Fresh issue of shares to nri

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Utsav Garg (Querist)

07 October 2013 Dear Experts,

Our Authorized capital is Rs. 10 Lacs divided into 1,00,000 shares of Rs. 10 each, out of which 1 lakh is paid up(shares held by indian directors) now, we want to issue 50,000 fresh shares to NRI.

Please guide me whether we can issue 50,000 shares at par or we have to use DCF method as precribed by FEMA.

Thanks in advance

Bhaskaran Chackrapani Warrier

Bhaskaran Chackrapani Warrier (Expert)

07 October 2013 To be necessarily valued under DCF method.

Ajay Mishra

Ajay Mishra (Expert)

07 October 2013 Hi

Yes you will use DCF method and you will also comply FDI norms in the regards as given under FEMA, 1999.

Utsav Garg

Utsav Garg (Querist)

09 October 2013 Thanks for your help.

Can existing Shares ie 10,000 can be valued as per DCF method for the purpose of transfer to NRI? or we have to use any other method?

Suppose Share value as per DCF method is Rs. 18.70 and par value of share is Rs 10, then difference of Rs. 8.70 will be considered as Security premium?

Ajay Mishra

Ajay Mishra (Expert)

09 October 2013
DCA Circular dated 16-2-1995 clarifies that there can not be any restriction for incorporation of a company whether all the subscriber to the MOA/AOA/ proposed directors are residing abroad, being either foreign nationals, or NRI subject to the approval of RBI, where necessary.

The RBI may issue such a general permission also under FEMA, 1999 also. The FEMA(Permissible Capital Account Transactions) Regulations, 2000 allow persons resident outside India to invest in an issue of security by body corporate or an entity in India.

Now, it has been decided by RBI through Circular No. 36 dated 26.09.2012 that in cases, where non-residents (including NRIs) make investment in an Indian company in compliance with the provisions of the Companies Act, 1956, by way of subscription to Memorandum of Association, such investments may be made at face value subject to their eligibility to invest under the FDI scheme.

For more details go to the following link:

https://rbi.org.in/scripts/BS_CircularIndexDisplay.aspx?Id=7590

Utsav Garg

Utsav Garg (Querist)

10 October 2013 Thanks Ajay Sir

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