Documents to retain
- legal issue memo
- transaction chronology
- forms and acknowledgements
- amount/delay calculation
- remediation and bank/RBI correspondence
- orders, appeals and closure certificate
Why this matters
Contraventions by Companies and Officers is relevant for finance teams, compliance officers, company secretaries, lawyers and auditors. This guide explains the separate entity and individual liability analysis and converts the legal framework into a practical decision path.
The legal framework
- Substantive permission, reporting, late-submission fee, compounding and adjudication are different legal layers.
- A rejected or incomplete portal filing is not the same as completed reporting.
- Compounding requires an eligible admitted contravention and completion of necessary administrative action.
- Section 3(a), section 37A, non-quantifiable, post-adjudication and serious matters require special treatment and may be outside ordinary RBI compounding.
- Judicial reliance requires court hierarchy, direct FEMA versus historical FERA classification and appeal-status review.
- Section 42 contains person-in-charge and consent/connivance/neglect limbs.
- Designation alone should not replace evidence of responsibility.
- Delegation, compliance systems and reasonable diligence are relevant.
Step-by-step analysis
| Step | Control |
|---|---|
| 1 | Identify the transaction and controlling legal instrument. |
| 2 | Separate substantive breach from reporting delay. |
| 3 | Quantify amount, delay and continuing element. |
| 4 | Complete administrative action and seriousness screening. |
| 5 | Choose LSF, RBI compounding, ED/adjudication or appeal route. |
| 6 | Close evidence, remediate controls and monitor recurrence. |
Practical example
A non-executive director had no operational role but was included in the notice. Governance and meeting records help define the position.
Common mistakes
- assuming LSF cures illegality
- compounding before administrative action
- ignoring investigation or repeat breach
- missing appeal deadlines
- quoting cases without official text or status
Questions and answers
What is the first question in Contraventions by Companies and Officers?
Identify the person, transaction date and exact legal event before applying a limit or form.
Does bank or portal acceptance prove FEMA compliance?
No. Operational acceptance does not cure an impermissible underlying transaction.
What evidence should be retained?
Keep the legal-source note, transaction documents, bank trail, valuation/approval where relevant, filing acknowledgement and closure evidence.
When should the analysis be refreshed?
Refresh it when residence, ownership, control, amount, activity, instrument terms or law changes.
Finin2min summary
Do not begin with a form, portal or commercial label. Identify the person, purpose, instrument and transaction date; confirm the substantive route; complete payment, reporting and evidence; and refresh the analysis when facts or law change.
Official sources
- Foreign Exchange Management Act, 1999 - Operative - consolidation as on 1 June 2026
- Master Direction - Reporting under FEMA - Current through 24 June 2026
- Master Directions - Compounding of Contraventions under FEMA - Current through 24 April 2025
- Directorate of Enforcement - FEMA materials - Official legal-material source
- Appellate Tribunal under SAFEMA - FEMA jurisdiction - Current institutional source
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