CS Knowledge Platform-Ravi Garg: Procedure of Transfer of shares form Resident to Non Resident:

Checklist for Transfer of shares form Resident to Non Resident:

Please find the below compliances:-

1. Pass Board Resolution for transfer of share from Resident to Non Resident.

2. after receiving fund please intimate to AD Bank for the same in prescribed format provided by the bank.

3. send request letter to AD bank for FIRC copy.

4. file FCTRS with in 60 days to AD Bank.

Enclosure required with FCTRS:-

1. CA Certificate /Valuation report

2. buyers and seller consent

3. debit authority letter

4. declaration from buyer

5. other documents required for as per ban

Retention of Amount in Foreign Currency Account :

Indian companies which are eligible to issue shares to persons resident outside India under the FDI Policy may be allowed to retain the share subscription amount in a Foreign Currency Account, with the prior approval of RBI.

A. Procedure of Transfer of shares form Resident to Non Resident:

Subject to FDI sectoral policy (relating to sectoral caps and entry routes), applicable laws and other conditionalities including security conditions, non-resident investors can also invest in Indian Companies.

By purchasing/acquiring existing shares from Indian shareholders.
By purchasing/acquiring existing shares from other non-resident Shareholders

Condition:
General permission has been granted to non-residents/NRIs for acquisition of shares by way of transfer subject to the following:-

i. Transfer from Non- Resident to another Non- Resident: A person resident outside India (other than NRI and erstwhile OCB) may transfer by way of sale or gift, the shares or convertible debentures to any person resident outside India (including NRIs).

Without Government Approval: Government approval is not required in sectors which are under automatic route.
Without Government Approval: Government approval is required in which are under Government approval route.

Other Situations:

NRIs may transfer by way of sale or gift the shares or convertible debentures held by them to another NRI.
A person resident outside India can transfer any security to a person resident in India by way of gift. A person resident outside India can sell the shares and convertible debentures of an Indian company on a recognized Stock Exchange in India through a stock broker registered with stock exchange or a merchant banker registered with SEBI.

ii. Transfer from Resident to Non- Resident:

A person resident in India can transfer by way of sale, shares/ convertible debentures (including transfer of subscriber’s shares), of an Indian company under private arrangement to a person resident outside India, subject to the guidelines given in para 5.2 and Section 1 of this Annexure of FDI Policy (Discussed below in detail).

General Permission:

General permission is also available for transfer of shares/convertible debentures, by way of sale under private arrangement by a person resident outside India to a person resident in India, subject to the guidelines given in para 5.2 and Section 1 of this Annexure.

The above General Permission also covers transfer by a resident to a non-resident of shares/convertible debentures of an Indian company, engaged in an activity earlier covered under the Government Route but now falling under Automatic Route, as well as transfer of shares by a non-resident to an Indian company under buyback and/or capital reduction scheme of the company.

Sale Consideration: The sale consideration in respect of equity instruments purchased by a person resident outside India, remitted into India through normal banking channels, shall be subjected to a Know Your Customer (KYC) check by the remittance receiving AD Category-I bank at the time of receipt of funds. In case, the remittance receiving AD Category-I bank is different from the AD Category-I bank handling the transfer transaction, the KYC check should be carried out by the remittance receiving bank and the KYC report be submitted by the customer to the AD Category-I bank carrying out the transaction along with the Form FC-TRS.

B. Terms and conditions

For Transfer of Shares/Convertible Debentures, by way of Sale, from a Person Resident in India to a Person Resident outside India (i.e. to foreign national, NRI, FII, FPI and incorporated non-resident entity other than erstwhile OCB):

i. Parties Involved:

Seller (resident)
Buyer (non-resident)
Duly authorized agent/s of the seller and/or buyer,
Authorized Dealer bank (AD) branch
Indian company, for recording the transfer of ownership in its books

ii. Pricing Guidelines:

Price of shares transferred by way of sale by resident to a non-resident where the shares of an Indian company are:-

Listed: – Listed on a recognized stock exchange in India shall not be less than the price at which the preferential allotment of shares can be made under the SEBI guidelines. Condition: the same is determined for such duration as specified therein, preceding the relevant date, which shall be the date of purchase or sale of shares

Non- Listed: – Not Listed on a recognized stock exchange in India shall not be less than the fair value to be determined by a SEBI registered Merchant Banker or a Chartered Accountant as per any internationally accepted pricing methodology on arm’s length basis.

Condition: The price per share arrived at should be certified by a SEBI registered Merchant Banker or a Chartered Accountant

iii. Responsibilities / Obligations of the parties: All the parties involved in the transaction would have the responsibility to ensure that

the relevant regulations under FEMA are complied with and
Consequent on transfer of shares, the relevant individual limit/sectoral caps/foreign equity participation ceilings as fixed by Government are not breached.
Settlement of transactions will be subject to payment of applicable taxes, if any.

iv. Method of payment and remittance/credit of sale proceeds :

Non Resident: The sale consideration in respect of the shares purchased by a person resident outside India shall be remitted to India through normal banking channels.

FII & FPI: In case the buyer is a FII,FPI, payment should be made by debit to its Special Non-Resident Rupee Account.

NRI: In case the buyer is a NRI, the payment may be made by way of debit to his NRE/FCNR (B) accounts.

However, if the shares are acquired on non-repatriation basis by NRI, the consideration shall be remitted to India through normal banking channel or paid out of funds held in NRE/FCNR (B)/NRO accounts.