Realised exchange gain on Share Appl. Money

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Vishal (Querist)
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18 March 2010 A pvt ltd comapny is in receipt of share application money from its non resident parent comapny. The money is received in USD and the board resolution was passed for alloting X number of shares to the parent comapny for the amount of capital invested in USD at an agreed exchange rate of USD 1 = Rs. 44.

All the shares were alloted for the complete share application money but due to difference in exchange rate agreed in Board resolution and rate at the time of actual receipt in bank account, the pvt ltd company recorded a exchange gain of 2 lacs.

Are there any restrictions on using this money by the company?
Does it need to repatriate this amount to parent company abroad as per FEMA / RBI guidelines ?

Are there any timelines to do it? If the time lines have expired and the amount is still with the indian company what are the legal consequences?

Rasesh

Rasesh (Expert)
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18 March 2010 Firstly, a lot would depend on the wordings of the resolution. If the resolution states that 1 shares will be alloted for USD 1 invested in the company and that the rate of conversion has been considered at Rs. 44/-, then it would mean that one share is issued at Rs. 44/-. In such a scenario, the company will have to return back the balance amount to the subscribers. Till the time, it has not been refunded, it will be shown as creditors.

The FC-GPR filed with RBI must be in Indian rupees and hence will not have any impact.

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