RBI COMPLIANCES
Compliance Description
Reference
Requirement
Overseas Direct Company C must ensure that its Overseas Direct
Investment (ODI) Investment (ODI) complies with the prescribed
Regulation 6 of
Compliance limits and conditions under the Overseas
the Foreign
Investment (OI) Rules and Regulations.
Exchange
Management
Specifically: Regulation 6(1)(i): Any investment
(Overseas
by way of subscription, purchase, or otherwise
Investment)
acquisition of equity capital in foreign entities
Directions, 2022
must be reported to the RBI using Form FC
within the stipulated time frame.
Financial An Indian entity may make financial commitments
Commitment Limits within the prescribed limits and must adhere to
the following conditions:
Part III, Section 1) Swap of securities must comply with FEMA
21 of the Foreign provisions.
Exchange 2) For partnership firms, individual partners may
Management hold shares for and on behalf of the firm if
(Overseas required by host country regulations.
Investment) 3) Financial commitment by way of debt must be
Directions, 2022 facilitated by AD bank and verified for bona fides.
4) Provisions related to guarantees and their
reporting requirements.
5) Provisions related to pledge/charge and the
associated financial commitments.
Reporting and Regulation 10 of Regulation 10: All reporting related to Overseas
Documentation the Foreign Investment must be routed through the
Exchange designated AD bank in the prescribed manner
Management
(Overseas 1) All reporting related to overseas investment
Investment) must be done through the designated AD bank.
Regulations, 2) Annual Performance Report (APR) must be
certified by a chartered accountant if statutory
Section 17 of the audit is not applicable.
Foreign Exchange
Management
(Overseas
Investment)
Directions, 2022
Sector-Specific Regulation 11 of If Company C operates in a strategic sector (e.g.,
Regulations the Foreign energy, natural resources), the following
Exchange additional compliance requirements must be
Management adhered to:
(Overseas
Regulation 11(1): Obtain specific
Investment)
permissions from the competent authority
Directions, 2022
as required for strategic sectors.
Regulation 11(2): Follow any additional
guidelines and conditions imposed by the
sectoral regulators.
No Objection Regulation 12 of Company C must obtain a No Objection
Certificate (NOC) the Foreign Certificate (NOC) from the relevant authorities
Exchange under the following conditions:
Management
Regulation 12(1): If any financial sector
(Overseas
regulator or investigative agency is
Investment)
involved, obtain an NOC before making any
Directions, 2022
financial commitment.
Regulation 12(2): Ensure that all conditions
laid out in the NOC are complied with fully.
Section 15 of the
Foreign Exchange An Indian entity may open, hold, and maintain a
Opening of Foreign Management Foreign Currency Account (FCA) abroad for
Currency Account (Overseas making ODI in accordance with the relevant
Investment) regulations.
Directions, 2022
1) A person resident in India making ODI must
meet the obligations laid down in regulation 9 of
Section 16 of the
OI Regulations.
Foreign Exchange
Obligations of the
Management
Person Resident in 2) Submit evidence of investment to AD bank
(Overseas
India within six months.
Investment)
Directions, 2022
3) Form FC must be submitted for obtaining UIN
before making initial ODI.
1) Delays in reporting must be regularized by
Section 18 of the paying LSF.
Foreign Exchange
Late Submission Fee
Management 2) The LSF amount and calculation matrix are
(LSF) for Delayed
(Overseas provided.
Reporting
Investment)
Directions, 2022 3) Non-payment of LSF within the specified time
frame will render the advice null and void.
Regulation 4 of
the Foreign
Financial An Indian entity may lend or invest in debt
Exchange
Commitment by instruments issued by a foreign entity, provided
Management
Indian Entity by way the loans are backed by a loan agreement and the
(Overseas
of Debt interest rate is charged on an arm’s length basis.
Investment)
Regulations, 2022
Financial Regulation 5 of Guarantees may be issued to or on behalf of the
Commitment by way the Foreign foreign entity or any step-down subsidiary where
of Guarantee Exchange the Indian entity has acquired control. Various
Management types of guarantees and conditions for their
(Overseas issuance are specified.
Investment)
Regulations, 2022
Company C can pledge the equity capital of the
foreign entity in which it has made ODI or its
Regulation 6(a) of step-down subsidiary for availing fund-based
Foreign Exchange facilities.
Financial
Management
Commitment by way
(Overseas Specifically: "An Indian entity, which has made
of Pledge or Charge
Investment) ODI by way of investment in equity capital in a
Regulations, 2022 foreign entity, may pledge the equity capital of
the foreign entity in which it has made ODI or of
its step-down subsidiary outside India..."
Regulation 12 of
the Foreign
Restrictions on Exchange No further financial commitment or transfer of
Further Financial Management investment can be made until any delay in
Commitment (Overseas reporting is regularized.
Investment)
Regulations, 2022
Regulation 11 of
the Foreign
Any delay in submission of evidence or filing can
Exchange
be regularized by paying the Late Submission Fee
Delay in Reporting Management
within a maximum period of three years from the
(Overseas
due date.
Investment)
Regulations, 2022
Company C, as a step-down subsidiary, must
Rule 21 of
adhere to the regulations on acquiring and
Acquisition and Foreign Exchange
transferring immovable property outside India.
Transfer of Management
Specifically: "A person resident in India who has
Immovable Property (Overseas
made an ODI in accordance with these rules may
Outside India Investment)
acquire immovable property outside India
Rules, 2022
through such foreign entity..."
Company C can defer the payment of
consideration for the acquisition of equity capital
Regulation 7(1) of subject to terms and conditions. Specifically:
Foreign Exchange
Deferred Payment
Management "Where a person resident in India acquires
for Acquisition or
(Overseas equity capital by way of subscription to an issue
Transfer
Investment) or by way of purchase from a person resident
Regulations, 2022 outside India or where a person resident outside
India acquires equity capital by way of purchase
from a person resident in India.
AD Bank shall not facilitate any transaction in
respect of any foreign entity engaged in an
Prohibition on
Regulation 20(1) activity mentioned in rule 19(1) of OI Rules or
Transactions with
of OI Directions located in countries/jurisdictions as advised by
Certain Entities
the Central Government under rule 9(2) of OI
Rules.
Financial commitment by a person resident in
India in a foreign entity that has invested or
Restrictions on
Regulation 20(2) invests into India at the time of making such
Layering of
of OI Directions financial commitment or at any time thereafter,
Subsidiaries
resulting in a structure with more than two layers
of subsidiaries is not permitted.
