Procedure for transfer of shares from Non-resident to Resident
1. Valuation of shares: – Price of share shall be decided on the basis of valuation of Shares by a Chartered Accountant or/a SEBI registered Merchant Banker.
2. Sale consideration (net of taxes) must be remitted outside India through an authorized dealer (AD) bank.
3. Transfer of shares must be reported in Form FC-TRS to RBI through an AD bank within 60 days of receipt/remittance of sale consideration. The onus of submission of the said Form FC-TRS is on the transferor / transferee resident in India.
4. Documents are required to be submitted to the AD bank along with the Form FC-TRS:
- Consent letters signed by the transferor and the transferee, or their duly appointed agent, indicating the details of transfer.
- Where the consent letter is signed by an agent, the power of attorney authorizing the agent to purchase/sell shares by the transferor / transferee.
- Share purchase agreement.
- The shareholding pattern of the investee company before and after transfer of shares showing equity participation of residents and non-residents category-wise.
- If the transferor is an NRI, the copies of RBI approvals evidencing the shares held by them on repatriation/non-repatriation basis. The sale proceeds shall be credited to non-resident (external) rupee account / non-resident ordinary rupee account, as applicable.
- Valuation certificate.
- Undertaking from the transferee to the effect that the pricing guidelines have been adhered to.
- No objection/ tax clearance certificate from the Income Tax Authority/ Chartered Account.
- FIRC/Outward remittance certificate and KYC to be attached at the specified attachment.
- Additional documents in respect of sale of shares by a person resident outside India
5. Post submitting form on FIRMS portal, AD bank scrutinize each and every application and it may send the form for re-submission if any documents/information is incorrect or missing.
6. Sanction letter/Certificate issued by AD Bank: AD Bank provides you with a sanction letter or certificate if all the documents and information are satisfactory to them. This is a documentary evidence which states that FDI compliances are duly taken care off by the applicant.
Requirement under the Companies Act, 2013 for Transfer of Shares from Non-residents to Residents
1. Execution of securities transfer form (“STF”) i.e. SH-4 will need to be executed by transferor and transferee and submitted to company within two months of its execution.
2. Stamp duty @ 0.25% on the value of the shares (i.e. consideration or the fair value, whichever is higher) will need to be paid in Indian rupees.
3. The transferee / his agent must submit to the company a certificate in the Form FC-TRS endorsed by the AD bank that the payment has been made by the transferee.
4. On receipt of the said certificate, the company may record the transfer in its books.
Author Bio
An Individual Shareholder of a Private Limited Company was RI when he subscribed to MOA and AOA at the time of incorporation about 8 Years back. He recently became NRI due to his Employment abroad.
Now, he wants to Transfer his entire Shareholding to an RI. Which compliances need to be done under FEMA? Is FC-TRS filing mandatory in the above peculiar and rare situation, too?