Legal Compliances under Foreign Exchange Management Act (FEMA) of 1999, Clothing & Apparel Industry: Best FDI Attorney Legal Advice in Delhi NCR
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“In order to open a bank account in India by a foreign investor and in order to transfer funds internationally a proper Legal Consultation or Legal Advice from an FDI Attorney in India is required. A lot of Foreign Direct Investments inflows happen in India and some of the international transfers are flagged by the Government Agencies including the Reserve Bank of India for their non–compliance or non-fulfilment of statutory compliances. Over here the pre-requisites for international money transfers is/are discussed.”
Introduction
Foreign Exchange Management Act of 1999, (FEMA) was enacted to consolidate and alter the law governing foreign exchange and with an ultimate goal of enabling international trade and payments and supporting the steady growth and management of India’s foreign currency market. FEMA’s major goal was to assist India in facilitating external trade and payments. It lays out the procedures, rules, and dealings that all foreign exchange transactions in India must follow.
Permitted transactions under Foreign Exchange Management Act of 1999 for Foreign Corporations
All persons who want to conduct a foreign exchange shall abide by the procedures and rules laid down under the FEMA, 1999 and with the permission from the Reserve Bank of India. No person shall, as per the regulation under section 3 of the FEMA, shall transfer or deal with any foreign security to any person unless the person to whom it is sent is an authorized person, as defined under section 2(c) of the FEMA. As per the Act no person who has conducted the business transaction or any acquisition or transfer shall enter into a transaction for the same in India.
Meaning of the term Authorized Person under Foreign Exchange Management Act of 1999
On an application submitted in this regard, the Reserve Bank may permit any person to be identified as an authorized person dealing in foreign exchange or foreign assets, as authorized dealer, currency changer, or off-shore banking unit, or in any other manner it considers appropriate. The authorization thus given should be in written form and it may be revoked by the RBI at any time if it feels that the person to whom it has been authorized has contravened the rules and provisions of the act failed to fulfil the terms on the basis of which authorization was granted or the RBI feels that the authorization is contravene to the public interest.
Provisions to comply with by the Authorized Person
An authorized person must follow such general or special instructions or instructions as the Reserve Bank may issue from time – to – time in all his interactions in foreign exchange and also foreign securities, and he may also not get himself involved in any kind of transaction that includes any foreign security or exchange that is not in compliance with the definitions of his permission under this section unless the Reserve Bank has given him prior permission. Before engaging in any foreign exchange transaction on behalf of another person, an authorised person shall require that person to make such a declaration and provide such details that will reasonably fulfil that the transaction will not constitute, and is not intended to entail, any contraventions or misuse of the provision of the Act or any rule, regulation, notification, direction, or order. If the said person fails or only partially complies with any such condition, the authorized person must decline the transaction in writing and notify the situation to the Reserve Bank if he has reason to suspect that any violation or contravention is being envisaged by the person. If a person who is not an authorized representative has purchased any foreign securities for anything which is mentioned in FEMA, and he does not use the authorization for the purpose mentioned in the declaration or any acquisition which is not permissible as per the act then he is said to contravene the act.
Penalties under Foreign Exchange Management Act of 1999
If a person violates the terms of FEMA or any regulation, guideline, order, or rule issued under FEMA, he may be fined up to triple the amount involved in the violation or Rs.2 lakh. The person will be subjected to additional penalty of up to Rs.5,000 for each day the contravention continues in case the contravention persists.
A proper legal consultation from the best corporate lawyer in India is an essential task to under the statutory and non-statutory compliances.
Conclusion
Foreign Direct Investment (FDI) compliance in India means that money from outside the country is invested in a company in India by a business or an individual. In India, FDI Compliances allow a person or firm to invest in one nation for the purpose of doing business in another. The FEMA deals and regulates the investments in India and puts forth the permitted activity, penalties, definition of terms etc.
Authored By: Adv. Anant Sharma & Afsana Khan