Share transfer from nri to resident

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Querist : Anonymous

Querist : Anonymous (Querist)

20 November 2012 Sir, incase if we were to transfer a pvt ltd co share from NRI to Resident without ay consideration, what will be the implications? as per company laws and fema? How will I file the FCTRS forms incase where the trf is for no consideration..

Ajay Mishra

Ajay Mishra (Expert)
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20 November 2012 Hi

Transfer of shares and convertible debentures –
(i) Subject to FDI sectoral policy (relating to sectoral caps and entry routes), applicable laws and other conditionalities including security conditions, non-resident investors can also invest in Indian companies by purchasing/acquiring existing shares from Indian shareholders or from other non-resident shareholders. General permission has been granted to non-residents/NRIs for acquisition of shares by way of transfer subject to the following:
(a) A person resident outside India (other than NRI and erstwhile OCB) may transfer by way of sale or gift, the shares or convertible debentures to any person resident outside India (including NRIs).
(b) NRIs may transfer by way of sale or gift the shares or convertible debentures held by them to another NRI.
(c) A person resident outside India can transfer any security to a person resident in India by way of gift.
(d) A person resident outside India can sell the shares and convertible debentures of an Indian company on a recognized Stock Exchange in India through a stock broker registered with stock exchange or a merchant banker registered with SEBI.
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(e) A person resident in India can transfer by way of sale, shares/convertible debentures (including transfer of subscriber‘s shares), of an Indian company under private arrangement to a person resident outside India, subject to the guidelines given in para 3.4.5.2 and Annex-2.
(f) General permission is also available for transfer of shares/convertible debentures, by way of sale under private arrangement by a person resident outside India to a person resident in India, subject to the guidelines given in para 3.4.5.2 and Annex-2.
(g) The above General Permission also covers transfer by a resident to a non-resident of shares/convertible debentures of an Indian company, engaged in an activity earlier covered under the Government Route but now falling under Automatic Route, as well as transfer of shares by a non-resident to an Indian company under buyback and/or capital reduction scheme of the company.
(h) 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 the Form FC-TRS within the given timeframe would be on the transferor/transferee, resident in India.

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Ajay Mishra

Ajay Mishra (Expert)
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20 November 2012 Documents to be submitted by a person resident in India for transfer of shares to a person resident outside India by way of gift

i. Name and address of the transferor (donor) and the transferee (donee).
ii. Relationship between the transferor and the transferee.
iii. Reasons for making the gift.
iv. In case of Government dated securities and treasury bills and bonds, a certificate issued by a Chartered Accountant on the market value of such security.
v. In case of units of domestic mutual funds and units of Money Market Mutual Funds, a certificate from the issuer on the Net Asset Value of such security.
vi. In case of shares and convertible debentures, a certificate from a Chartered Accountant on the value of such securities according to the guidelines issued by Securities & Exchange Board of India or DCF method for listed companies and unlisted companies, respectively.
vii. Certificate from the concerned Indian company certifying that the proposed transfer of shares/ convertible debentures by way of gift from resident to the non-resident shall not breach the applicable sectoral cap/ FDI limit in the company and that the proposed number of shares/convertible debentures to be held by the non-resident transferee shall not exceed 5 per cent of the paid up capital of the company.
viii. An undertaking from the resident transferor that the value of security to be transferred together with any security already transferred by the transferor, as gift, to any person residing outside India does not exceed the rupee equivalent of USD 50,000 during a financial year*.
* RBI‘s A.P. (DIR Series) Circular No. 14 Dated 15.09.2011

Querist : Anonymous

Querist : Anonymous (Querist)

20 November 2012 We will have to treat this as gift from NRI to Resident and also submit the above documents along with FCTRS .. Am I right sir?

Ajay Mishra

Ajay Mishra (Expert)
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20 November 2012

Hi

Yes, most of the documents required and FC-TRS is also required to file by AD Banker.

Querist : Anonymous

Querist : Anonymous (Querist)

20 November 2012 Thankyou sir, one more question.. NRI and resident are required to be in relation for gifting the shares or should there be a strong reason for gifting? I mean can we just not mention that these were transfered as gift..

Ajay Mishra

Ajay Mishra (Expert)
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20 November 2012 Hi

Generally it is not mandatory, but most of the case is covered under gift is for relatives. No clarification is available whether gift given to other person is covered or not.

Querist : Anonymous

Querist : Anonymous (Querist)

21 November 2012 Sir, in this case which bank will be treated as AD, since there is no remittance or trf involved who will route my paperwork to RBI..??

Ajay Mishra

Ajay Mishra (Expert)
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21 November 2012 Hi

In this case Indian Bank will be AD and transferor or transferee will appoint for the same.

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