RBI proposes changes in timeframe for share issuance

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The Reserve Bank today came up with draft norms on timelines for issuance of shares on receipt of FDI and reporting the same to the central bank in an attempt to align provisions of the Foreign Exchange Management Act with the Companies Act, 2013. As per draft norms, an investee company receiving FDI should issue shares within 60 days of receipt of foreign investment and file the report with the Reserve Bank. Timeline under FEMA is 180 days of the receipt of FDI. The report needs to be filed with the Reserve Bank within 30 days of the receipt of the FDI and within 30 days of the issuance of shares. Under the proposed regulations, an investee company will be required to submit a certificate from a company secretary or chartered accountant to the effect that provisions of the Section 42 of the Companies Act, 2013, have been complied with. As per the Section 42, an Indian company is required to issue shares within 60 days from the date of receipt of share application money, RBI said, adding that this provision is applicable to a company receiving share application money from foreign investors as well. “In view of the specific and express provisions under the Companies Act, 2013, it was felt that there is no need to have a separate and different timeframe for these purposes in FEMA provisions,” the central bank said and has sought public comments by February 22 on the draft. The draft also stipulates that delay in filing of report with RBI should attract a minimum penalty of Rs 5,000 and maximum Rs 5 lakh per month or part thereof for the first six months of delay and twice that rate thereafter. The RBI is also proposing to introduce similar penalty structure for other mandatory reporting requirements under FEMA.