presentation

Corporate Law

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Foreign Exchange Management Act 1999.

Presented By:-
Hemangi Patil

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Introduction
An Act to consolidate and amend the law relating to
foreign exchange with the objective of facilitating
external trade and payments and for promoting the
orderly development and maintenance of foreign
exchange market in India.

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Structure:
FEMA is administered by means of Notifications/ Circulars/ Clarifications/ Rules issued by RBI/
Government.

Section 2 Definitions

Regulation & Management of

Section 3 - 9
Foreign Exchange

Provisions relating to
Section 2(c) & 10 - 12
Authorised Persons

Section 13 - 15 Contravention & Penalty

Section 16 - 35 Adjudication & Appeals

Section 36 - 38 Enforcement Directorate

Section 39 - 49 Miscellaneous

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Objectives:

objectives

Facilitating promoting

Ordinary development

Orderly maintenance
Externa l trade

External payme nt FE market In India

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Extent & Application of FEMA (Section 1)

 It extends to the whole of India.

 It shall also apply to all branches, offices and agencies outside
India owned or controlled by a person resident in India and.
 Any contravention committed outside India by any person to
whom this Act applies.

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Important Definations
 Foreign exchange (“Forex”) – Sec 2(n) means
◦ Foreign currency
◦ Credit card
◦ Deposits, credits and balances in foreign currency
◦ Drafts, traveler's cheques, LOC, BOE expressed/ drawn in Indian
currency but payable in foreign currency
◦ Drafts, traveler’s cheques, LOC, BOE drawn by non-resident but
payable in Indian currency
 Person – Sec 2(u) includes
◦ Individual, HUF, Firm, Company, AOP/ BOI, Artificial juridical person
◦ The term includes any agency, office or branch owned/ controlled by
such person
 Person resident outside India (“PROI”) – Sec 2(w)
◦ Any person other than a person resident in India

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Person resident in India (“PRII”) – Sec 2(v)Individual who stays in India for more
than 182 days during the previous financial year:

a) Employment outside India

Gone out of b) Carrying on business/ vocation outside
India or stays India PROI
Outside India c) Other purpose with an intention to stay
for outside for an uncertain period

Any other purpose - PRII

Comes to
India or stays a) Employment in India
in India b) Carrying on business/ vocation in India PRII
for c) Other purpose for an uncertain period

Any other purpose - PROI

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 Firm/ body corporate/ AOP/ BOI
◦ Registered or incorporated in India – PRII
◦ Registered or incorporated outside India – PROI
 Agency/ office/ branch
◦ In India – PRII
◦ Outside India
 Owned/ controlled by resident in India – PRII
 Owned/ controlled by resident outside India – PROI
 Currency – Sec 2(h) includes
◦ Currency notes, money order, cheques, DD, instruments, traveler's cheques, letter of
credit, credit cards, BOE, promissory notes
◦ The term includes debit cards and ATM cards
 Authorised Person – Sec 2(c)
◦ Means an AD, money changer, offshore banking unit or any other person authorized
under Sec 10(1) to deal in forex or foreign securities

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 Repatriate to India – Sec 2(y)
◦ Means bringing into India the realised foreign exchange and
 The selling of such foreign exchange to an authorized person in India
in exchange for rupees
 The holding of realised amount in an account with an authorized
person in India to the extent notified by the Reserve Bank
◦ Includes use of the realised amount for discharge of a debt or liability
denominated in foreign exchange

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Provisions:
The main provision of the Act are as follows:
 Section 3: Dealing in Foreign Exchange

 Section 4 Holding of foreign Exchange

 Section 5 Current account Transaction

 Section 6 : Capital account Transaction

 Section 7: Export of Goods and Services

 Section 8 : Relisation of Repatriation and Foreign Exchange

 Section 9: Exemption from Resalisation and Repatriation

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Regulation & Management:
The Reserve Bank can, by regulations, prohibit, restrict
or regulate the following :-
 Transfer or issue of any foreign security by a person resident in India;

 Transfer or issue of any security by a person resident outside India;

 Transfer or issue of any security or foreign security by any branch, office or

agency in India of a person resident outside India;

 Any borrowing or lending in foreign exchange in whatever form or by

whatever name called;

 Any borrowing or tending in rupees in whatever form or by whatever name

called between a person resident in India and a person resident outside India;

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Regulation & Management:
 deposits between persons resident in India and persons resident outside
India;
 export, import or holding of currency or currency notes;

 transfer of immovable property outside India, other than a lease not

exceeding five years, by a person resident in India;

 acquisition or transfer of immovable property in India, other than a lease

not exceeding five years, by a person resident outside India;

 giving of a guarantee or surety in respect of any debt, obligation or other

liability incurred
(i) by a person resident in India and owed to a person resident outside India
or
(ii) by a person resident outside India.

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Conversion from FERA TO FEMA
 The Foreign Exchange Regulation Act of 1973 (FERA) in India was
repealed on 1 June, 2000. It was replaced by the Foreign Exchange
Management Act (FEMA), which was passed in the winter session of
Parliament in 1999. Enacted in 1973, in the backdrop of acute shortage of
Foreign Exchange in the country.

 FEMA, which has replaced FERA, had become the need of the hour since
FERA had become incompatible with the pro-liberalisation policies of the
Government of India. FEMA has brought a new management regime of
Foreign Exchange consistent with the emerging frame work of the World
Trade .

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