Reserve Bank of India (RBI) has liberalized the provisions relating to foreign investment which comes into India. Foreign investment comes into India in various forms and is required to be reported to RBI.
This articles deals with the Reporting of Transfer of Shares by a Person Resident in India to a Non Resident through E-Biz Portal to RBI.
In case of Transfer of shares by way of sale from
a) Resident to non-resident
b)Non-resident to resident
the resident transferor/ transferee/ Investee Company/ NRI transferor/ Non Resident transferor (herein after called as “Initiator” should file FC-TRS with 60 days from receipt of funds.
RBI has come up with the one-stop shop e-biz project of the Government of India so as to enable on-line filing of various returns, one of whom is FC-TRS Form which is submitted to RBI for transfer of securities between resident and person outside India.
Thus with a view to promote the ease of reporting of transactions related to Foreign Direct Investment online filing of forms has been initiated by the Government of India and physical filing of Form FC-TRS has been discontinued and forms submitted in online mode only through e-biz portal will be accepted.
The Form FC-TRS should be submitted to the AD Category –I Bank, within 60 days from the date of receipt of the amount of consideration. The onus of submission of form would be on the transferor/transferee, resident in India. However, in case where the NR investor, including an NRI, acquires shares on the stock exchange under the FDI scheme, the investee company would have to file the form FC-TRS with the AD Category –I Bank.
PROCEDURE FOR REPORTING OF TRANSFER OF SHARES BY A PERSON RESIDENT IN INDIA TO A NON RESIDENT THROUGH E-BIZ PORTAL
1. DETERMINATION OF PRICE OF SHARE
Price of shares transferred by way of sale, where the shares of the Indian company are:
a) 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 , as applicable, provided 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,
b) 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. The price per share arrived at should be certified by a SEBI registered Merchant Banker or a Chartered Accountant.
2. REMITTANCE OF SALE PROCEEDS
The sale consideration in respect of the shares purchased by a person resident outside India shall be remitted to India through normal banking channels. In case the buyer is a FII,FPI, payment should be made by debit to its Special Non-Resident Rupee Account. 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.
3. REGISTER ON E-BIZ PORTAL
Initiator or Agent shall obtain digital signature and register on the e-biz portal. You can click on below link:
4. File Form FC-TRS
File Form FC-TRS through AD Category-I bank, in respect of declaration regarding transfer of shares/compulsorily and mandatorily convertible preference shares/ compulsorily and mandatorily convertible debentures/ others by way of sale from resident to non-resident.(Either fill the Form FC-TRS while being online or Download the form like any other form to fill and then use internet connection to upload the same.)
Consent letter duly signed by the seller and buyer or their duly authorized agent indicating following details of transfer:
a) Number of shares to be transferred
b) The name of the investee company whose shares are being transferred
c) The price at which shares are being transferred.
Power of Attorney document executed by the seller/buyer authorizing the agent to purchase/ sell shares, where consent letter has been signed by their appointed agent.
The shareholding pattern of the investee company after acquisition of shares by a person resident outside India showing equity participation of residents and non –residents category wise and its percentage of paid up share capital.
Certificate indicating fair value of shares from a Chartered Accountant/ SEBI registered Category one Merchant Banker.
Undertaking from the buyer to the effect that he is eligible to acquire shares/convertible debentures under FDI policy and existing sectoral limits and Pricing Guidelines have been complied with.
Copy of broker’s note if sale/ purchase is made on Stock Exchange
Undertaking from the FII/sub account to the effect that the individual FII/ Sub account ceiling as prescribed by SEBI has not been breached, till it gets registered as FPI.
RBI/FIPB approval wherever necessary i.e. when FDI is allowed under Approval route.
Extract of Share Purchase Agreement containing
a) Name of the buyer and seller
b) Name of the investee company
c) No. of shares to be transferred
d) Price at which they are transferred
e) Mode of transfer
f) Date of transfer
g) Any other information
· No objection / Tax Clearance Certificate from Income Tax Authority / Chartered Accountant.
· Copy of Know Your Customer (KYC) check.
· Copy of FIRC (Foreign Inward Remittance Certificate)
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.
Any other document if required.
5. RECORD TRANSFER OF SHARE
Submit the certificate in the Form FC-TRS from the AD branch to the investee company along with other papers for transfer of shares, when the form is certified to record the transfer in their books.
Disclaimer: This write up is based on the understanding and interpretation of author and the same isnot intended to be a professional advice.
Tags :Corporate Law