FEMA for inbound FDI: the thirty-day clock nobody tells founders about

Raising foreign capital into an Indian company is, legally, the easy part. The obligations that follow are procedural, strictly time-bound, and entirely unforgiving of the fact that nobody mentioned them at closing.

The sequence, in the order it bites

• On receipt. Funds must arrive through banking channels and the authorised dealer bank has to be given the KYC and remittance details. Get the Foreign Inward Remittance Certificate at this stage, not months later when your banker's relationship manager has changed.
• Allotment. Shares must be issued within the prescribed window from receipt of funds — a period counted in days, not quarters. Miss it and the money is refundable, which is a conversation no founder wants with a new investor.
• Reporting. Form FC-GPR is filed with the Reserve Bank through its reporting portal within thirty days of allotment. Thirty days of allotment, not of closing, not of the board meeting you held later to regularise it.
• Annually. The FLA return, covering foreign assets and liabilities, falls due each year once you have foreign investment on the books — including in years when nothing new happened.

What actually goes wrong

Rarely the law. Usually the paperwork: a valuation report that post-dates the allotment, a board resolution recorded after the shares were issued, a share certificate dated to suit the file, a bank that cannot locate the inward remittance because the purpose code was wrong.

Each of these is fixable at the time and expensive afterwards. Late filings attract a late submission fee, and while that is a manageable number, the real cost lands later — in diligence, where an unreported allotment becomes a condition precedent, an indemnity, or a delay at exactly the moment the founder has no leverage.

The sector question comes first

Before any of this, confirm the sector's entry route and whether any conditions or government approval apply, and whether the investor's country of origin triggers additional scrutiny. This is a five-minute check at term-sheet stage and a serious problem at closing.

A simple discipline

Keep one file per funding event containing the term sheet, the valuation report, the board and shareholder resolutions in date order, the FIRC, the allotment record and the filing acknowledgement. If those seven documents exist and their dates tell a coherent story, your next diligence on this round takes an afternoon. If they do not, it takes a month and costs you something at the negotiating table.

Two habits prevent nearly all of it. Put the reporting deadlines in the same calendar as your statutory dues, owned by a named person rather than by whoever helped last time. And commission the valuation before the board meets, not after — a report dated later than the allotment it supports is the commonest defect we see, and it is entirely avoidable.