FEMA Advisory & Compliance Audit

A FEMA compliance audit reviews an entity's foreign-exchange transactions against the reporting and structural requirements of the Foreign Exchange Management Act, 1999 ("FEMA") and its rules, to identify contraventions before they are picked up in an RBI inspection or bank due-diligence review.

Where the entity has received foreign direct investment, the audit checks compliance with the Foreign Exchange Management (Non-Debt Instruments) Rules, 2019, including timely filing of Form FC-GPR on allotment of shares to a non-resident (within 30 days, Rule 9(2)) at a price not below fair value (Rule 21), and Form FC-TRS on transfer of shares between resident and non-resident (within 60 days, Rule 4).

Where the entity has made an overseas investment, the audit checks compliance with the Foreign Exchange Management (Overseas Investment) Rules, 2022, including Form OI reporting within 30 days of investment, the Annual Performance Report (APR) due by 31 December each year, and the 400% of net-worth ceiling on total financial commitment without prior RBI approval.

Where a contravention is identified — a missed filing, delayed reporting, or a structural breach — the audit assesses exposure under section 13 of FEMA (penalty of up to three times the amount involved) and advises on regularisation through the compounding mechanism under section 15, which involves an application to the RBI, a compounding order typically issued within a defined window, and payment of the compounding fee within 15 days of that order.

Deliverables include a contravention/gap register, a remediation and regularisation roadmap (including compounding applications where required), and updated internal FEMA compliance checklists for ongoing monitoring.

FEMA advisory and compliance audit is the systematic examination of a company's foreign exchange transactions against the Foreign Exchange Management Act 1999 and its regulations — the check that finds the contraventions before the RBI, the auditor or an acquirer does. The audit covers foreign investment and its reporting, overseas investments and the APR/FLA returns, external commercial borrowings, export proceeds realisation, the establishment and operations of foreign offices, and the routine cross-border payments and receipts. Section 6 of FEMA 1999 anchors the RBI's regulatory power; the regulations under it set the conditions the audit tests.

The audit is the map of the company's FEMA exposure. Every transaction class has its compliance points — the forms, the timelines, the pricing, the permitted channels — and the audit checks each: the FC-GPR filed on time for each share issue, the export proceeds realised within the period, the ECB registered with its LRN, the foreign offices reported. The output is a findings report that ranks the contraventions and the fixes.

The cost of an undiscovered contravention is the FEMA penalty framework at the moment of discovery — at an RBI interaction, an audit, or an M&A due-diligence where the acquirer's FEMA counsel runs the same check the company never ran. An acquirer's diligence that finds unreported FDI or unregistered borrowings reprices the deal by exactly the exposure found.

This service is for companies with cross-border activity that want their FEMA position examined and clean. We audit the transactions and reporting under FEMA 1999 and the regulations, document the findings and the contraventions, implement the fixes — the missing filings, the regularisation routes — and advise on the transactions ahead, so the FEMA exposure is known, small and managed.