03 December 2009
There is a Notification by RBI that if monies are received from outside India for Share Capital, the Shares should be allotted within 6 months from the date of receipt. If this is not complied with, what is the penalty? Is condonation available for the delay and can shares be allotted now after 2 years? Can the money be refunded now after a long delay? What are the penal provisions? What is the procedure for condonation? Please guide. Thank You.
Provisios of Para 8 of Schedule 1 read with Regulation 5 (1) of FEM (Transfer and Issue of Securities by person resident Outside India) 2000, provides that if the Shares are not issued with in 180 days from the date of reciept of funds, it is to be refunded to the applicant.
[Provided that if the shares or convertible debentures are not issued within 180 days from the date of receipt of the inward remittance or date of debit to NRE/FCNR(B) account, the amount of consideration so received shall be refunded to the person concerned by outward remittance through normal banking channels or by credit to his NRE/FCNR(B) account, as the case may be:
Provided further that the Reserve Bank may, on an application made to it and for sufficient reasons permit an Indian company to refund the amount of consideration received towards issue of security, if such amount is outstanding beyond a period of 180 days from the date of receipt.]
Further section 13 of FEMA 1999 specifies penalty which may be upto 300% of amount involved in violation.
There is also requirement to go for compounding of offences/violation.
You may refer some expert before decide how to more forward as penalty amount may go upto 3 times of amount involved.
05 December 2009
Thank You very much for your guidance. I have discussed with the Client and refunding or approaching RBI for condonation or compunding is not in their minds. They want to allot shares for the monies received. It was received a couple of years back and the audited accounts show it as Application Money pending allotment. Now, can the allotment be made at the present date? Can Form FC GPR be filed now? Will this attract any penal provision? Is there a way out for compliance without penalty or prosecution? Please guide. Thank You.
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