TaxTMI 
TaxTMI 
FEMA - Foreign Direct Investment in India - Transfer of Shares/Convertible Debentures by way of Sale - Simplification of Procedures
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....ncorporated non-resident entity other than erstwhile OCB, foreign nationals, NRI, Foreign Institutional Investor (FII),) require prior permission of the Government followed by approval from Reserve Bank. 2.2 On a review, and with a view to make the environment in India more attractive to foreign investors and also to simplify procedures, Government has decided to dispense with the requirement of obtaining prior approval of the Government (FIPB)in respect of transfer of shares/convertible debentures, by way of sale, from residents to non-residents (including transfer of subscriber's shares) of an Indian company in sectors other than financial service sector (i.e. Banks, NBFCs and Insurance) provided the following conditions are complied with: a. The activities of the investee company are under the automatic route under FDI policy (vide Annexure B to Schedule 1 to RBI Notification No. FEMA 20/2000-RB dated May 3, 2000 as amended from time to time) and transfer does not attract the provisions of SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 1997. b. The non-resident shareholding after the transfer, complies with sectoral limits under FDI policy. c. The pri....
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....Authorised Dealers may bring the contents of this circular to the notice of their constituents and customers. 7. The direction contained in this circular has been issued under Sections 10(4) and 11(1) of the Foreign Exchange Management Act, 1999 (42 of 1999) and is without prejudice to permissions/approvals, if any, required under any other law. Yours faithfully Grace Koshie Chief General Manager Encls: As above Annex 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 and from a Person Resident Outside India to a Person Resident in India 1.1 In order to address the concerns relating to pricing, documentation, payment/ receipt and remittance in respect of the shares/convertible debentures of an Indian company, other than a company engaged in financial service sector, transferred by way of sale; the parties involved in the transaction shall comply with the guidelines set out below. 1.2 Parties involved in the transaction are (a) seller (resident/non-resident), (b) buyer (resident/non-resident), (c) duly authorized agent/s of the seller and/or buyer, (d) Authorised Dealer (AD....
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....kh per seller per company, at a price mutually agreed to between the seller and the buyer, based on any valuation methodology currently in vogue, on submission of a certificate from the statutory auditors of the Indian company whose shares are proposed to be transferred, regarding the valuation of the shares, and ii) if the amount of consideration payable for the transfer exceeds Rs.20 lakh per seller per company, at a price arrived at, at the seller's option, in any of the following manner, namely: A) a price based on earning per share (EPS linked to the Price Earning (P/E) multiple ,or a price based on the Net Asset Value (NAV) linked to book value multiple, whichever is higher, or B) the prevailing market price in small lots as may be laid down by the Reserve Bank so that the entire shareholding is sold in not less than five trading days through screen based trading system or C) where the shares are not listed on any stock exchange, at a price which is lower of the two independent valuations of share, one by statutory auditors of the company and the other by a Chartered Accountant or by a Merchant Banker in Category 1 registered with Securities and Exchange Board of Ind....
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....ounts. 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. 4.2. The sale proceeds of shares (net of taxes) sold by a person resident outside India) may be remitted outside India. In case of FII the sale proceeds may be credited to its special Non-Resident Rupee Account. In case of NRI, if the shares sold were held on repatriation basis, the sale proceeds (net of taxes) may be credited to his NRE/FCNR(B) accounts and if the shares sold were held on non repatriation basis, the sale proceeds may be credited to his NRO account subject to payment of taxes. 4.3 The sale proceeds of shares (net of taxes) sold by an OCB may be remitted outside India directly if the shares were held on repatriation basis and if the shares sold were held on non-repatriation basis, the sale proceeds may be credited to its NRO (Current) Account subject to payment of taxes, except in the case of OCBs whose accounts have been blocked by Reserve Bank. 5. Documentation Besides obtaining a declaration in the enclosed form FC-TRS (in quadruplicate), the AD branch ....
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.... credited NRE/NRO account, as applicable. iv. Certificate indicating fair value of shares from a Chartered Accountant. v. No Objection/Tax Clearance Certificate from Income Tax authority/Chartered Account. vi. Undertaking from the buyer to the effect that the Pricing Guidelines have been adhered to. 6. Reporting requirements 6.1 For the purpose the Authorized Dealers may designate branches to specifically handle such transactions. These branches could be staffed with adequately trained staff for this purpose to ensure that the transactions are put through smoothly. The ADs may also designate a nodal office to coordinate the work at these branches and also ensure the reporting of these transactions to the Reserve Bank. 6.2 When the transfer is on private arrangement basis, on settlement of the transactions, the transferee/his duly appointed agent should approach the investee company to record the transfer in their books along with the certificate in the form FC-TRS from the AD branch that the remittances have been received by the transferor/payment has been made by the transferee. On receipt of the certificate from the AD, the company may record the transfer in its books.....
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....nvertible debentures under FDI policy and the existing sectoral limits and Pricing Guidelines have been complied with. vi. Undertaking from the FII/sub account to the effect that the individual FII/ Sub account ceiling as prescribed by SEBI has not been breached. Additional documents in respect of sale of shares by a person resident outside India vii. If the sellers are NRIs/OCBs, the copies of RBI approvals evidencing the shares held by them on repatriation/non-repatriation basis. viii. No Objection/Tax Clearance Certificate from Income Tax Authority/Chartered Account. 1 Name of the company Address (including e-mail ,telephone Number Fax no) Activity NIC Code No. 2 Whether FDI is allowed under Automatic route Sectoral Cap under FDI Policy 3 Nature of transaction Transfer from resident to non resident Transfer from non resident to resident 4 Name of the buyer Category (please tick appropriate category) Individual Company FII Others In case of Company/FII etc please indicate the constitution of the company i.e. Limited company, registered partnership etc Date and Place of Incorporation Address of the buyer (including e-mail ,telephone Number Fax no)....
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....t A - NRI/erstwhile OCB Part B - Foreign National/non-resident incorporated entity Part C - Foreign Institutional Investors Inflow -Transfer from resident to non-resident Date of transaction Name of the company Activity NIC Code Name of the buyer Name of the seller No. of shares transferred Face value Sale price per share Total inflow (1) (2) (3) (4) (5) (6) (7) (8) (9) (10) Outflow - Transfer from non-resident to resident Date of transaction Name of the company Activity NIC Code Name of the seller Name of the buyer No. of shares transferred Face value Sale price per share Total outflow (1) (2) (3) (4) (5) (6) (7) (8) (9) (10) Ministry of Finance Wednesday, September 29, 2004 SIMPLIFICATION OF FOREIGN INVESTMENT PROCEDURES In order to make the environment in India more attractive for foreign investors, Government has decided to simplify the procedure by placing the following under the General Permission route (i.e. RBI route) instead of existing Government approval route (i.e. FIPB route) for speedy and streamlined investment approvals: a) Transfer of shares from resident to non-resident (including transfer of subscribers' shares ....