Indian regulations currently allow investors all around the world to invest in India via a number of different routes namely Foreign Direct Investment (FDI), Foreign Portfolio Investment (FPI), Foreign Venture Capital Investment, and Alternative Investment Fund, etc.

Today we are going to discuss one of the most preferred routes – Foreign Portfolio Investment (FPI):

Q1. What Is Foreign Portfolio Investment (FPI)?

Ans: FPI is an investment by non-residents in Indian (NRIs) securities including shares, government bonds, corporate bonds, convertible securities, units of business trusts, etc. The class of investors who make an investment in these securities is known as Foreign Portfolio Investors (FPIs).

Q2. What Are The Major Laws/Regulations Applicable To An FPI In India?

Ans: Foreign Portfolio Investments are primarily governed by The Securities and Exchange Board of India (SEBI). SEBI has recently introduced the SEBI (Foreign Portfolio Investors) Regulations, 2019, repealing the erstwhile 2014 Regulations. Further, FPIs are also required to comply with the Foreign Exchange Management Act, 1999 and the Income-tax Act, 1961.

Q3. What Are The Types/Categories Of Foreign Portfolio Investors In India?

Ans: An applicant can obtain FPI license under SEBI regulations, in one of the two categories mentioned below:

(a) “Category I FPI” which mainly include:

• Government and Government related investors;
• Pension funds and university funds;
• Appropriately regulated entities such as asset management companies, banks, investment managers, investment advisors, portfolio managers;
• Eligible entities from the Financial Action Task Force (FATF) member countries;

(b) “Category II FPI” which include all investors not eligible under Category I such as:

• appropriately regulated funds not eligible as Category-I foreign portfolio investor;
• endowments and foundations;
• charitable organizations;
• corporate bodies;
• family offices;
• Individuals;
• Unregulated funds in the form of limited partnership and trusts.

Q4. What Are The Advantages Of Being Registered As A Category I FPI As Opposed To Category II?

Ans: The main advantages of category I am as under:

(a) eligibility to issue Offshore Derivative Instruments (ODIs);

(b) ease of compliance of certain know your client (KYC) norms as compared to Category II FPIs; and

(c) enhanced position limits in case of stock and currency derivatives.

Apart from the above, Category I FPIs are exempted from the applicability of “Indirect Transfer” provisions under the Indian Income-tax Act. These provisions are otherwise applicable to an overseas investor upon transfer of shares/interest in an overseas entity with assets in India.

Q5. What Are The Relevant Operational Aspects For Making A Foreign Portfolio Investment?

Ans: The following are the relevant operational aspects:

1. Appoint a legal representative:

Appoint a legal representative in India to assist in obtaining an FPI license under SEBI regulations. The process involves making an application in the prescribed format and complete necessary documentation. The role of legal representative can be played by any financial institution authorized by the Reserve Bank of India. Even reputed law firms can assist in the process.

2. Appoint a Tax advisor:

A tax advisor will help comply with all tax obligations that will arise from the activities of an FPI in India. The advisor’s duties include maintaining records, issuance of certificates for repatriation of funds out of India, annual tax compliances, and representation before tax authorities.

3. Appoint a Domestic Custodian

Appoint a domestic custodian (before making any investments in India) for custodial services (including banking & Demat operations) in respect of securities. Domestic Custodian means any entity registered with SEBI to carry on the activity of providing custodial services in respect of securities.

Q6. What Are The Compliances Applicable To An FPI Under The Income Tax Act, 1961?

Ans: Since Foreign Portfolio Investors invest in securities such as shares, bonds, debentures, units of business trust, etc., they earn income in the nature of dividend, interest, and capital gains. FPIs would also need to remit such incomes (along with capital investment) out of India at regular intervals.

As a precondition to remittance of funds, the applicable income tax on such income needs to be deposited with the government treasury. Depending upon the nature of income, the taxes are deposited as – withholding taxes, payment of taxes in a self-assess mode or a combination of both. The custodian/banker would also require a certificate from a professional tax advisor prior to remitting the funds.

Moreover, after every Indian financial year ends, the FPI is required to file an annual tax return (in electronic mode). If the tax authorities wish to scrutinize the tax return in detail, it has to be presented before them.

Burning Issues faced by FPIs under the present tax regime

• FPIs structured as non-corporates are subject to a higher rate of a surcharge prescribed on income from capital gains. This has led to many FPIs considering a conversion from a non-corporate to a corporate structure. This conversion could potentially attract General Anti Avoidance Rules (GAAR) under the Indian tax laws.
• FPIs having fund managers located in India having potential exposure to establishing a business connection in India, upon not satisfying certain prescribed conditions.

Areas Where InCorp Can Assist FPIs:

Incorp has a dedicated team of professionals with expertise in catering to Foreign Portfolio Investors, planning to invest in India. We can assist by providing the following services:

• Assistance in advising and structuring under the FPI route.
• Assistance in Setting up the structure under the FPI route.
• Coordination with the custodian for obtaining information on periodic transactions and maintaining necessary records of the same.
• Computation of tax liability in respect of income earned on securities considering provisions of the Indian Income Tax Act and the Treaty (i.e. Double Taxation Avoidance Agreement) along with the applicability of Multilateral Instrument.
• Issuance of certificate for repatriation of funds out of India as per the requirements of the Income-tax Act and RBI guidelines.
• Preparing and filing of Annual Income Tax Return.
• Replying and attending to notices/letters issued by the tax authorities and advising thereon.
• Appearing before the tax authorities in the course of any proceedings and reviewing assessment orders passed by them.
• General correspondence with the tax authorities.

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Real Estate is one of the major sectors which has been deeply impacted by the COVID-19 pandemic and the consequent lockdown to contain it. The sector which was already seeing a lull period got hit by a ‘perfect storm’ of Coronavirus. If your company is seeing liquidity issues and cash flow mismatches and you are looking for an able advisor to help your company navigate through these stormy waters through a one-time restructuring, your search ends at InCorp.

Impact Of COVID-19 On Businesses

The economic impact of the COVID-19 pandemic has created significant stress on the liquidity and overall financial position of businesses, especially those which have a borrowing from banks, NBFCs and other financial institutions. The cashflow mismatches created to the subdued business activity over the last six months and the possibility of the same not recovering in the immediate future would lead to increasing rate of defaults by even otherwise viable and sustainable businesses.

The moratorium provided over the last six months, viz the period covering the lockdown phase in the country comes to an end in the current month and there was a need for addressing the issue of cashflow mismatch by a more sustainable and long term solution.

Need For A One-Time Restructuring Scheme

There was a long-standing demand from the industry for RBI to announce a One-Time Restructuring of the loans to give much needed relief, clarity and long-term sustainable support to the businesses. The RBI announced a framework to permit restructuring of the stressed accounts of ‘eligible borrowers’ without the account being classified as a Non-Performing Asset (NPA)

This blog post highlights everything you need to know about a restructuring of loans; the eligibility criteria, the provisions involved and much more.

GIFT IFSC is set-up in Gandhinagar, Gujarat to undertake financial services transactions that are currently carried on outside India by overseas financial institutions and overseas branches/ subsidiaries of Indian financial institutions.

GIFT City IFSC opens a great opportunity to High-net-worth individuals (HNIs) who are currently investing in overseas funds to benefit from the favourable financial environment, access to global markets, and potential tax advantages offered by the IFSC.

What Does Single Family Means?

Legal Form Of FIF

Important Considerations:

• FIF shall seek registration as an ‘Authorised FME’.
• FIF should maintain a minimum corpus of USD 10 million within 3 years from the date of obtaining certificate of registration.
• FIF can undertake all activities related to managing FIF as specified by Authority.
• FIF can borrow funds or engage in leveraging activities as per their risk management policy.
• FIF could be open ended or close ended depending upon the requirement of family
• Resident Individuals may invest in FIF upto USD 2,50,000 per year and Resident Entity may invest upto 50% of their net worth.
• FIF set up in IFSC will be considered as an Indian resident for tax purposes and an overseas resident/ offshore unit from an exchange control perspective.

Permissible Investment By FIF

Tax Benefits

• FIF would be entitled to 100% income tax exemption for ten consecutive years out of fifteen years.
• FIF would be entitled to GST exemptions on services received by unit in IFSC or provided to IFSC / SEZ units, Offshore clients.
• FIF may be subject to MAT/AMT, as applicable, and the amount thus paid should be available as credit in subsequent years. Also, TCS at 20% would be applicable from October 1, 2023, using LRS (subject to regulation) for investing in FIF.

Brief Roadmap

• Application for name reservation for a setup (Company/LLP) of proposed unit under Gift City-IFSC
• Identification of suitable office space at GIFT City
• Application for incorporation of Company/Limited Liability Partnership entity with MCA
• Application to the SEZ Authority
• Application to the IFSCA Authority
• ODI/LRS Compliance for transferring funds to GIFT City in case of resident individuals

Why Choose InCorp?

Incorp will assist you in the following services:

• Assistance in structuring the FIF as per the requirement
• Providing advisory services on regulation & taxation to ensure compliance and optimal structuring
• Assistance in preparing necessary documentation required for incorporation of FIF in GIFT City
• Assistance in setting up FIF and post setup requirements and compliance if any required by FIF

FAQs

Need help with navigating the rules and regulations in Gift City?

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There are several grounds on which a company may be wound up in India. The two major laws governing winding up of a company are the Insolvency and Bankruptcy Code (IBC), 2016 and the Companies Act, 2013.

In this blog, we’ll be looking at the grounds which are covered for winding up of a company under both these above named laws.

Winding Up Of A Company Under IBC, 2016

The ground for winding up ‘inability to pay debts’ was earlier covered under Section 271 of the Companies Act, 2013 and was one of the six grounds for winding up under that section. However after the passing of IBC, 2016, the said ground has been omitted from Companies Act, 2013 and is now exclusively covered under IBC, 2016.

Hence, if an entity is unable to pay debts and has committed a default of the minimum amount prescribed, it will have to undergo a process called ‘Corporate Insolvency Resolution Process’ (CIRP) under IBC,2016. The application can be filed by the creditors of the entity or by the entity itself. An attempt will be made to rescue the entity (corporate debtor) and revive it.

If the revival / rescue / rehabilitation is not possible within the prescribed timelines, then the entity will have to undergo winding up and a liquidator will be appointed to execute the process. Hence, the entity may or may not have to undergo liquidation, depending upon the result of insolvency resolution.

Voluntary Winding Up Of A Company Under IBC, 2016

Apart from the inability to pay debts, there is another mode of winding up a company under IBC called “Voluntary Winding Up.” Section 59 of IBC, 2016 provides that “A corporate person who intends to liquidate itself voluntarily and has not committed any default may initiate voluntary liquidation proceedings under this chapter”.

The Code mandates a ‘Declaration of Solvency’ by majority of the directors of the company by passing a resolution verified by an affidavit stating that the liquidation is not for the purposes of defrauding anyone. This mode is applicable when the reason for winding up is other than insolvency like completion of the business / project of the company, completion of the duration for which the company was incorporated etc.

Winding Up Of A Company Under Companies Act, 2013

Grounds Covered under Companies Act, 2013

This is also referred to as ‘Compulsory Winding Up’ / ‘Winding Up by National Company Law Tribunal (NCLT)’ and Section 271 of the Companies Act, 2013 has provided 5 grounds for the same. As stated before, there was one more ground “Inability to pay debts” earlier, which has now been omitted from the Companies Act, 2013. The grounds prescribed are:

• Special Resolution (SR) passed by the members for winding up by NCLT;
• Actions against the sovereignty, integrity of India or security of the State or against public order / decency / morality;
•  Affairs conducted in a fraudulent manner or there is misconduct / misfeasance;
•  Default in filing financial statements or annual returns for 5 consecutive financial years;
• Other just and equitable ground for winding up.

Conclusion

The lawmaker has tried to avoid an overlap between IBC, 2016 and Companies Act, 2013. The grounds under which a particular law would be applicable to the case are thoroughly prescribed. Some of the points to be checked before deciding upon the Law applicable are:

• Whether the entity is insolvent or solvent
• Whether the entity has defaulted in repayment of debt(s)
• Whether the reason for winding up of a company is as per Section 271 of the Companies Act, 2013
• Whether the solvent entity is to be voluntarily liquidated

J K Shah Education is the largest CA coaching institute in India with 90,000+ students studying at 75 centres located across 39 cities in India.

 “This is an opportunity for us to take a proven and successful education pedagogy to a wider audience using technology. Veranda Learning will enable us to democratize our programs and bring them to students across all socio-economic strata and locations.

InCorp Advisory played a key role in helping us navigate the entire transaction lifecycle from due diligence support to transaction structuring and closing. The invaluable support provided by the Investment Banking and Transaction Advisory team at InCorp Advisory helped us unlock the value of mutual synergies with a strategic investor like Veranda Learning.” – J. K. Shah, Pioneer Educationist Professor and Founder of J K Shah Education.

“It is very rare to see a sell-side advisor work in an integrated manner as we could see with the InCorp team. Their technical inputs and solutions-centric approach at critical times was key to the successful and timely closure of this transaction.” – Mr. Kalpathi S. Suresh, Chairman and Executive Director, Veranda Learning Solutions.

“This acquisition is another feather in the cap for us at InCorp Advisory. This is among the largest strategic investment in the education sector for 2022 and among the Top 3 transactions in India’s Competitive Exam Preparation segment. A deep understanding of our client’s business, and ability to engage on all aspects of the transaction is instrumental in the success of this deal.” – Manish Modi, CEO, Incorp Advisory.

Having more than 1800 All-India Rankers at CA Exams, J K Shah Education is today one of the most recognized brands in the Education Sector in India. Notable alumni of J K Shah Education include Industrialist Kumar Mangalam Birla and Cabinet Minister Piyush Goyal.

About InCorp Advisory

InCorp Advisory is a Singapore-headquartered professional services firm with 1500+ professionals operating from 8 countries across the Asia Pacific. In India, InCorp Advisory offers Transaction Advisory, Investment Banking, Corporate Restructuring, RoC Compliance, Taxation and ESG Services through Mumbai, Bangalore, Chennai, and GIFT City offices.

04th April 2023, Ahmedabad (India): Prozeal Infra Engineering Pvt. Ltd. has announced their first round of funding led by Chandrakant Gogri’s family office arm – Alchemie Ventures. The $4 Million (approx. INR 32.5 Crore) investment is for a minority stake at an undisclosed valuation. The funds will be used to scale operations and execute developer-model projects for energy and utility companies. Incorp Advisory was the exclusive investment banker for the transaction, which represents the largest Series-A fundraising transaction in India’s Solar EPC space in over 2 years.

Prozeal Infra is a home-grown venture founded by two Ahmedabad-based co-founders. The company already has an order book worth INR 1,000 crore ($120 million) that will be fulfilled over the next twelve months. In FY25, they expect to exceed INR 1,500 Crore ($187.5 Million) in revenue.

“It is very rare to see a sell-side advisor work in an integrated manner as we could see with the InCorp team. Their technical inputs and solutions-centric approach at critical times was key to the successful and timely closure of this transaction.” – Manan Thakkar, co-founder at Prozeal

“We are thrilled to have Mr. Chandrakant Gogri and his family office as our first investors. Mr. Chandrakant Gogri has a proven track record of building fast-growing and profitable businesses – creating immense value for shareholders. His sharp business acumen and guidance will enable the next phase of sustainable growth for Prozeal Infra.” – Shobit Rai, co-founder at Prozeal Infra.

“I am impressed with what the dynamic and passionate founders at Prozeal Infra have achieved. Solar energy and decarbonization are the backbone of India’s climate change commitment. Prozeal Infra, through its engineering capabilities, is well positioned to capture a lion’s share of this energy transformation.” – Chandrakant Gogri, the Founder & Chairman Emeritus of Aarti Group of Industries [NSE:AARTIIND].

India has made a climate change commitment of meeting 50% of its energy requirements through renewable sources by 2030. This translates to 300 GW of installed solar power capacity by 2030, of which only 65 GW is installed today. Prozeal Infra has a vision to be a decarbonization and net-zero solution company for commercial and industrial MNCs, MSMEs and Government institutions supporting India’s sustainable energy goals.

“This investment catapults Prozeal Infra towards becoming one of India’s largest players in this space. We are proud to be associated on this marque transaction. We proved that commercially prudent businesses with a commitment to create long-term customer value are not affected by the so-called ‘funding winter’.” – Inderpreet Chadha, Head of Investment Banking at InCorp Advisory.

About Prozeal Infra

Prozeal Infra Engineering Pvt. Ltd. is a leading solar EPC company based in Ahmedabad, India. The company started in 2013 with focus on the commercial & industrial segments, and gradually expanded to larger contracts catering towards the utilities segment. Today they have an installed capacity of 1 GW across multiple projects. They have executed projects for 200+ companies, including marquee clients such as Ashok Leyland, Pidilite Industries, Mahindra CIE, Indian Oil, Hinduja Renewables, JSW, GHCL and many more.

About Alchemie Ventures

Alchemie Ventures is the family office arm of Mr. Chandrakant Gogri – the Founder & Chairman Emeritus of Aarti group of Industries. Alchemie Ventures invests selectively in high growth and cash flow-positive companies, currently focused on investments that drive climate change technologies.

About InCorp Advisory

InCorp Advisory is a Singapore-based professional service business with 1500+ professionals operating from across the Asia Pacific. In India, InCorp Advisory offers Transaction Advisory, Investment Banking, Corporate Restructuring, CFO Outsourcing, Compliance, Taxation, and ESG Advisory through offices in Mumbai, Bangaluru, Chennai, and GIFT City.

Need help with navigating the rules and regulations in Gift City?

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In this blog, we will explore the key features and potential of GIFT City as India’s upcoming economic and financial hub.

1. Integrated Ecosystem and Infrastructure:

Spanning over 886 acres, GIFT City offers a holistic and self-sustaining environment for businesses and residents. The city comprises a Central Business District (CBD), a Special Economic Zone (SEZ), and a Domestic Tariff Area (DTA). The SEZ provides tax incentives, streamlined regulations, and facilities for international trade, while the DTA encourages domestic businesses to thrive within a well-regulated framework. With 67% of the built-up area dedicated to commercial spaces, GIFT City fosters a vibrant business ecosystem.

2. Single Regulator- International Financial Services Centers (IFSCs):

GIFT City is home to India’s first International Financial Services Centers (IFSCs). These IFSCs operate under the supervision of the International Financial Services Centers Authority (IFSCA), which acts as a single regulator. The IFSCA promotes innovation, growth, and regulation of financial products, services, and institutions within GIFT City. This regulatory framework provides a secure and conducive environment for financial institutions, attracting major players from both domestic and international markets.

3. Strategic Location and Connectivity:

Situated between Gandhinagar and Ahmedabad, GIFT City benefits from its prime location in Gujarat. It offers excellent connectivity through airports, highways, and railways, facilitating easy access for businesses and professionals. The city’s strategic position as a gateway to international markets positions it as an attractive destination for global investors and businesses looking to expand their operations in India.

Related Read: What is the Place Of Effective Management (POEM) under the Income Tax Act?

4. NSE IFSC-SGX Connect:

The NSE IFSC-SGX Connect is an agreement between Singapore Exchange Limited (SGX) and the NSE’s subsidiary in GIFT City. Under this collaboration, the NSE-IFSC order matching and trading platform processes all orders on NIFTY futures made by Singapore Exchange members. The Connect is expected to enhance market liquidity for derivative trading in GIFT City, attract more foreign investors, and contribute to the overall growth and development of the local financial ecosystem.

5. Technology and Innovation:

GIFT City places a strong emphasis on technology and innovation. The city is equipped with state-of-the-art infrastructure, including advanced telecommunications and information technology systems. This enables businesses to leverage cutting-edge technologies such as artificial intelligence, blockchain, and fintech solutions to drive efficiency, productivity, and competitiveness.

6. Regulatory Flexibility:

The regulatory framework of GIFT City offers flexibility and adaptability to meet the evolving needs of businesses. The IFSCA, as the single regulator, adopts a proactive approach to understand industry requirements and implements regulatory changes efficiently. This enables businesses to navigate the regulatory landscape smoothly and encourages experimentation and innovation within a controlled environment.

7. Vibrant Business Community:

GIFT City aims to foster a vibrant and collaborative business community. The city organizes networking events, conferences, and seminars that bring together industry experts, entrepreneurs, and investors. These platforms facilitate knowledge sharing, idea generation, and business collaborations, creating a dynamic ecosystem that drives innovation and growth.

8. Sustainability and Green Initiatives:

GIFT City is committed to sustainability and eco-friendly practices. The city incorporates green building designs, renewable energy sources, waste management systems, and efficient water conservation measures. By prioritizing environmental sustainability, GIFT City not only contributes to a healthier environment but also attracts environmentally conscious businesses and investors.

9. Global Connectivity:

GIFT City is designed to have strong global connectivity. It aims to establish direct connectivity with international financial centers, enabling seamless cross-border transactions and fostering international collaborations. The city’s connectivity initiatives, such as the NSE IFSC-SGX Connect, enhance its position as a global financial hub and facilitate trade and investment opportunities.

Related Read: Note On One-Time Restructuring Of Loans

10. Miscellaneous Requirements:

The government of India provides strong support to GIFT City, recognizing its potential to drive economic growth and attract foreign investments. Various policy measures, tax incentives, and regulatory reforms are in place to encourage businesses to establish a presence in GIFT City. This support from the government further strengthens the city’s position as a preferred destination for financial and technological services.

Conclusion

GIFT City is a transformative initiative that aims to position India as a global economic and financial powerhouse. With its integrated ecosystem, regulatory support, and strategic location, GIFT City offers businesses a competitive edge and investors an attractive destination for growth. The city’s emphasis on innovation, connectivity, and social infrastructure sets the stage for its future success. As GIFT City continues to evolve and expand, it will play a crucial role in India’s economic development and serve as a beacon of opportunity for both domestic and international stakeholders.

Need help with navigating the rules and regulations in GIFT City?

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Introduction

SEBI had mandated top 1,000 listed entities (by market capitalisation) to file BRSR (“extant BRSR”) as part of the Annual Report with SEBI from FY 2022-23 onwards. In February 2023, SEBI issued a consultation paper to widen the periphery of ESG disclosures and proposed phased manner of applicability of BRSR Core, value chain disclosure and assurance thereof.

SEBI through a notification dated 14 June 2023 amended the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 (Listing Regulations) to introduce the BRSR Core and BRSR Core for a company’s value chain. Subsequently, on 12 July 2023, SEBI issued the framework (“the framework”) prescribing the disclosure and assurance requirements for BRSR Core, ESG disclosures for value chain, and assurance requirements.

In the sections below, we intend to give our synopsis on the framework as issued by SEBI vide Circular no. SEBI/HO/CFD/CFD-SEC-2/P/CIR/2023/122 dated 12 July 2023).

The framework enumerates disclosure requirements and assurance applicability in a glide path and can be divided into THREE categories:

• BRSR Core (sub-set of extant BRSR)
• Updated BRSR (extant BRSR + BRSR Core)
• BRSR Core for Value Chain (Cumulatively comprising 75% of its purchases / sales (by value) by the top upstream and downstream value chain partners of a listed entity)

* Reporting may be segregated for upstream and downstream partners or can be reported on an aggregate basis
* Scope of reporting and any assumptions or estimates, if any, should be clearly disclosed

Nine Attributes Of BRSR Core

Changes In The Extant BRSR To Incorporate BRSR Core KPIs

* New Insertion in Essential Indicator (N)
* Transposition from Leadership to Essential Indicator (T)

Criteria When Selecting BRSR Core Assurance Provider

Expertise: The listed entity’s Board should confirm that the chosen assurance provider for the BRSR Core possesses the necessary competence to execute reasonable assurance.

No Conflict of Interest: The listed entity needs to ascertain that there’s no conflict of interest with the selected assurance provider in charge of assuring the BRSR Core disclosures.

For example, the entity must ensure that neither the assurance provider nor any of its affiliates market their products or offer non-audit/non-assurance services, such as consulting, to the listed entity or its group companies.

Conclusion

An important feature of the circular is its focus on inclusion of value chain disclosures. Though this will contribute to a comprehensive assessment of a company’s environmental, social, and governance impact, this approach significantly increases the burden of compliance, as integrating sustainability policies within the supply chain becomes a complex and laborious task. The responsibility for reporting still lies with the listed entity. However, the circular encourages value chain partners to align with the company’s sustainability policies, as they risk losing business from the listed entities if they don’t comply.

Why Choose InCorp?

InCorp Advisory provides a complete ecosystem and support for your BRSR needs. Our team of experts conducts a 360-degree assessment to identify and highlight potential risks and opportunities which can arise with BRSR reporting. Our clients range from listed companies to investors as we help them not only improve their ESG reports but also help create valuable investments.

FAQs

Have you started collecting your BRSR data yet?

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Entrepreneurs can maximise the advantages of GIFT City IFSC and build a solid base for their commercial activities by skilfully navigating the legal system.

A Step-By-Step Overview Of The Legal Requirements And Processes Involved In Establishing A Business In GIFT City IFSC.

1. Business Structure and Registration:

Determining the appropriate legal structure for your business, such as a company, limited liability partnership (LLP), or branch office, is the first step. Registering the business entity with the appropriate regulatory authority, such as the Registrar of Companies (RoC) or the Limited Liability Partnership Registrar, is essential to establish its legal existence.

2. Reserve a Name:

Choosing a unique name for your business is crucial for brand identity. You can check the availability of your proposed name through the online name reservation system provided by the Ministry of Corporate Affairs (MCA). It is important to ensure that the proposed name complies with the guidelines specified by the MCA.

3. Obtaining Prior permissions /Approvals:

Identify the specific type of financial services you intend to provide within GIFT City IFSC and seek the necessary approvals from the relevant regulatory bodies governing those services. For example, banking services require prior approval from the Reserve Bank of India (‘RBI’), while insurance-related activities necessitate approval from the Insurance Regulatory and Development Authority of India (IRDAI).

4. Charter Documents:

Drafting the charter documents like MoA and AoA, partnership deed, Trust deed etc is crucial to define the scope of activities, rights, and obligations of the company and its shareholders. Ensure compliance with the Companies Act, 2013, and any other relevant regulations governing your business.

5. Base Minimum Capital Requirement:

Determine the minimum capital requirement based on the type of financial services you intend to provide. It is important to fulfill the capital infusion requirements before commencing operations to comply with the regulations.

6. Obtaining Necessary approvals:

Depending on the specific activities you plan to undertake within GIFT City IFSC, you will need to apply for licenses and permits from regulatory authorities. These licenses may include those related to securities, insurance, banking, fund management, and other financial services.

7. Periodic Compliance with regulatory authorities:

Complying with the regulations and guidelines set forth by regulatory authorities such as the Securities and Exchange Board of India (SEBI), RBI, IRDAI, etc., is crucial for the smooth operation of your business. Establish robust compliance systems and procedures to ensure adherence to legal and regulatory requirements.

8. Accounting, Taxation and Transfer Pricing:

Understanding the taxation framework applicable to businesses operating within GIFT City IFSC, including direct and indirect taxes, is extremely essential. Compliance with transfer pricing regulations is also necessary if your business engages in cross-border transactions with related entities. IFSC entities enjoy where exemption/relaxation from stringent provisions under various tax laws.

9. Employment and Labor Laws:

Familiarize yourself with the employment and labour laws in India, including those related to hiring, contracts, wages, social security, etc. Ensure compliance with applicable labour laws and maintain necessary documentation to safeguard your business interests and protect the rights of your employees.

10. Miscellaneous Requirements:

Complying with other regulatory obligations, such as data protection, intellectual property, anti-money laundering (AML), and know your customer (KYC) requirements, is vital. These measures help ensure the integrity of your business operations and maintain the trust of your stakeholders.

Conclusion

Establishing a business in GIFT City IFSC requires careful attention to legal requirements. From registering the business entity and obtaining necessary approvals to compliance with regulatory authorities, taxation, and labour laws, entrepreneurs must navigate various aspects to ensure a successful operation. By adhering to the legal framework and fulfilling obligations, businesses can leverage the advantages of GIFT City IFSC and thrive within this dedicated financial hub. Seeking professional guidance is crucial for a smooth and compliant setup in GIFT City IFSC.

Why Choose InCorp?

At In. Corp, our team will help you with setting up IFSC units in GIFT and other services at GIFT City:

Setting up IFSC entities at GIFT City, Gujarat: Incorp can help to setup IFSC units at GIFT City within the regulatory framework. These includes selection of appropriate structure, incorporation of the entity, services from identification of office space to incorporation of units and advice on different services offered by IFSCA Authority.

Obtaining SEZ & IFSCA approvals: Incorp will liaison with SEZ & IFSCA Authority for applying, preparing documentation required, obtaining necessary licenses to operate from GIFT City as IFSC unit.

Other regulatory compliances: Incorp will assist you to obtain various initial registrations under Income Tax Act, GST Law, IEC, RCMC etc. and can provide assistance in the various regulatory compliance.

FAQs

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In order to capitalise on India’s potential in the international financial services sector, the entity may undertake following steps to incorporate their business in GIFT City.

Brief Process:

The procedure for establishing IFSC Unit in GIFT City is as follow:

Steps To Incorporate Your Business In GIFT City IFSC

If you are considering establishing an IFSC unit in GIFT City, this guide will walk you through the process step-by-step.

Step 1: Identification Of Suitable Office Space In GIFT SEZ

The initial step involves identifying and selecting office space within the GIFT SEZ. This includes entering into an agreement with the developer or co-developer of GIFT SEZ. The chosen office space will serve as the location for establishing your business operations within the SEZ.

Step 2: Obtain Provisional Letter of Allotment (PLOA)

After finalizing the agreement with the developer, it is necessary to obtain a Provisional Letter of Allotment (PLOA). This letter officially confirms the allocation of the chosen office space within the GIFT SEZ for your entity. The PLOA serves as a crucial document for initiating the establishment of your business operations in the SEZ.

Step 3: Application In FORM F To SEZ Authorities

The entity needs to prepare and submit FORM F along with the following annexures:

• Demand Draft of Rs 5,000/-
• Provisional Letter of Allotment issued by the Co-Developer.
• Detailed Project Report, including projections for the next five years.
• Entity ID documents such as License, PAN Card, IEC Code, etc.
• Self-certified copies of Memorandum of Association and Articles of Association.
• Self-certified copies of Board Resolution for setting up an office in GIFT IFSC.
• Certificate of Incorporation.
• List of Directors with their identity proofs.
• Last 3 years’ audited financial statements and IT returns of the entity or directors.
• Brief presentation covering the entity profile and scope of activities in GIFT IFSC.
• AFFIDAVIT

Prepare three sets of the above documents and submit them as follows:

• Original set to the Office of the Development Commissioner.
• Second set to the developer (GIFT SEZ) to facilitate the submission of NOC from the developer to the Office of the Development Commissioner.
• Third set for the entity itself.

Step 4: Unit Approval Committee (UAC) Meeting

The Development Commissioner will contact the entity for a meeting with the Unit Approval Committee (UAC) after receiving the FORM F. During the hearing, the entity’s authorised representative will present the case on their behalf.

Step 5: Letter of Permission / Approval (LOA)

The Development Commissioner will give the entity a Letter of Permission / Approval (LOA) if the UAC is pleased with the entity’s presentation.

Step 6: Letter Of Acceptance

Within 45 days of the LOA’s issuance, the entity must deliver a Letter of Acceptance to the Development Commissioner expressing acceptance of the LOA’s terms and conditions.

Step 7: Execution of Lease Deed

The entity must sign a lease deed with the co-developer of GIFT SEZ within six months of getting the LOA and submit it to the Development Commissioner.

Step 8: SEZ License and Registration with NSDL Portal

After the issuance of the SEZ License, the entity needs to obtain registration with the NSDL portal for SEZ Online Registration. This registration allows for reporting and other services related to import, procurement, and services.

Step 9: Bond Cum Legal Undertaking

The organisation must prepare and sign a Bond Cum Legal Undertaking with the Development Commissioner and GIFT SEZ’s Specified Officer before submitting it.

Step 10: Obtain Registration Certificates and Exemption Eligibility

The entity must proceed to obtain various registration certificates such as GST, RCMC, IEC, etc. Additionally, it should apply for eligibility certificates for exemption from various taxes from the Central and State Government.

Step 11: Registration with IFSCA

Before commencing business operations, the entity must obtain a Certificate of Registration from the International Financial Services Centres Authorities (IFSCA). The entity should prepare and submit an application along with the required fees to the IFSCA.

Step 12: Commencement of Business Operations

After completing all the necessary steps, the entity becomes eligible to commence its business operations (export of services). It is mandatory to inform the Office of the Development Commissioner about the date of the first export of services through an application titled “Commencement of business operations” and provide supporting evidence such as a tax invoice. A copy of the application should also be marked to the GIFT SEZ developer.

Conclusion

In conclusion, thorough adherence to the recommended measures and compliance with regulatory criteria are required when opening an office in the GIFT SEZ. Businesses may successfully navigate the procedure and take advantage of the opportunities and benefits offered within the GIFT SEZ by following this thorough guidance. This strategic step lays the way for success and development in a dynamic corporate ecosystem and aids India’s expansion in the field of international financial services.

Why Choose InCorp?

At Incorp, we understand the complexities of setting up an Insurance Intermediary Office in GIFT City IFSC. That’s why we offer specialized advisory services to guide you through the process, from initial planning to ongoing compliance. Our expertise can help your organization navigate international regulations and leverage the significant opportunities of GIFT City IFSC, such as access to global markets and a business-friendly environment.

Contact us today to learn how Incorp can assist in successfully establishing your Insurance Intermediary Office in this prestigious international financial center.

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