What is Form FC-GPR and Form FC-TRS?

Why these forms exist

Foreign investment in an Indian company is allowed under the foreign exchange rules, but for ecommerce the conditions depend on the business model:

• A brand that makes its products in India, itself or through a contract manufacturer, can sell them online under the manufacturing route.
• A brand that buys or imports finished goods to sell under its own brand is in single-brand retail trading, which has its own conditions, including on local sourcing.
• An online store that holds inventory and sells other brands' goods cannot take foreign direct investment. A marketplace for other sellers can, with conditions.

Check the model against the current FDI policy before taking the money. The RBI tracks the investment through reports filed on its FIRMS portal (Foreign Investment Reporting and Management System), verified by the company's or resident party's authorised dealer (AD) bank.

Before the first report, the company registers on FIRMS and creates its Entity Master record.

Form FC-GPR: new shares to a foreign investor

When an Indian company issues shares, compulsorily convertible preference shares or debentures, or other equity instruments to a person resident outside India, it reports the issue in Form FC-GPR.

• The money must come in through banking channels, and the shares must be issued within the time the rules allow after the money arrives, or the money must be refunded.
• The issue price must be at least fair value, worked out by an internationally accepted pricing method on an arm's length basis and certified by a chartered accountant, a SEBI-registered merchant banker or a practising cost accountant.
• The company files FC-GPR within the time limit after allotment, with the valuation report, the bank's evidence of the remittance and the investor's KYC.

The company must also comply with the Companies Act on the same issue (see Dilution).

Form FC-TRS: transfers between residents and non-residents

When existing shares move between a resident and a non-resident, the transfer is reported in Form FC-TRS. The resident party, buyer or seller, is responsible for filing it.

• A non-resident buying from a resident must pay at least fair value.
• A non-resident selling to a resident may be paid no more than fair value.
• The company should record the transfer in its register only after the FC-TRS has been acknowledged.

Transfers between two non-residents, or between two residents, are not reported in FC-TRS.

Filing late

A late FC-GPR or FC-TRS can be regularised by paying a Late Submission Fee: a fixed amount plus a charge that grows with the amount involved and the length of the delay. The fee is available only for delays within the period the RBI allows; beyond that, the contravention has to be compounded, which is slower and costlier. Any delay also holds up later steps, such as the next round or a founder's sale.

What goes wrong

• Issuing shares before checking the sector rules, for example where the brand has started reselling other brands' products from its own stock.
• No valuation report dated close to the issue, or a price below fair value.
• Missing the FC-TRS when a founder or angel sells to a foreign fund, because it is the founder, not the company, who must file it.