be done as provided under the LRS where such investment is reckoned towards the LRS limit. Acquisition of foreign securities by way 13 of inheritance or gift in accordance with paragraph 2 of Schedule III of OI Rules shall not be reckoned towards the LRS limit and hence, shall not require reporting under LRS

No reporting of APR shall be required where–

• a person resident in India is holding 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
• a foreign entity is under liquidation.

Late Submission Fee (LSF) in case of Delay in Reporting:
In the event a person resident in India does not make the requisite filing within the prescribed time limit may make such filing along with Late Submission Fee. No further financial commitment towards such foreign entity or transfer shall be allowed till the delay in reporting is regularized.

Reporting requirements for Overseas Investment.–

• Unless otherwise provided in these regulations, all reporting by a person resident in India, as specified, shall be made through the designated AD bank in the manner provided in this regulation and in the format provided by the Reserve Bank.
• A person resident in India who has made ODI or making financial commitment or undertaking disinvestment in a foreign entity shall report the following, namely:–
  • financial commitment, whether it is reckoned towards the financial commitment limit or not, at the time of sending outward remittance or making a financial commitment, whichever is earlier;
  • disinvestment within thirty days of receipt of disinvestment proceeds;
  • restructuring within thirty days from the date of such restructuring.
• A person resident in India other than a resident individual 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.
• 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:

Provided that no such reporting shall be required where–

• a person resident in India is holding 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
• a foreign entity is under liquidation.

Explanation.– For the purposes of this sub-regulation–

• the APR shall be based on the audited financial statements of the foreign entity:
  Provided that where the person resident in India does not have control in the foreign entity and the laws of the host country or host jurisdiction, as the case may be, do not provide for mandatory auditing of the books of accounts, 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;
• 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. 
• 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.

Delay in reporting.–

• A person resident in India who does not submit the evidence of investment within the time specified or does not make any filing within the time specified, may make such submission or filing, as the case may be, along with Late Submission Fee within such period as may be advised, and at the rates and in the manner as may be directed by the Reserve Bank, from time to time:
  Provided that such facility can be availed within a maximum period of three years from the due date of such submission or filing, as the case may be.
• A person resident in India responsible for submitting the evidence or any filing relating to overseas investment in accordance with the Act or regulations made thereunder before the date of publication of these regulations in the Official Gazette and who has not made or does not make such submission or filing within the time specified thereunder, may make such submission or filing along with Late Submission Fee or make payment of Late Submission Fee where such submission or filing has been done, as the case may be, within such period as may be advised, and at the rates and in the manner as may be directed by the Reserve Bank, from time to time.
  Provided that such facility can be availed within a maximum period of three years from the date of publication of these regulations in the Official Gazette.

The LSF for delay in reporting of overseas investment related transactions shall be calculated as per the following matrix: