Swap of shares - fema provision


Never Give up....No matter what....

Dear Friends and Experts,

Please kindly suggest on the following Issue:-

1. There are Two Companies - ABC Pvt. Ltd.(INDIAN COMPANY) - 2 Shareholder and Directors as well  and XYZ Inc. (USA COMPANY) - 2 Shareholder and Directors as well.

2. These two companies are having business transactions with each other.

3. Now, the Owners of these TWO Companies want to go for a Cross Holding of stake in the other respective Company through Mutual agreed Exchange of Shareholding.

4. There will NOT be  any remmittance of Foreign Currency inbound and outbound.[No Actual Funds Inflow and Outflow]

5. SHARES WILL BE HELD BY THE INDIVIDUALS ONLY [i.e. SHAREHOLDER OF INDIAN COMPANY BECOMES SHAREHOLDER OF THE FOREIGN COMPANY AND VICE-VERSA] - SHAREHOLDING NOT IN THE NAME OF THE COMPANY.

 

Please kindly suggest Relevant FEMA Provisions and Companies Act Provisions whether above arrangement is allowed or not.

 
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