Written by Foreign investment brings several reporting and compliance responsibilities for Indian companies. One important requirement is the filing of the Annual Return on Foreign Liabilities and Assets, commonly known as the FLA Return. Companies that have received foreign direct investment (FDI) or made direct investment outside India may need to report their foreign assets and liabilities to the Reserve Bank of India (RBI).
The annual FLA Return is generally required to be submitted by July 15 for the relevant reporting year. RBI guidance states that the return is submitted through its online reporting system.
However, businesses sometimes miss the filing deadline because of changes in management, incomplete records, lack of awareness, restructuring, or other administrative reasons. When several years have been missed, the company needs to review its historical compliance and take appropriate steps to regularize the pending filings.
This guide explains the important considerations involved in Catching Up on Years of Missed FLA Returns.
What Is an FLA Return?
The FLA Return is an annual reporting requirement related to an Indian company’s foreign liabilities and assets. It provides information about foreign investment received by an Indian company and, where applicable, investments made by the company outside India.
The return is intended to provide the RBI with information relating to India’s international investment position and foreign investment-related statistics.
Companies should not treat the FLA Return as a one-time filing. Where the reporting conditions continue to apply, the requirement generally arises every year.
Who Needs to File an FLA Return?
Indian companies that have received FDI and/or made direct investment abroad may fall within the scope of FLA reporting. RBI materials specifically state that entities with FDI or overseas direct investment are required to submit the annual return.
The requirement should be assessed based on the company’s investment structure and the applicable RBI/FEMA reporting framework for the relevant financial year.
Examples may include:
- Indian companies with foreign shareholders
- Companies that have received equity investment from overseas investors
- Indian companies that have established or invested in an overseas entity
- Businesses with reportable foreign assets or liabilities
- Companies that previously had foreign investment but have outstanding historical reporting obligations
Because the applicability can depend on the facts of a particular company, businesses should review their investment and reporting history before deciding whether a particular year’s filing is required.
Why Do Companies Miss FLA Return Filing?
There can be several reasons why an FLA Return is not filed on time. Some companies may not realize that foreign investment creates an annual reporting obligation. Others may have undergone changes in accountants, directors, finance teams, or professional advisers.
Common reasons include:
1. Lack of Awareness
A company may receive foreign investment but fail to understand that annual FLA reporting is separate from other corporate and tax filings.
2. Changes in Management
When accounting or compliance responsibilities move between teams, historical RBI filings can sometimes be overlooked.
3. Incomplete Historical Records
Old financial statements, shareholding information, foreign investment documents, or overseas investment records may not be readily available.
4. Business Restructuring
Mergers, changes in shareholding, conversion of entities, or changes in overseas investments can make historical reporting more complicated.
5. Administrative Oversight
Even companies with otherwise strong compliance systems can occasionally miss a reporting deadline.
What Does Catching Up on Years of Missed FLA Returns Involve?
Catching Up on Years of Missed FLA Returns requires more than simply completing the latest return. The company should first determine which financial years are pending and collect the information required for each relevant year.
A structured approach can make the process easier.
Step 1: Identify the Missing Years
Start by reviewing the company’s FLA filing history and identifying the financial years for which returns were not submitted.
The company should create a year-wise compliance tracker showing:
- Financial year
- Foreign investment position
- Foreign assets and liabilities
- Whether an FLA Return was filed
- Available supporting records
- Pending action
Step 2: Review Foreign Investment Records
Historical documents should be collected and reviewed. These may include share allotment records, foreign investment details, financial statements, overseas investment documents, and other relevant records.
The objective is to establish an accurate picture of the company’s foreign liabilities and assets for each applicable year.
Step 3: Reconcile Financial Information
The figures reported in the FLA Return should be consistent with the company’s underlying financial records.
Historical balance sheets, profit and loss statements, investment records, shareholding information, and other relevant financial data may need to be reviewed before preparing the return.
This reconciliation is particularly important when multiple years are being addressed together.
Step 4: Check the Applicable RBI Reporting Process
The FLA Return is submitted through the RBI’s online reporting platform. RBI guidance provides for online submission of the annual FLA Return and directs entities to the relevant user manuals for the filing process.
The company should check the current RBI process and applicable requirements before submitting historical returns because reporting procedures and regulatory requirements can change over time.
Step 5: Address Delayed Compliance
Missed filings should not simply be ignored. The company should determine the appropriate process for dealing with its outstanding reporting obligations based on the circumstances and applicable FEMA/RBI requirements.
Where there are complex historical issues, professional assistance can help the company identify the relevant compliance route and prepare the necessary information.
Documents and Information Required
Preparing historical FLA Returns may require information from several sources.
Important records can include:
- Audited financial statements
- Balance sheets and profit and loss statements
- Details of foreign shareholders
- Shareholding and capital structure records
- FDI-related documentation
- Overseas investment details
- Details of foreign assets and liabilities
- Previous RBI correspondence, where applicable
- Historical accounting records
- Relevant corporate and investment documents
Maintaining organized records can make future annual filings significantly easier.
Common Challenges in Historical FLA Filing
Historical filings can become difficult when records are incomplete. A company may have changed its accounting software, professional advisers, shareholders, or management team over the years.
Another challenge is ensuring that figures for different years are correctly matched with the financial position applicable to each reporting period.
Companies should therefore avoid copying figures from one year into another without reviewing the underlying records. Each return should be prepared based on the information applicable to that specific reporting period.
Can Professional Assistance Help?
Yes. Companies dealing with multiple years of pending FLA compliance may benefit from professional assistance, particularly where foreign investment structures or historical records are complicated.
A professional can assist with:
- Identifying pending reporting years
- Reviewing historical investment records
- Reconciling financial information
- Preparing relevant FLA data
- Reviewing filing requirements
- Supporting online filing procedures
- Maintaining a future compliance calendar
Businesses such as Companiesnext can also assist companies with broader accounting and compliance requirements while they work through their historical reporting obligations.
How to Avoid Missing Future FLA Deadlines
Once historical compliance has been addressed, companies should establish a simple annual compliance process.
A practical system can include:
- Maintaining an FLA compliance calendar.
- Assigning responsibility to a specific finance or compliance team.
- Keeping foreign investment records updated.
- Reviewing the company’s foreign assets and liabilities annually.
- Starting preparation well before the July deadline.
- Maintaining copies of submitted returns and supporting information.
- Reviewing changes in RBI and FEMA reporting requirements.
RBI guidance identifies July 15 as the annual deadline for the FLA Return, making advance preparation important for timely compliance.
Conclusion
FLA compliance is an important part of managing foreign investment-related reporting obligations in India. When a company discovers that several years of FLA Returns have been missed, the issue should be approached systematically rather than postponed further.
Catching Up on Years of Missed FLA Returns generally involves identifying the pending years, reviewing historical foreign investment information, reconciling financial records, preparing the required information, and following the applicable RBI reporting process.
Once the historical backlog has been addressed, maintaining a yearly compliance calendar and keeping investment records organized can help prevent similar issues in the future. Companies should also verify the current RBI requirements applicable to their specific circumstances before completing historical filings.