Is there a timeline for bringing in subscription money under FEMA?

22 May 2019 • Kavita Agrawal


Is there a timeline for bringing in subscription money under FEMA?

22 May 2019 • Kavita Agrawal

One of the important steps after incorporating a wholly owned subsidiary (WOS) of a foreign company is opening of bank account and bringing in subscription money. IS THERE ANY TIMELINE FOR BRINGING IN THE SUBSCRIPTION MONEY.? To answer this question, we shall go through the provisions of two major Acts that govern a company in India, namely, Companies Act, 2013 and Foreign Exchange (Management) Act, 1999.

Legal Provisions

Under Companies Act, 2013

  • In case of issue of shares by an existing company, the shares are required to be allotted within 60 days from the date of receipt of the application money. If the company is not able to allot the securities within this period, it shall repay the application money to the subscribers within fifteen days from the expiry of sixty days (Sec 42(6) of the CA, 2013, for reading more on provisions relating to share application money, please click here).

  • In case of a newly incorporated company, the recent amendments {via Companies (Amendment) Ordinance, 2018 dated 02.11.2018} specify that the subscribers are mandatorily required to bring in subscription money within 180 days from the date of incorporation and the Directors are required to file a declaration to this effect with the Registrar (Sec 10A of the Act).

It is noteworthy that there had never been any provision under Companies Act pertaining to timelines for bringing in subscription money in case of a private limited company. Through the insertion of section 10A, it is for the first time that some clarity has been brought in and bringing in of subscription money has been made time bound by the statute.

Under FEMA

  • It specifies that capital instruments (shares subscribed) are required to be issued to the investor within 60 days from the date of receipt of consideration (Para 2.2 of Schedule 1 of FEMA-20(R)/2017-RB dated November 07, 2017), which is in sync with the provisions of Companies Act, 2013.

  • In case of a newly incorporated company, no timelines have been specified pertaining to bringing in of subscription money.

Deemed Allotment

Deemed Allotment is an important term while determining the timelines applicable as given under the Acts. In general parlance, share allotment means apportionment or division of shares among the applicants which results in ownership of the allotted shares. The event of share allotment happens subsequent to receipt of share application money. As stated above, shares are required to be allotted within 60 days from the date of receipt of application money.
However, in case of incorporation, the shares are deemed to be allotted on the date of incorporation of the Company and subscription amount is received subsequently.
The above provisions have been summarized in the following figure: –

Applied Provisions

Going by the legal provisions, it is evident that there is no timeline for bringing in subscription money by foreign subscribers as per FEMA. Further, RBI had never prescribed any timelines and therefore, it had always been a grey area. There was an unstated principle that the money should be brought in within reasonable time. However, there was no clear understanding as to what is the reasonable time.

Prior to introduction of integrated form for incorporation (i.e. SPICe), the newly incorporated companies used to apply for PAN before it could go forward with bank account opening, as PAN is a mandatory requirement by the banks. The time involved in these processes was considerable and hence, there were cases of delay in receipt of subscription money which led to resultant delay in filing of FC-GPR. Sometimes, RBI required the delay to be compounded.

However, lately it has been noticed that RBI follows an internal timeline of 60 days within which subscription money is to be brought in. Further, with the introduction of Late Submission Fee (LSF), any delayed receipt (of subscription money) or delayed reporting (FC-GPR) is subject to levy of LSF by RBI. Additionally, in some cases, RBI also insists on getting such delays compounded. Whether it is justified to levy LSF as well as require the company to go for compounding?

Our Analysis

Our practical experience says that in case of further issue of shares, the shares are to be allotted within 60 days from the date of receipt of inward remittance. Further, in case of incorporation, the subscription money is also to be remitted within 60 days from the date of incorporation/subscription. Though this later timeline is not prescribed anywhere, it seems that it is a suggested timeline. Therefore, this 60 days’ timeline is to be kept in mind while dealing with incorporation cases as well.

You may also read our other blogs on reporting under FEMA by clicking on the following:


  1. In case of Private placement, the NRI investor has invested out of NRE account inadvertently. Now he wants to go make the investment through NRO account. Can the application money received be refunded immediately, even before completion of 60 days from the date of receipt of application money ? Can he now pay money from NRO account for subscribing to the securities

    1. Dear Reader,

      As per the provisions of Foreign Exchange Management (Mode of Payment and Reporting of Non-Instruments) Regulations, 2019 and Foreign Exchange Management (Non-Debt Instruments) Rules, 2019, “for investments by Non-resident Indian (NRI) on repatriation basis, the amount of consideration shall be paid from abroad through banking channels or out of funds held in NRE account.”

      Please note that NRO account is opened for managing income earned by NRI in India whereas, NRO account is for the operation of his foreign earnings.
      As per our understanding, income earned in India cannot be said to be a foreign investment. Thus, the above provisions specifically asks for remittance to be routed through NRE or foreign banking channels.

      Therefore, in your case, remittance has been made from the correct bank account.

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