Amendments in reporting requirements Overseas Direct Investment (ODI) – Rationalization and reporting of ODI Forms

 CS Divyanshu Sahni  

	Amendments in reporting requirements under ODI Regulations:

                                                                                                        

                                                                              BY CS DIVYANSHU SAHNI

COMPANY SECRETARY

PH: 9871027426

Facebook page link:  Updates on Compnies Act, 2013

                            

                        Background

The liberalisation in the policy on overseas investments has enabled many Indian corporate and Resident Individuals to establish presence in overseas markets, redefining the global outreach of Indian entities. To compliment this liberalisation of policy, the reporting framework was rationalized during 2007. Through this a new system had been introduced for reporting Closure / Disinvestment / Winding up / Voluntary Liquidation of the overseas JV / WOS under general permission (Part IV of the erstwhile form ODI). However, times have changed and further rationalization was the need of the hour to capture data comprehensively on all fronts. Hence, in order to facilitate reporting of Overseas Direct Investment (ODI) forms and rationalize the same, the Reserve Bank of India (RBI) has issued circulars on rationalization and the operationalization of the online reporting system of ODI Forms1 vide notification no. RBI/2015-16/374 of A.P. (DIR Series) Circular No.622 on the 13th of April, 2016.

I.        Changes in the forms

1.       Subsuming of parts of the form

In order to capture all data pertaining to the Indian Party (IP)3 undertaking ODI as  well as the related transaction, it has been decided to subsume Form ODI Part II  within Form ODI Part I. Thus, Form ODI will have five sections instead of six, as under the erstwhile regulations. ODI part II was for Reporting of remittances, which has been now subsumed in Part I for application for allotment of Unique  Identification Number (UIN)4 and reporting of remittances/ transaction.

The revised ODI forms and instructions for filling up the forms will come into effect immediately. The revised Form ODI now comprises of:-

Ø Part I – Application for allotment of Unique Identification Number (UIN) and reporting of Remittances / Transactions:

Section A – Details of the IP / RI.

Section B – Capital Structure and other details of JV/ WOS/ SDS.

Section C - Details of Transaction/ Remittance/ Financial Commitment of IP/ RI. Section D – Declaration by the IP/ RI.

.

 Section E – Certificate by the statutory auditors of the IP/ self-certification by RI.

 Ø Part II - Annual Performance Report (APR)

 Ø Part III – Report on Disinvestment by way of:

a.       Closure / Voluntary Liquidation / Winding up/ Merger/ Amalgamation of overseas JV / WOS;

b.       Sale/ Transfer of the shares of the overseas JV/ WOS to another eligible resident or non-resident;

c.       Closure / Voluntary Liquidation / Winding up/ Merger/ Amalgamation of IP; and

d.      Buy back of shares by the overseas JV/ WOS of the IP / RI.

2.       New reporting format for Venture Capital Fund (VCF) / Alternate Investment Fund (AIF), Portfolio Investment and overseas investment by Mutual Funds

A new reporting format has also been introduced for Venture Capital Fund (VCF) / Alternate Investment Fund (AIF), Portfolio Investment and overseas investment by Mutual Funds as per the format in Annex II5 and Annex III6.

3.      Post investment changes

Post investment changes subsequent to the allotment of the UIN are required to be reported as indicated in the operational instructions on submission of Form ODI   Part

I.   The AD banks would continue to receive the ODI forms as also documents related to the post investment changes in the physical form. These should be preserved UIN wise for submission to the Reserve Bank, if and when specifically required.

4.      Self-certification allowed for investment by Resident Individuals (RI)

An RI may apply to the Reserve Bank for permission to acquire shares in a foreign entity offered as consideration for professional services rendered to the foreign entity. In case of an RI undertaking ODI, certification of Form ODI Part I by statutory  auditor or chartered accountant need not be insisted upon. Self-certification by the RI concerned may be accepted. This is a facilitative change brought in and will help in doing away with lengthy procedures and speeding up the investment process.

II.     Changes in online reporting

1.      Revamping of OID application

To reduce the traditional paper-based filing system, the online OID application has been revamped. The facilitation of online systems helps in a number of ways. Some noteworthy benefits are as follows:-

a.       To provide the AD banks fast and easy accessibility to data for reference purpose,

b.       To improve the coverage

c.       Ensure proper monitoring of the flows in a dynamic environment

2.      Introduction of AD Maker, AD Checker and AD Authorizer

 To infuse diversification in work and have decentralized work, a novel concept of AD Maker, AD Checker and AD Authorizer has now been introduced in the online application process.

a.       The AD Maker shall initiate the transaction and submit to the AD Checker

b.       AD checker shall verify the transaction before submission to Reserve Bank.

c.       The AD Authorizer shall have the authority to ratify these ODI transactions which are pending         due to various reasons, such as, delay arising on account of seeking further clarification from the        IP / RI, technical difficulty in reporting the transaction in the online OID application and on              account of delay in completing the due diligence process.

The AD bank may identify an official in the middle management level who may be assigned the responsibility of the AD Authorizer, whose responsibility will be to examine genuineness of the reason/s behind late submission of the ODI Forms and ratifying those online transaction which are reported with a delay owing to operational difficulties after recording the facts in the online OID application under the Remarks column.

The facilitation has also been done with the intent to provide AD banks greater capability to track submission of APRs and also improve compliance level in the matter of submission of APRs by the IPs / RIs.

III.   Changes in Annual Performance Report (APR)

 One of the obligations on the part of IP/RI is that of submission of an Annual Performance Report (APR) in Form ODI Part II to the Reserve Bank by 31st December (earlier, in Part III by 30th of June*) every year in respect of each Joint Venture (JV) / Wholly Owned Subsidiary (WOS) outside India set up or acquired by the IP / RI. In order to provide AD banks greater capability to track submission of APRs and also improve compliance level in the matter of submission of APRs by the IPs / RIs, the following changes have been made:-

a.  The online OID application has been suitably modified to enable the nodal office of the AD bank to view the outstanding position of all the APRs pertaining to an applicant including for those JV / WOS for which it is not the designated AD bank.

b.  In the case of investment by Resident Individuals, APRs may be self-certified.

c.  In case multiple IPs / RIs have invested in the same overseas JV / WOS:-

i.             The obligation to submit APR shall lie with the IP / RI having maximum stake in the JV / WOS, or

ii.               The IPs / RIs holding stake in the overseas JV / WOS may mutually agree to assign the responsibility for APR submission to a designated entity which may acknowledge its obligation to submit the APR in terms of Regulation   15

(iii) of Notification, ibid, by furnishing an appropriate undertaking to the AD bank.

iii.                An IP / RI, which has set up / acquired a JV / WOS overseas in terms of the Regulations of the Notification, ibid, shall submit, to the AD bank every year, an APR, based on the latest audited annual accounts of the JV / WOS unless specifically exempted by the Reserve Bank, in Form ODI Part II in respect of each JV / WOS outside India and other reports or documents by 31st of December each year or as may be specified by the Reserve Bank from time to time.

Earlier, this was to be done in Form ODI Part III by 30th of June each year or as may be specified by the Reserve Bank from time to time.7

IV.  Comparative table

Serial no.	Earlier provision	Amended provision
1.	ODI reporting was done in 4 parts, viz Form ODI-Part I, II, III and IV.	ODI reporting is now in 3 parts, viz Form ODI-Part I, II and III.
2.	Six parts in form ODI Part-I.	Five parts in form ODI Part-II, since Part-II of erstwhile regulation has been subsumed in Part I.
3.	No prescribed form was provided though reporting requirement was mandatory for VCF, AIF, Portfolio Investment and overseas investment by Mutual Funds.	Reporting format has been introduced for VCF, AIF, Portfolio Investment and overseas investment by Mutual Funds as per the format  in Annex I and Annex III.
4.	Certification of Form ODI Part I by statutory auditor or chartered accountant was required.	Self-certification       allowed       for investment by RI.
5.	No such concepts of AD Maker and checker.	Introduction of AD Maker, AD Checker and AD Authorizer.

6.

Submission of APR in Form ODI Part III to the Reserve Bank by 30th of June every year.

Submission of APR in Form ODI Part II to the Reserve Bank by 31st of December every year as per instruction kit and master direction

These changes are expected to facilitate timely filing and reporting of necessary documents. Also, it is expected that the regulations will be adhered to strictly and lapses in filing will be to bare minimum