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Un-paid shares, in name of non-resident as per moa,tranfer

Varun Sharma (Proprietor-Sharma Varun & Co.) (244 Points)

22 August 2016

A newly incorporated company having a Non-Resident as subscriber to 90% of the shares. Non-Resident has not paid any amount for shares to the company.

Above shares needs to be transferred in name of a Resident in India.

Please help me with procedure for the same, along with sharing required resolutions.

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6 Replies

Pratik Shah (Practising Company Secretary) (4432 Points)
Replied 22 August 2016

Since Non-resident has not paid any amount to Company for shares subscribed, the Company can not issue Share Certificates to Non-resident. Further, if Company has not issued Shares to Non-resident, the question of transfer of shares does not arise.

Varun Sharma (Proprietor-Sharma Varun & Co.) (244 Points)
Replied 23 August 2016

Dear Pratik,

Subscribers of MOA are deemed shareholders of the company. They don't need to take shares. As soon as they subscribe the MOA & file it with ROC along with other incorporation documents they become the members as well as shareholders of the company.

As per above Non-Resident is deemed shareholder of the company.

Would like to have you view on above and course of action to be taken.

Pratik Shah (Practising Company Secretary) (4432 Points)
Replied 23 August 2016

I don't think so. Even if you treat them as deemed shareholders, how will you be able to allot shares to foreign resident if the Company has not yet received money for it. As you also know that alloting shares to Non-resident requires reporting to RBI.

In normal situation (resident shareholder), your view of deemed shareholder may be correct. But in case of non-resident, without receiving money, it would be very difficult to allot shares to them becasue you need to comply with FDI reporting and rules.

As per my opinion, you can not transfer such shares unless you comply with all the procedures properly. However, kindly wait for others' views if they have different opinion. Thanks

Praveen Kr. Tiwary (Practicing Company Secretary) (54 Points)
Replied 25 August 2016

Agree with Prateek.. though partially.. Even in case of resident subscribers, the shares will have to be first madr fully paid up, before being able to transfer them.

Further, subscriber to MOA is a deemed Member only for the purpose of complying with the provisions that the company cannot be incorporated without a member. However, unless the subscriber pays for his shares, he cannot become a shareholder.

Varun Sharma (Proprietor-Sharma Varun & Co.) (244 Points)
Replied 26 August 2016

Thanks for your valuable opinion. Does taht mean first we have to allot shares to the Non-Resident after receipt of funds and compliance with RBI & FEMA notifications & provisions respectively. Afterwhich shares would be transferred.

Praveen Kr. Tiwary (Practicing Company Secretary) (54 Points)
Replied 26 August 2016

Yes. your understanding is correct. first complete the allotment to Non Resident and issue him the Share Certificates. Then only the stamped and executed transfer deed ALONG WITH ORIGINAL SHARE CERTIFICATE will have to be submitted to the Company for registration of transfer of shares

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