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Indian Corporate Law and FEMA Update – June - July 2019 

by Gagan Verma

Published: September, 2019

Submission: September, 2019

 



What


When


Summary


1. Online reporting for filing of Annual Return on Foreign Liabilities and Assets (FLA Return) by Indian Companies


28.06.2019


The Reserve Bank of India (“RBI”) has introduced a new web based online reporting for filing of Annual Return on Foreign Liabilities and Assets (“FLA Return”) by every entity having received / made foreign investment in the previous year (s) including current year, thereby discontinuing the existing mechanism of email-based submission of FLA forms. With the introduction of web based online filing, the reporting in excel sheet format has been discontinued with immediate effect. The online reporting of FLA Return will enable RBI to be keep a track of all the foreign investment made or received by an entity in every year. As was the case earlier, the FLA Return has to be filed on or before July 15 of every year (for financial year 2018-19, the date has been extended till July 31, 2019).


The following steps must be taken by every entity for filing its FLA Return from financial year 2018-19 onwards:


1.To register the entity online on the interface https://flair.rbi.org.in;


2.On successful registration, the entity will receive a login id and password, which can then be used for filing the FLA Return;


3.Once the reporting is made in the FLA Return and upon successful submission, the entity will receive a system generated acknowledgment.


Note: In view of the recent change in reporting platform for submission of FLA Return, RBI has extended the due date for filing the FLA Return to July 31, 2019.


2. Notification of Companies (Significant Beneficial Owners) second Amendment Rules, 2019 and revised FORM BEN – 2 (Return to the Registrar in respect of the declaration under Section 90).


01.07.2019


The Ministry of Corporate Affairs, on July 1, 2019, issued Companies (Significant Beneficial Owners) Second Amendment Rules, 2019 and thereby notifying e Form BEN-2 required to be submitted by Companies under Section 90 of the Companies Act,2013.


Earlier this Year, the Ministry vide its notification dated 8th February 2019 had amended the erstwhile Companies (Significant Beneficial Owners) Rules, 2018 by introducing the Companies (Significant Beneficial Owners) Rules, 2019. The Rules bestow responsibility upon every Reporting Company (i.e. the Indian Company) to find out about the Significant Beneficial Owner (“SBO”) and make a declaration to the Reporting Company in Form No. BEN-1.


SBO means an “individual” who has the following rights or entitlements in a Reporting Company:


  • Holds more than ten per cent. of the shares indirectly or together with any direct holdings;
  • Holds more than ten per cent. of the voting rights in the shares indirectly or together with any direct holdings;
  • Has right to receive or participate in not less than ten per cent of the total distributable dividend, or any other distribution, in a financial year through indirect holdings alone, or together with any direct holdings; or
  • Has right to exercise, or actually exercises, significant influence or control, in any manner other than through direct holdings alone. *

* Note: Significant influence means the power to participate, directly or indirectly, in the financial and operating policy decisions of the reporting company but is not control or joint control of those policies.


Where the member of the reporting company is a body corporate, the SBO shall be an individual who-


(a) holds majority stake in that member; or


(b) holds majority stake in the ultimate holding company (whether incorporated or registered in India or abroad) of that member;


Upon receipt of declaration in Form BEN-1, the Reporting Company shall file a return in Form No. BEN-2 with the Registrar in respect of such declaration, within a period of thirty (30) days from the date of receipt of such declaration by it along with requisite fees.


 


Footnotes:

We are writing to you to provide an update on the current developments in the Indian corporate laws and Foreign Exchange Management Act (“FEMA”) for the months of June & July 2019. We hope that the update would be of useful to you, your organisation and your clients.



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