January 14, 2021 In Consultancy, Corporate Law

The Foreign Contribution (Regulation) Amendment Act 2020 – Brief Synopsis

Himanshu Goswami

The Foreign Contribution (Regulation) Amendment Act 2020 (“Amendment”) has been notified by the Government of India on 29th September 2020, to amend certain provisions of the Foreign Contribution (Regulation) Act 2010 (“Act”).

Key highlights of the Amendment:

  1. Prohibition on “public servant” from receiving foreign contributions

Section 3 of the Act lists out prohibited categories or persons who may not receive foreign contributions. The Amendment adds a “public servant”, i.e. a person who is employed by or on the payroll of the central or state government, or any government owned or controlled enterprise, to this list and consequently, a public servant is now also prohibited from receiving any foreign contribution.

  1. Prohibition on transfer of foreign contribution

The Amendment substitutes Section 7 of the Act completely, and consequently prohibits persons authorized to receive foreign contributions under the Act from transferring such foreign contributions to any person. ‘Persons’ includes any juristic entity like a society, trust, corporation, AOP etc. It is to be noted that pursuant to the Amendment, even a transfer to another person/entity that holds a valid registration under the Act, is prohibited. 

  1. Revising the cap on administrative expenses

The cap on defraying the Foreign contributions received has been lowered from 50% to 20% of the total foreign contributions received in a financial year. This appears to have been done to make more funds available for achieving the objective for which the registration was granted to such person or organization. 

  1. Opening of a designated FCRA account with State Bank of India, New Delhi

The Amendment modifies Section 17 of the Act by making it mandatory for all persons holding a registration under the Act to open a bank account with the State Bank of India, Sansad Marg, New Delhi, which account shall be designated as an FCRA account and shall be the sole account in which such persons/organization can receive the foreign contributions. A person holding a valid registration under the Act can thereafter, transfer funds received into this FCRA account, into another FCRA account maintained by it with a scheduled bank, including any existing accounts that such person maintained prior to the Amendment coming into force.

  • Power to prohibit a person holding registration/prior permission under the Act, from utilizing/receiving its funds

The Amendment now empowers the Government to direct that any person who has been granted registration/prior permission under the Act but has contravened any provisions of the Act, to not utilize the unutilized foreign contribution or seek any additional foreign contribution as the case may be without the prior approval of the Central Government.

  • Additional Identification requirements

Pursuant to the Amendment, the Central Government now has the power to seek identification documents by way of Aadhaar numbers of the principle office bearers and directors of the applicant. Where such individuals are not Indian citizens, the Government has the power to seek details of their Passports or overseas Citizens of India cards.

  • Period of suspension

Pursuant to the Amendment, the Central Government now has the powers to suspend the registration of any person under this Act, pending inquiry, for a period of up to 360 days, which is up from the earlier limit of 180 days. 

The foregoing is a brief synopsis of the salient features of the Amendment. It does not constitute legal advice. In the even you have any questions with regard to FCRA or the Amendment, please feel free to reach out to us at office@nglaw.in.

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