Regarding Share transfer of Pvt. ltd. company from NRI to NRI
This query is : Resolved
26 May 2022
Dear Sir/Madam,
I request to you please guide regarding share transfer from Pvt. ltd. company from NRI (Foreigner) to NRI (Indian)
What is process?
Need to inform to RBI and any other department?
please guide
thanking you in advance
Regards
Rajnish
I request to you please guide regarding share transfer from Pvt. ltd. company from NRI (Foreigner) to NRI (Indian)
What is process?
Need to inform to RBI and any other department?
please guide
thanking you in advance
Regards
Rajnish
10 July 2024
Transferring shares from a Non-Resident Indian (NRI) who is a shareholder in a Private Limited Company (Pvt. Ltd.) to another NRI (Indian or Foreigner) involves specific regulatory requirements and procedures. Here’s a general outline of the process and regulatory considerations:
### Process of Share Transfer:
1. **Board Resolution:**
- The Board of Directors of the Pvt. Ltd. company must first approve the transfer of shares. A board resolution should be passed in a board meeting indicating the approval of the transfer.
2. **Share Transfer Deed:**
- Prepare a share transfer deed. This document formalizes the transfer of shares from the transferring NRI to the receiving NRI. Both parties must sign the share transfer deed.
3. **Stamp Duty:**
- Pay stamp duty on the share transfer deed as per the rates applicable in the state where the company is registered. Stamp duty rates vary across states in India.
4. **Filing with the Company:**
- Submit the executed share transfer deed along with any other required documents to the Pvt. Ltd. company. The company maintains a register of members where the transfer is recorded.
5. **Issuance of Share Certificate:**
- Upon approval and recording of the share transfer by the Board of Directors, the company issues a new share certificate in the name of the transferee (the new shareholder).
6. **Intimate ROC:**
- File Form MGT-7 with the Registrar of Companies (ROC) within 60 days of the share transfer. This form notifies the ROC about changes in shareholding.
### Regulatory Considerations:
1. **Foreign Exchange Management Act (FEMA):**
- According to FEMA regulations, share transfers involving NRIs require compliance with foreign exchange rules. However, for transfers between NRIs, approval from the Reserve Bank of India (RBI) may not be necessary if the transfer is in compliance with the Foreign Exchange Management (Transfer or Issue of Security by a Person Resident Outside India) Regulations.
2. **Income Tax Implications:**
- Consider any tax implications both in India and the home country of the NRIs involved. Capital gains tax might apply depending on the nature of the transfer.
3. **Reporting Requirements:**
- The Pvt. Ltd. company must maintain updated records of shareholding and inform regulatory authorities as per the Companies Act and FEMA regulations.
### Additional Steps:
- **Due Diligence:** Ensure compliance with all applicable laws, regulations, and the company’s Articles of Association governing share transfers.
- **Legal Advice:** Seek guidance from legal professionals or company secretaries with expertise in corporate law and compliance to navigate specific nuances and requirements.
By following these steps and ensuring compliance with regulatory requirements, the share transfer process from one NRI shareholder to another can be completed smoothly and in accordance with the law.
### Process of Share Transfer:
1. **Board Resolution:**
- The Board of Directors of the Pvt. Ltd. company must first approve the transfer of shares. A board resolution should be passed in a board meeting indicating the approval of the transfer.
2. **Share Transfer Deed:**
- Prepare a share transfer deed. This document formalizes the transfer of shares from the transferring NRI to the receiving NRI. Both parties must sign the share transfer deed.
3. **Stamp Duty:**
- Pay stamp duty on the share transfer deed as per the rates applicable in the state where the company is registered. Stamp duty rates vary across states in India.
4. **Filing with the Company:**
- Submit the executed share transfer deed along with any other required documents to the Pvt. Ltd. company. The company maintains a register of members where the transfer is recorded.
5. **Issuance of Share Certificate:**
- Upon approval and recording of the share transfer by the Board of Directors, the company issues a new share certificate in the name of the transferee (the new shareholder).
6. **Intimate ROC:**
- File Form MGT-7 with the Registrar of Companies (ROC) within 60 days of the share transfer. This form notifies the ROC about changes in shareholding.
### Regulatory Considerations:
1. **Foreign Exchange Management Act (FEMA):**
- According to FEMA regulations, share transfers involving NRIs require compliance with foreign exchange rules. However, for transfers between NRIs, approval from the Reserve Bank of India (RBI) may not be necessary if the transfer is in compliance with the Foreign Exchange Management (Transfer or Issue of Security by a Person Resident Outside India) Regulations.
2. **Income Tax Implications:**
- Consider any tax implications both in India and the home country of the NRIs involved. Capital gains tax might apply depending on the nature of the transfer.
3. **Reporting Requirements:**
- The Pvt. Ltd. company must maintain updated records of shareholding and inform regulatory authorities as per the Companies Act and FEMA regulations.
### Additional Steps:
- **Due Diligence:** Ensure compliance with all applicable laws, regulations, and the company’s Articles of Association governing share transfers.
- **Legal Advice:** Seek guidance from legal professionals or company secretaries with expertise in corporate law and compliance to navigate specific nuances and requirements.
By following these steps and ensuring compliance with regulatory requirements, the share transfer process from one NRI shareholder to another can be completed smoothly and in accordance with the law.
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