Vigilance towards the FEMA Compliances is rapidly increasing. This shift is characterized by an increase in awareness, involvement of investors, due diligence, and regulatory actions. All leads towards the compliant economy and also increase the ranking in the Compliance Risk Index.
Foreign Investment or FDI is a vital part of FEMA and FDI is always be on the watch-list of the regulators with a robust policy and the Companies are required to take proper precautions for its compliance which is within the rules and regulations made under the law.
At the time Foreign Investment made in India, its liquidation and transfer, are required either reporting to RBI or in few cases approval are also required and the documents pertaining to the same for eg. reporting, acknowledgement, documents filed with the authority, etc. are required to be maintained/kept in its records enduringly. Without these documents, the Compliance may be deemed to be non-complied.
In one of the cases, we encountered a situation where a person resident in India transfer his/her shareholding to a Person Resident Outside India. However, reporting of the same i.e., in form FC-TRS or its acknowledgement is not available with the Company and the same is neither be able to trace with the Authorised Dealer nor with RBI.
For more understanding of the above case, whenever, a Person Resident in India is interested to transfer its shareholding of Indian Company to a Person Resident outside India or vice a versa, the Transferor or Transferee, whosoever is Indian, is required to file an intimation to RBI via Form FC-TRS.
Therefore, the Transferor, in the above case, is required to file the FC-TRS and undergo the process in accordance with the provisions of the Foreign Exchange Management Act, 1999 and the Rules and Regulations made thereunder.
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