Foreign Subscription Received but Shares Not Issued: The 60-Day FEMA Rule

Foreign subscription money can arrive before every closing condition is complete. If allotment is delayed, the company must manage both the compliance timetable and the possibility that the money needs to be returned.

Generic office building, illustrating business funding and planning

Image: Side of office building by Alanthebox; CC0 1.0. Unmodified, illustrative photograph.

The FEMA clock

Under Schedule I payment provisions in FEMA 395, equity instruments are generally issued within 60 days of receipt. If not issued, the consideration is refunded within 15 days after those 60 days. For partly paid shares, the 60-day period is reckoned from each call receipt.

This article concerns that Schedule I framework. Startup convertible notes and other categories need their own analysis. Companies Act allotment, use-of-money and refund requirements must also be checked separately.

Avoid spending before readiness

Keep a clear view of the amount that may need to be refunded. A planned supplier payment is not a reason to ignore an uncompleted issue. Before requesting the remittance, establish whether approvals, valuation, documentation and bank checks are sufficiently advanced.

A receipt-control checklist

  • Confirm investor name, amount and source account.
  • Record the actual receipt date and applicable timetable.
  • Reconcile currency conversion and subscription arithmetic.
  • Identify every remaining allotment condition.
  • Set an internal escalation date well before the statutory limit.
  • Agree the refund process with the authorised dealer if completion fails.

Use a calendar with responsible people and evidence. Do not depend on a single employee remembering the date from an email.

If the deadline is at risk

Bring the issue to the board, company secretary, counsel and authorised dealer promptly. Ask what can lawfully be completed and what needs to be returned or regularised. Do not backdate an allotment or assume that calling the amount an advance changes its true character.

An illustrative delay caused by a missing shareholder consent should be resolved through valid corporate action or the appropriate refund process. An informal agreement between promoter and investor cannot override an applicable statutory requirement.

Preserve the trail

Retain remittance evidence, approvals, allotment records or refund confirmation and the correspondence explaining the outcome. Where a breach has already occurred, assess it accurately. A later transaction does not automatically erase the earlier compliance issue.

Connect with Monei Matters

Discuss FDI receipt, allotment and refund documentation readiness with Monei Matters.

Monei Matters
B-9, Near City Centre Market, Ramprastha, Ghaziabad, Uttar Pradesh 201011
Phone: +91 93138 03227 / +91 93110 03227
Website: www.moneimatters.com

Services include business finance, working capital, commercial mortgage/LAP, lease rental discounting, debt syndication, restructuring, settlements, FDI advisory and equity syndication.

Disclaimer

General information based on sources reviewed for the position as at 10 September 2026; not transaction-specific legal, tax or investment advice. Illustrations are hypothetical. Applicable law, documents and lender or investor terms govern each case; funding and settlement outcomes are not guaranteed.

Sources

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