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Fema Compliances and Compounding

FEMA Compliance & Compounding

FEMA COMPLIANCES AND COMPOUNDING

We at PKP provides complete services for compliances and compounding as prescribed under Foreign Exchange Management Act, 1999  as under:-.

Services related to Compliances:-
 

  • Transactions involving Foreign exchange inward (FDI) and outward (ODI)
  • Preparation of various statements, documents and applications as required for obtaining necessary approval from RBI/AD Banker.

Services related to Compounding

Compounding is a process whereby the applicant who has committed any violation of FEMA Act or Rules & Regulations made there under files voluntarily an application to the Competent Authority to compound its offences /violation by way of imposing financial penalties. However, compounding application cannot be filed for the contravention u/s 3A of the Act.  Such compounding application needs to be filed alongwith necessary detail/documents as under:-

  •  Application in the prescribed  format disclosing the contravention/default committed by the applicant  
  • Memorandum of Association or Charter documents of the applicant
  • Copy of latest audited Balance Sheet
  • Demand Draft toward application fee in favour of  “Reserve Bank of India” for Rs. 5,000/-
  • Other related documents concerning the default/contravention committed.

We at PKP can render following services:-
 

  • Consultancy and Advisory
  • Compliance of consequential contraventions, if any, committed by the applicant as may be required before filing of  compounding application to RBI.
  • Preparation of  necessary compounding application alongwith detail/documents required
  • Filing of application with  RBI
  • Compliance to the queries raised by RBI/AD Banker
  • Liaison with Competent Authorities

At Prakash K Prakash, we are committed to offering FEMA compliance and compounding. We can help you to complete all the relevant compliances before the application compound. Furthermore, we are also helpful when it comes to document drafting for RBI submission. furthermore, our team provides all the help by offering consultations regarding the compounding of offences.

You can count on us to liaisoning with RBI and AD Bank related to the Compounding of offences. When you count on us for FEMA compliances and compounding, be assured that we shall provide all kinds of help related to it. We have empanelled different experts to offer the services.

Our team of experts keeps themselves updated with the regulatory environment and helps our clients promptly make FEMA compliances. Some of our key services include:

  • Advisory and consultations about foreign companies established in the country in the form of a branch office, project office or liaison office.

  • Advisory about the documents that need to be maintained. We also provide advisories on RBI compliances that must be made by foreign companies present in India.

  • Help related to timely RBI reporting of the transactions in the form of shares issuance to NRIs, selling and buying of securities, etc.

  • Advisories to Indian organizations establishing their presence in foreign countries and compliances to be made.

  • Representation for compounding of offences made under FEMA compliance.

To learn more about how we can help you with FEMA compliances and compounding, contact us right away.

Frequently Asked Questions

FEMA (Foreign Exchange Management Act, 1999) regulates all foreign exchange transactions in India, including FDI, ODI, and cross-border remittances. Compliance ensures that individuals and companies follow RBI guidelines, avoiding penalties or legal complications.

FEMA compounding is a voluntary process through which an individual or company that has violated FEMA provisions admit the contravention and settle the matter by paying a monetary penalty to the Reserve Bank of India (RBI) instead of facing legal consequence which may include prosecution also.

A company should apply for compounding as soon as it identifies a FEMA violation, such as delay in reporting FDI, non-allotment of shares to foreign investors within the prescribed time, or non-filing of mandatory forms (FCGPR, FCTRS, APR etc.) with the RBI through AD banker.

The main documents include:

• Prescribed compounding application form
• Memorandum of Association (MOA) or Charter documents
• Latest audited balance sheet
• Demand draft of ₹10,000 in favour of the Reserve Bank of India
• Supporting documents related to the violation

Some common violations include:

• Delay/default in FDI reporting
• Delay/default in ODI reporting
• Delay/default in share issuance to foreign investors
• Non-receipt of export proceeds or partial receipts
• Default in payment towards imports or partial payment
• Long outstanding on account of advance received toward export
• Export of goods without IEC
• Write off of export debtors without RBI approval.
• Write off of import liabilities without RBI approval

Typically, once a complete compounding application is submitted, the RBI takes about 90 to 120 days to process and issue an order. However, the timeline can vary depending on the complexity of the case and the response to RBI queries.

PKP provides end-to-end support — from identifying violations and preparing necessary documents to filing compounding applications with RBI and responding to queries. Our experts also offer advisory services to ensure full FEMA compliance in future transactions.