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List of important Legal Documents

In this article, we will discuss important Legal documents every company or startup should follow in practice, The document which clearly mentions the detailed terms and conditions, roles, and responsibilities has become a necessity for every business. Most businesses to scale up require alliances or business associates or require alternate resources or new technology, therefore to enter into a legal contract or obligation document which is the one that is clear enough to be easily understood by a person of ordinary prudence and at the same time detailed enough so that it cannot be wilfully misinterpreted is required and this documents than forms part of an integral part when the terms of the contract are beached by any party for commercial litigations purposes.

List of some important Legal Documents which every Startup Company or Business is Required :

  1. Business Associate Agreement
  2. Partnership Agreement
  3. Franchisee and Trademark Assignment Agreement
  4. Board Resolutions
  5. Business Takeover Agreement
  6. Work Space Sharing Agreement
  7. NON Disclosure Agreement
  8. Leave and Licence Agreement
  9. Software Licence Agreement
  10. Website Terms and Conditions, Privacy Policy and Disclaimer
  11. Refund Policy
  12. Social Media Policy
  13. Appointment Letter for Managerial Personals

 

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How to Register Nidhi Company in India

Nidhi Company is the most popular form for giving loans to its members and accepting deposits from its members. It is also called a mutual benefit Company. For Providing Loan and Accepting Deposits you have to register Nidhi Company and with the Capital of Nidhi Company subject to the Condition provided in Nidhi Rules you can lend money and accept deposits from Its members. The First step to start a Nidhi Company is to complete the Nidhi Company Registration as per provisions of the Companies Act, 2013 and Nidhi Rules 2014.

Nidhi Company will always be a public limited company and its name should end with ‘Nidhi Limited”, Presently Nidhi Company is becoming very popular for lending business.

nidhi company

Step By Step Nidhi Company Registration Procedure:

  • Obtaining Digital Signature Certificate (DSC ) for All the members/Shareholders and Directors
  • Preparation of requried Declarations and Documents for Nidhi Company Registraiton
  • Application for Approval of name
  • Preparation and Drafting of Incorporation documents
  • Signing of Incorporation Documents
  • Application for Incorporation of Nidhi Company with ROC
  • Approval by ROC, after verifying all  the required documents and information.

Minimum Requirements For Nidhi Company Registration

1. Required Minimum 3 Directors and 7 Shareholders/members
2. Can Accept Deposits From its members
3. Body Corporate and Benefits of Limited Liability
4. Can Land Money to its Members
5. Can Provide Locker Facility to its members
6. Required to have a Minimum of 200 members within one year of Incorporation
7. Best suited for Small lending and deposit Business
8. Minimum Capital Rs. 5 Lakh at the time of Incorporation and Thereafter required to have Rs. 10 Lakh.

Documents Required For Nidhi Company Registration

1. PAN of all Directors
2. Voter ID/DL/Aadhar Card/Passport of All Directors /members
3. Passport Photo of all Directors
4. Latest Bank Passbook/Statement or Electricity/Broadband Bill/Mobile Bill
5. Latest utility bill (electric bill/telephone bill) and Rent Agreement or latest tax receipt/ownership deep of the property for the property to be used for registered office

Net Owned Funds Requirements

Every Nidhi Company is required to have Minimum Net Owned Funds of Rs. 10Lakh all the time. Within one year from Registration of Company Should follow this requirement.

Net Owned Funds

Aggregate Amount of paid-up equity share capital and free reserves as reduced by accumulated losses and intangible assets appearing in the last audited balance sheet provided the amount representing the proceeds of the issue of preference share shall not be included for calculating net owned funds.

What Nidhi Company Cannot Do As Par Nidhi Rules

If you planning to Register this company , you must need to ensure that what you cannot do in Nidhi Company, Once Nidhi Company Registration is done, you must follow Nidhi Rules

  • Shall not carry any chit fund, hire purchase finance leasing finance insurance or acquisition of securities issued by any Body corporate
  • Not allowed to issue any kind of preference shares or any debt instruments by any name whatsoever.
  • Prohibited to open any current account with its members
  • Prohibited to do any compromise or arrangement or takeover unless it is passed by a Special Resolution in the General Meeting and also obtained the previous approval from the Regional Director having jurisdiction over such nidhi company
  • Carry on any business other than the business of borrowing or lending in its own name
  • Prohibited to accept deposits or lend amount other than its members
  • Pledge any of the assets lodged by its members as security
  • Prohibited to take deposits or lend money to any Body corporate
  • These companies are prohibited to enter into any partnership arrangement in its borrowing or lending activities
  • Prohibited to issue any advertisement in any form for soliciting deposits

How much loan a Nidhi Company can provide to its Member

  • Rs. 2 Lakh where a total amount of Deposits form its members is less than Rs. 2 crore
  • Rs. 7.50 Lakh where the total amount of Deposits form its members is more than Rs. 2 crore but less than twenty crore rupees
  • Rs. 12 Lakh where the total amount of Deposits form its members is more than Rs. 20 crore but less than Fifty crore rupees
  • Rs. 15 Lakh where the total amount of Deposits form its members is more than Rs. 50 crore
  • No fresh loans exceeding 15% of above can be if Nidhi is not profitable for continuously three preceding financial years.
  • Members who have taken a loan from Nidhi and defaulted in repayment of such loan shall not be allowed to take fresh loans form Nidhi.
  • Only Members of Nidhi Company can take loan form Nidhi Company

How Much Interest Can Be Charged On Loans By Nidhi Company

The rate of Interest to be charged on loan given by Nidhi shall not go above seven and a half percent(7.5%) above the highest rate of interest offered on deposits by Nidhi.

i.e.7.5% the gross margin that a Nidhi Company is able to earn from the operations.

 

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How to get Copyright Registration in India

Copyright is a right given by the law to creators of literary, dramatic, musical, and artistic works and producers of cinematograph films and sound recordings. Copyright Registration provides a bundle of rights like rights of reproduction, communication to the public, adaptation, and translation of the work.

Copyright ensures certain minimum safeguards of the rights of authors over their creations, thereby protecting and rewarding creativity. The development of a society is dependent on the creativity of creators and their rights over their work should be protected. The rights & protection provided by copyright to the efforts of writers, artists, designers, dramatists, musicians, architects, and producers of sound recordings, cinematograph films, and computer software, create an atmosphere conducive to creativity, which induces them to create more and motivates others to create.

Application for Copyright Registration Application :

The application can be made both online and Offline by the applicant or the Authorized Attorney of the applicant. An applicant filing a copyright application should have the work in soft copies and hard copies in at least two copies, like the author of Literary work should have two copies of the book for copyright.

Information required for Copyright Registration Application :

  • Name, Address and Nationality of the Applicant
  • Nature of the Applicant’s interest in the Copyrightof the work
  • Class and description of the work
  • Title of the work
  • Language of the work
  • Name, Address and Nationality of the Author and if the Author is deceased, the date of decease
  • Whether the work is Published or Unpublished
  • Year and Country of first publication, and Name,Address and Nationality of the publisher
  • Year and Countries of subsequent publications, if any, and Name, Address and Nationality of the publisher
  • Name, Address and Nationality of the Owners of the various rights comprising the copyright in the work and extent of rights held by each, togetherwith particulars of assignments and licence. If any
  • Name and address and nationality of otherpersons, if any authorized to assign or licence therights comprising the copyright
  • If the work is an ‘Artistic work’, the location of theoriginal work, including name, address andnationality of the person in possession of the work,(In the case of an architectural work, the year ofcompletion of the work should also be shown)

Documents Required for Copyright Registration : 

  • 2 Copies of work
  • Authorization from author/publisher
  • If the work is being used on goods or capable of being used on the goods
  • If the application is being field through attorney, a specific power of attorney in original duly signed bythe applicant and accepted by the attorney
  • Search Certificate from Trade Mark Office(TM-60) ( Only in case of Artistic work ).

Time for Processing Copyright Registration Application

  • Applicaiton Filing – 1 Day
  • Allotment of Diary Number – 1 Day
  • Waiting Period – 30 days
  • Approvals /Objections- 10-15 days

Once an application for Copyright registration is filed, we get allotted Diary Number, have to wait for a mandatory period of 30 days so that no objection is filed in the Copyright office against your claim that particular work is created by you.

Scope of Copyright Registraiton

All kinds of literary and artistic works can be copyrighted, you can also file a copyright application for your website or other computer programs. Computer Software or program can be registered as a ‘literary work’. As per Section 2 (o) of the Copyright Act, 1957 “literary work” includes computer programs, tables, and compilations, including computer databases. ‘Source Code’ has also to be supplied along with the application for registration of copyright for software products. Copyright protection prevents the undue proliferation of private products or works and ensures the individual owner retains significant rights over his creation.

File your Copyright Registration Application

We help you to file your Copyright Registration Application with the Department for the following type of work:

  • Books
  • Sound Recordings
  • Softwares and Apps
  • TM

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Frequently Asked Questions on Private Limited Company Registration in India with Foreign Directors & Members

Registration of Private Limited Company in India with foreign Directors and Members is more or less similar to that of normal private limited company with Indian Directors and shareholders except that if foreign nationals are incorporating a company in India there is compliance requirement of Companies Act, FEMA applicable in case of foreign nationals are required to be complied with, here we have listed some frequently asked questions on private limited company registration with Foreign nationals in India

Private Limited Company Registration in India with Foreign Directors

Can two  Foreign Companies form a Company in India?

 Yes, representatives of these companies may be appointed as Directors in Indian Company, one of them should be Indian Resident.

Can a Company may be registered without any object?

No, as per Indian laws a Company must have a lawful object at the time of Incorporation.

Is foreign National is required to visit India for registration of Company?

No, Company registration is 100% online process, they just need to send scanned copy of documents required.

Is the Company required to hold Compulsory Board Meeting and if so does foreign national is required to come India for such meetings?

Yes, Company is required to hold 4 Board Meetings during the financial year BUT foreign directors are not required to visit India for attending the meeting. A meeting may be held through video conferessing.

Can registered office may be situated outside India?

No, it must be situated in India Only.

Can a foreign Company register a Wholly Owned Subsidiary Company in India?

Yes, a foreign company may do so but the new company must have a resident Indian Director.

Who is resident in India?

Every Company shall have at least one Director who has stayed in India for a total period of not less than 182 days in the previous calendar year.

Is there is any RBI Compliance required to be done when there is Foreign Capital Inflow in Company?

In  Sectors where 100% FDI is allowed under Automatic Route, there is no requirement for RBI Approval but Company is required to make reporting of these transaction to RBI to Authorized Dealer Bank.

What documents are required from Foreign National to get Digital Signature and Director Identification Number ?

Notarized or apostilled Copy (if a Commonwealth country) of Passport in support of address and identity proof along with duly.

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How to Add Designated Partner in LLP

For adding a Partner in LLP following procedure is to be followed as per the Provisions of LLP Act,2008:

Designated Partner in LLP

Designated Partner in LLP

  1. Eligibility Criteria for becoming a Designated Partner in LLP:

    • Only Individual can be appointed as Designated Partner in LLP.
    • The Person wish to appointed as a Designated Partner in LLP must have a Valid Director Identification Number.
    • Director Identification Number may be obtained by Filling FORM DIR-3 available on www.mca.gov.in after completing the form and attaching supporting documents, this form require pre-certification from Practicing Professional i.e. Company Secretary,Chartered Accountant or Cost Accountant. For obtaining Director Identification Number or Professional Certification.
    • After obtaining Director Identification number an individual is eligible for appointment as a Designated Partner.
  2. Procedure to be followed after obtaining Director Identification Number:

    • After obtaining Director Identification number, the proposed Designated Partner is required to intimate his DIN to the LLP.
    • The LLP is than will call a Meeting of Existing Partner for considering the appointment of Proposed Designated Partner. For getting draft of resolution passed in the Meeting and Preparing Minutes of the Meeting .
    • After approval of Existing Partners in duly conveyed Meeting for appointment of Proposed Designated Partner, A supplementary LLP Agreement is required to be made for draft of Supplimentry LLP Agreement .
    • A consent from Proposed Designated Partner is also required to be obtained in prescribed form.
  3. Intimation to Registrar of Companies about Appointment of New Designated Partner:

    • After Appointment of Designated Partner LLP is required to inform concerned Registrar of Companies i.e. in whose jurisdiction Registered office of LLP is situated, In E-FORM LLP-4 available on Www.mca.gov.in, within 30 days of appointment. you may visit Fastlegal for preparation of Forms and Pre Certification by Professional by CS, CA OR CMA
    • LLP is also required to file Supplementary LLP agreement in LLP FORM-3 within 30 days of such Appointment.

Note: Please ensure to file necessary forms within Prescribed time as late fee is Rs.100/- per day for each day of delay which has no upper limit.

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How to Register Sole Proprietorship Firm in India

proprietorship registration

In India a Sole Proprietorship firm may be started by getting any of the following registrations:

Shop Act Registration  or Gumasta Licence for Proprietorship Firm Registration :

Registration under the Shop and Commercial Establishment Act is Commonly known as “Shop Act Registration” Most of the Banks open Current Bank Account for this Registration 

GST Registration for Proprietorship Firm Registration

GST Registration: As GST Registration is Mandatory Only if Gross Sales Exceeds Rs. 20 Lakh in any Financial Year, but you can voluntary take GST Registration, GST Registration is Mandatory if you are selling products on E-commerce Marketplace Websites like: Amazon, Flipkart, Snapdeal, eBay, Esty etc.. also if you are running ads for your business promotion on popular Social Networking like Facebook, Twitter, etc.

GST Registration is required by vendors if they are registered under GST , this makes easier for them to make uniformity in business transitions.

How to Register Sole Proprietorship Firm in India 1

Udhyam Registration for Proprietorship Firm Registration

Udhyam Registration is for MSME Enterprises, this registration will give recognition of MSME enterprise for your business if you are running proprietorship firm business and want to have Single Registration this is a great deal to have in the pocket. You can apply for MSME Registration with Fastlegal Team Members.

Proprietorship Firm Registration

Opening of Current Bank Account in the name of Business : 

Once you get any of the above registration certificates, you can contact to the Bank with which you wish to open your current account.

Its all Done: Your Business is registered business entity now.  you can now do all the banking transactions in the name of your firm.

Benefits of Proprietorship firm Registration:

  1. Fast and Cheaper Registration
  2. Less Legal Compliance
  3. Banking Transaction may be done in the name of the firm
  4. No Need to obtain different PAN for your business entity (Pan of the Proprietor shall be the business entity also)
  5. No need to file return of your income if your income does not exceed the maximum amount liable to tax (which is at present Rs. 250000/- and may be changed in every budget)

Looking for Proprietorship Firm Registration Online?

Just submit your request in below Form and Fastlegal Team Members will contact you shortly for getting your Firm Registered as per your business needs, you just need to share Required documents and information Via E-mail.

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Main objects of Interior Decorator Company

Main objects of Interior Decorator Company:
To carry on in India or elsewhere the business to manufacture, develop, fabricate, finish, manipulate and to act as importer, exporter, buyer, seller, job worker, wooden beading and mouldings, wooden packing cases, and to carry on either alone or jointly with one or more persons, government, local or other bodies, the business of to undertake Architectural work, inter designers, erection and installation and to act as civil engineers, architectural engineers, interior decorators, consultants, advisors, contractors, turnkey contractors and managers, and to do all incidental acts and things necessary for the attainment of the above objects.

Book on Company Law

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भारत में एनजीओ के लिए NITI Aayog पंजीकरण- In Hindi

सरकारी अनुदान प्राप्त करने के लिए NGO के लिए NITI Aayog पंजीकरण आवश्यक है, अब सभी NGO और स्वैच्छिक संगठनों (VOs) के लिए FCRA पंजीकरण / नवीनीकरण के लिए आवेदन करने से पहले NITI Aayog के साथ पंजीकरण करना और मंत्रालयों या विभागों से अनुदान प्राप्त करना अनिवार्य है। केंद्र सरकार की।

एनजीओ के एनआईटीआईएओजी के साथ पंजीकरण करने के लिए आवश्यक जानकारी और दस्तावेज:

  • एनजीओ का नाम
  • एनजीओ का पूरा पता
  • ईमेल आईडी
  • मोबाइल No.
  • एनजीओ के पैन की कॉपी कार्यालय वाहक विवरण का विवरण:
    • सदस्य का नाम
    • जन्म की तारीख
    • पद
    • पैन कार्ड कॉपी
    • आधार कार्ड कॉपी
    • ईमेल आईडी
    • और मोबाइल नं 
    • संगठन में कार्य करना
  • एनजीओ के फंड का स्रोत
  • मुख्य संपर्क व्यक्ति
  • एनजीओ के कार्य क्षेत्र
  • एनजीओ द्वारा सर्वश्रेष्ठ आचरण प्रमुख गतिविधियाँ / उपलब्धियाँ

Fastlegal NGO के लिए NITI Aayog पंजीकरण सेवाएँ प्रदान करता है, कृपया हमें अपनी आवश्यकताओं के लिए +919782280098 पर संपर्क करें या हमें [email protected] पर ईमेल करें।

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NITI Aayog Registration for NGO in India

NITI Aayog Registration for NGO is required to get the government grants, Now it is mandatory for all NGOs and voluntary organizations (VOs) to Register with NITI Aayog  before applying for FCRA registration / renewal and to receive grant-in-aid from ministries or departments of the central government.

Information and Documents required to registration with NITI AAYOG of NGO:

  • Name of NGO
  • Full Address of NGO
  • Email Id
  • Mobile No
  • Copy of PAN of NGO
  • Following Details of Office Bearer Details:
    • Name of Member
    • Date Of Birth
    • Designation
    • Pan Card Copy
    • Aadhar Card Copy
    • Email id and Mobile no
    • Working in Organisation Since
  • Source of Funds of NGO
  • Key Contact Person
  • Working Areas of NGO
  • Best Practices Followed by NGO
  • Major Activities/Achievements

Fastlegal Provides NITI Aayog Registration Services for NGO , Please contact us at +919782280098 for your requirements or email us at [email protected]

 

 

 

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Frequently Asked questions (FAQs) for Annual Return on Foreign Liabilities and Assets (FLA)

The Reserve Bank’s Co-ordinated Direct Investment Survey (CDIS) and Co-ordinated Portfolio Investment Survey(CPIS) are conducted under the auspices of the International Monetary Fund (IMF), wherein information is collected from Indian resident companies/ LLPs / Others [(include SEBI registered Alternative Investment Funds (AIFs), Partnership Firms, Public Private Partnerships (PPP)] on their foreign financial liabilities and assets position as at end-March of the previous financial year (FY) and end-March of the latest FY. This information is also used in the compilation of India’s Balance of Payments (BoP) and International Investment Position (IIP).

 

Confidentiality Clause: The company-wise information so provided will be kept confidential and only consolidated aggregates will be released by the Reserve Bank.

 

Q 1. What will be the consequences in case we do not file the said FLA Return by 15th July, as our accounts are not audited as yet, and we do not wish to file it with unaudited figures. Will there be any imposition of penalty or prosecution initiated against the company by RBI or FEMA?

Ans:Annual return on Foreign Liabilities and Assets has been notified under FEMA 1999 and it is required to be submitted by all the India-resident companies which have received FDI and/ or made overseas investment in any of the previous year(s), including current year by July 15 every year. Non-filing of the return before due date will be treated as a violation of FEMA and penalty clause may be invoked for violation of FEMA (A.P. (DIR Series) Circular No. 29,dated February 02, 2017)

Q 2. What information should be reported in FLA return, if balance sheet of the company is not audited before the due date of submission?

Ans:If the company’s accounts are not audited before the due date of submission, i.e. July 15, then the FLA Return should be submitted based on unaudited (provisional) account. Once the accounts get audited and there are revisions from the provisional information submitted by the company, company can submit the revised FLA return based on audited accounts by end–September.

Q 3. In case where account closing period of the company is different from reference period (end-March), can we report the information as per account closing period?

Ans: No, the company cannot report the information as per the account closing period, in case it is different from March closing. Information should be reported for the reference period only, i.e. previous March and latest March, based on the company’s internal assessment.

Q 4. If theold/new company fails to file the FLA form before the due date; can the company submit the FLA form?

Ans: Yes, company can file the FLA return after due date by taking approval from RBI.

Q 5. If an old/new company wants to file the previous year FLA form; can the company file the previous year FLA form?

Ans: Yes, company can file the previous year FLA form (through online FLA portal only) by taking approval from RBI. For taking approval, they need to send mail to [email protected].

Q 6. If an old/new company wants to delete the previous version of FLA form or modify;can the company delete/modify the FLA return?

Ans: Yes, company can delete/modify the FLA return after taking the approval from RBI (RBI will provide due date on the FLA portal).

Q 7.What will do, ifthe company has submitted the FLA form in old format?

Ans: RBI will accept FLA form submitted through online portal only (Old format email-based FLA forms will not be accepted).

 General Definitions

 Q 8. What is meant by “Residence of Enterprises”?

Ans:An enterprise is said to have a centre of economic interest and to be a resident unit of a country (economic territory) when the enterprise is engaged in a significant amount of production of goods and/or services in that centre or when it owns land or buildings located in that centre. The enterprise must maintain at least one production establishment in the country and must plan to operate the establishment indefinitely or over a long period of time.

Q 9. What is Direct investment?

Ans: Direct investment is a category of international investment in which a resident entity in one economy [Direct Investor (DI)] acquires a lasting interest in an enterprise resident in another economy [Direct Investment Enterprise (DIE)]. It consists of two components, viz., Equity Capital and Other Capital.

Q 10. What is meant by “Equity Capital under Direct Investment”?

Ans:It covers (1) foreign equity in branches and all shares (except non-participating preference shares) in subsidiaries and associates; (2) contributions such as the provision of machinery, land & building(s) by a direct investor to a DIE by equity participation; (3) acquisition of shares by a DIE in its direct investor company, termed as reverse investment (i.e. claims on DI).

Q 11. What is “Other Capital under Direct Investment”?                                                                                                  

Ans: The other capital component (receivables and payables, except equity and participating preference shares investment) of direct investment covers the outstanding liabilities or claims arising due to borrowing and lending of funds, investment in debt securities, trade credits, financial leasing, share application money etc., between direct investors and DIEs and between two DIEs that share the same direct Investor. Non-participating preference shares owned by the direct investor are treated as debt securities & should be included in ‘other capital’.

Identification of the Indian company (Item 9, Section-I).

 

Q 12. What are definitions of “Foreign Subsidiary”, “Foreign Associate” and “Special Purpose Vehicle”                                                                                                                                                                                                           

Ans:

 

Foreign Subsidiary:

An Indian company is called as a Foreign Subsidiary if a non-resident investor owns more than 50% of the voting power/equity capital OR Where a non-resident investor and its subsidiary(s) combined own more than 50% of the voting power/equity capital of an Indian enterprise.

 

Foreign Associate:

An Indian company is called as Foreign Associate if non-resident investor owns at least 10% and no more than 50% of the voting power/equity capital OR Where non-resident investor and its subsidiary(s) combined own at least 10% but no more than 50% of the voting power/equity capital of an Indian enterprise.

 

Special Purpose Vehicle:

A special purpose Vehicle (SPV) is a legal entity (usually a limited company of some type or, sometimes, a limited partnership) created to fulfil narrow, specific or temporary objectives. SPV have little or no employment, or operations, or physical presence in the jurisdiction in which they are created by their parent enterprises, which are typically located in other jurisdictions (economies). They are often used as devices to raise capital or to hold assets and liabilities and usually do not undertake significant production.

Eligible Companies / Entities to Submit the FLA Return

Q13. Which entities are required to submit the FLA Return?

Ans:The annual return on Foreign Liabilities and Assets (FLA) is required to be submitted by the following entities which have received FDI (foreign direct investment) and/or made FDI abroad (i.e. overseas investment) in the previous year(s) including the current year i.e. who holds foreign assets or/andliabilities in their balance sheets;

  • A Company within the meaning of section 1(4) of the Companies Act, 2013.
  • A Limited Liability Partnership (LLP) registered under the Limited Liability Partnership Act, 2008
  • Others [includeSEBI registered Alternative Investment Funds (AIFs), Partnership Firms, Public Private Partnerships (PPP)]
Q 14. If a company / LLP / Others did not receive FDI or made overseas investment in any of the previous year(s) including the current year, do we need to submit the FLA return?

Ans: If an Indian company / LLP / Others does not have any outstanding investment in respect of inward and outward FDI as on end-March of reporting year, the company need not submit the FLA Return.

 Q 15. Whether a company needs to submit the FLA Return, if it has received only share application money?

Ans: If a company has received only share application money and does not have any outstanding foreign direct investment or overseas direct investment as on end-March of the reporting year, then the company is not required to fill-up the FLA return.

 Q 16. If the company has not received any inward FDI / made overseas investment in the latest year, do they need to submit the FLA Return?

Ans: If the company has not received any fresh FDI and/or overseas direct investment (ODI) in the latest year but has outstanding FDI or/and ODI, it is required to submit the FLA return each year by July 15. It needs to submit FLA return till it continues to have any outstanding FDI or/and ODI in its balance sheet.

Q 17. Is it required to submit any financial statements like balance sheet or P&L accounts (audited/ unaudited) along with the FLA return?

Ans: No balance sheet or profit loss accounts need to be submitted. Only annual return on FLA through online web-based reporting portal needs to be submitted before due date (July 15).

 Q 18. Whether FLA return is required to be submitted by registered partnership firms (registered under Partnership Registration Act) or branches or trustees, who have made overseas direct investment, or it is mandatory only for companies (registered under Companies Act, 1956)?

Ans: Yes, FLA return is required to be submitted by registered partnership firms (registered under Partnership Registration Act) or branches or trustees, who have made overseas direct investment.

Q 19. If non-resident shareholders of a company have transferred their shares to the residents during the reporting period, then whether that company is required to submit the FLA Return?

Ans: If all non-resident shareholders of a company have transferred their shares to the residents during the reporting period and the company does not have any outstanding investment in respect of inward and/or outward FDI as on end-March of reporting year, then the company need not submit the FLA return.

 Q 20. If company had issued the shares to non-resident on non-repatriable basis, whether that company is required to submit the FLA Return?

Ans: Shares issued by reporting company to non-resident on non-repatriable basis is not considered as foreign investment; therefore, such companies are not required to submit the FLA Return.

Q 21. How does the company report data and submit the FLA return to the RBI?

 Ans: All the steps, one by one for online web-based reporting of annual return on FLA are provided in user manuals and FAQ 2 for FLA. A company should read

  • User manual on “FLA User Registration Form” and

 

  • User manual on reporting of “Annual Return on FLA” for all sections for step by step procedure for filling the FLA return.

 

  • FAQ – 2 for FLA

 

 

System Requirement for the FLA Return

 

Q 22.What is the system requirement at company’s side for filling the FLA Return through web-based online portal?

 

Ans: One needs to have access to the URL https://flair.rbi.org.in, any of internet explorer, google chrome, firefox etc. would support this application.

 

 Q 23. Where can company / LLP / Othersgetthe format of Annual Return on Foreign Liabilities and Assets (FLA Return)?

 

Ans: The format is available on https://flair.rbi.org.inHowever, the format and email-based reporting system has been replaced by the online web-based reportingfor submission of annual FLA return from June 1, 2019 (i.e., reporting from the 2018-19 round of FLA). In this web-based reporting system of FLA, entities first need to create business-user through “FLA User Registration form”.

 

Q 24. We have already submitted a hard copy of the FLA return with your office. Do we need to re-submit the FLA return through online web-portal?

 

Ans: For the data pertaining to 2018-19, the return has to be submitted through online web-based reporting portal as the previous mechanism of reporting is discontinued with the commencement of the revised FLA information reporting system (FLAIR), which has inbuilt checks and validations. So, if there are any discrepancies in the furnished information, you will be able to know and rectify them at your end before the final submission. Further, data submission through online reporting portal, you will receive the system generated acknowledgementinstantly.

 

 

Q 25.How would an acknowledgement be provided to us on submission of the form?

 

Ans: You will receive the system-generated acknowledgement of FLA data submitted by you at the time of final submission itself. No separate mail will be sent in this regard.

 

 

Q 26.What are participating and non-participating preference shares?

 

Ans: Participating preference shares are those shares which have one or more of the following rights:

(a) To receive dividend, out of surplus profit after paying the dividend to equity shareholders.

(b) To have share in surplus assets remaining after the entire capital is paid in case of winding up of the company.

 

On the other hand, Non-participating Preference Shares are those shares which do not have any of the above said rights.

 

Q 27. How the Net Worth of the company is calculated?

 

Ans: Formula for Net Worth is = Total Equity & Participating Preference Share capital + Reserves and Surplus (this field is automated in FLA form section-II, companies are not required to compute it separately).

 

Q 28.Whether equity participation includes equity shares as well as compulsorily convertible debentures (CCD)?

 

Ans: Compulsorily convertible debentures (CCD) issued by the company should not be included in the paid-up capital while furnishing the information in Paid-up capital (in Section II of the FLA Return). However, if the CCDs / Debentures are held by the non-resident direct investor who is holding the equity shares of Indian reporting company, then CCD / Debentures holding should be reported in ‘other capital’ component of 1.b FDI or 2.b DI (in Section III), depending upon the per cent equity held by the non-resident direct investor. However, if the investor holds only CCD as on end March, then it should be reported in item 2.2 of 3. Portfolio Investment in India (in Section-III). Similar treatment should be considered while reporting the compulsory convertible preference shares also.

 

Q 29. What isForeign Direct Investment (FDI) in India?

 

Ans: If the Indian company has issued the shares to non-resident entities under the FDI scheme in India, then it should be reported under the Foreign Direct Investment in India (Liabilities), Section III of the return. If the non-resident entity holds the 10 per cent or more equity plus participating preference shares together, in the reporting Indian company, then it should be reported under 1.b FDI of section III. However, if non-resident entity holds less than 10 per cent of the equity plus participating preference shares capital of reporting Indian company, then it should be reported under 2.b DI of section III. In both the cases, the non-resident entity is called as the Direct Investor (DI) while the reporting Indian company is called as Direct Investment Enterprise (DIE).

 

If the reporting Indian company also holds the equity shares in its DI company abroad and if its shareholding is less than 10 per cent of equity capital of DI company, then it is called as reverse investment and same should be reported under item 1.2 (claims on direct investor) of the respective blocks, i.e. 1.b FDI and 2.b DI of section III.

 

 

Q 30.What valuation guidelines are used while reporting foreign equity investment for unlisted companies?

 

Ans: This field will be automatically calculated in online web-based reporting (item 1.1, Section III). Companies are not required to compute it separately. However, for your information, calculation of market value of equity capital for unlisted companies (using the OFBV method) is as follows:

Market value of equity capital held by Non- resident at OFBV for current year/previous year

= (Net worth of the company for current year/previous year) * (% non-resident equity holding for current year/previous year)

Where, Net worth of the company

= (Paid up Equity & Participating Preference share capital of company + Reserves & Surplus – Accumulated losses)

 

Q 31. What valuation guidelines are used while reporting foreign equity investment for listed companies?

 

Ans:This field will be automatically calculated in online web-based reporting (item 1.1, Section III). Companies are not required to compute it separately. However, for your information, If the Indian reporting company is listed then closing share price as on reference period, i.e. end-March of previous and current year should be used for valuation of non-resident equity investment.

Q 32.What constitute the ‘Other Capital’ component of FDI?

 

Ans: Other capital is a debt which is to be reported as follows;

(a) Other capital, item 2.1 & 2.2 of Section III (1.b FDI) includes all other liabilities and claims at Nominal value, except equity and participating preference shares, (i.e. trade credit, loan, debentures, Non-participating share capital, other accounts receivable and payables etc.) of Indian reporting company with its direct investors holding more than 10 per cent equity.

(b) Other capital, item 2.1 & 2.2 of Section III (2.b Direct Investment) includes all other liabilities and claims at Nominal value, except equity and participating preference shares, (i.e. trade credit, loan, debentures, Non-participating share capital, other accounts receivable and payables etc.) of Indian reporting company with non-resident investors holding less than 10 per cent equity and indirect related parties (fellow enterprise or ultimate parent company or group company etc.).

 

 

Q 33.What is the definition of related party?

 

Ans: A related party is a person or entity that is related to the entity that is preparing its financial statements (referred to as the ‘reporting entity’).

A person or a close member of that person’s family is related to a reporting entity if that person:

(i) has control or joint control over the reporting entity;

(ii) has significant influence over the reporting entity; or

(iii) is a member of the key management personnel of the reporting entity or of a parent of the reporting entity.

In the definition of a related party, an associate includes subsidiaries of the associate and a joint venture includes subsidiaries of the joint venture. Therefore, for example, an associate’s subsidiary and the investor that has significant influence over the associate are related to each other.

 

Q 34.In the FLA Return, whether FDI should be reported based on the country of immediate investor or country of ultimate holding company? Where should we report the receivable/ payables with non-resident ultimate holding company?

 

Ans: Above situation is better explained with following case:

Example: A company incorporated in Mauritius has invested into Indian company. The parent company of Mauritian company is incorporated in USA. So, whether claims and liabilities of Indian company with parent company incorporated in USA also needs to be disclosed in the FLA Return and if yes, where?

Solution: While filling the FLA return, FDI reporting should be based on the country of immediate investor. However, if there are any receivables/payables with the non-resident ultimate holding company, then same should also be reported at ‘Other capital’ component of 2.b DI under Section III.

In respect of the above example, claims and liabilities of Indian company with the parent USA Company will be reported at ‘Other capital’ component of 2.b DI under Section III.

 

Q 35. Whether, any assets or liabilities for Indian party (i.e. domestic assets and liabilities) are to be included in the FLA Return?

 

Ans:  Any domestic liabilities or assets (even if it is in foreign currency) should not be reported in the FLA return.

 

Q36. What is Direct Investment abroad by Indian companies?

Ans: If the reporting Indian company invests in equity and/or participating preference shares of overseas company, under the Overseas Direct Investment Scheme in India, i.e. investment in Joint venture or wholly owned subsidiaries abroad, then it should be reported under Section IV of the FLA return. If the Indian company holds 10 per cent or more equity plus participating preference shares together, in overseas company, then it should be reported under 1.b ODI (item 1.1, claims on direct investment enterprise). However, if the Indian company holds less than 10 per cent of the equity plus participating preference shares capital of overseas company, then it should be reported under 2.b DI (item 1.1, claims on direct investment enterprise). In both the cases, the Indian company is called as the Direct Investor (DI) while the overseas company is called as Direct Investment Enterprise (DIE).

Q 37.If the overseas subsidiaries/ joint venture company’s accounting period is different from the reference/reporting period (i.e. April-March) in the Return, then what information should we furnished in Section IV?

 

Ans: Companies are required to furnish the information on outstanding external liabilities and assets as on end-March of previous and latest year. In case if the accounting period of overseas subsidiaries/ joint venture of Indian reporting company is different from the reference period, then the information for end-March should be given on internal assessment basis.

 

Q 38.What constitute the ‘Other Capital’ component of ODI?

 

Ans: Other capital is a debt which to be reported as follows:

(a) Other capital, item 2.1 & 2.2 of 1.b ODI section IV, includes all other claims and liabilities at Nominal value, except equity shares, (i.e. trade credit, loan, debentures, Non-participating share capital, other accounts receivable and payables etc.) of Indian reporting company with its DIE reported in 1.b ODI.

(b) Other capital, item 2.1 & 2.2 of 2.b DI section IV, includes all other liabilities and claims at Nominal value, except equity, (i.e. trade credit, loan, debentures, Non-participating share capital, other accounts receivable and payables etc.) of Indian reporting company with non-resident companies where Indian company holds less than 10 per cent equity and also with indirect related parties (fellow enterprise or ultimate parent company or group company etc.).

 

Source :  https://flair.rbi.org.in

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