Procedure for Reporting Transfer of Share between Resident to Non- Resident

Raunak Wahi 16 Jun 2022 21,840 Views 1 comment Print
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Procedure of Reporting Share Transfer as per the Foreign Exchange Management (Transfer or Issue of Security by a Person Resident Outside India) Regulations, 2017 effective from 07.11.2017) of Foreign Exchange Management Act, 1999

From Resident of India (“ROI”) to Non Resident of India (“NRI”)

Section 2(e) of the Foreign Exchange Management Act, 1999 (“FEMA”) defines Capital Account Transactions.

As per Foreign Exchange Management (Transfer or Issue of Security by a Person Resident Outside India) Regulations, 2017 PERMISSIBLE CAPITAL ACCOUNT TRANSACTIONS by NRI are-

1- Investment in India- either in a Security issued by a body corporate or security issued by a company in India and investment made in it by a resident outside India.

2- A person who is Resident outside India can transfer share in India as provided under FEMA or Rules and Regulations made under FEMA or with the permission of RBI.

3- Prior Government approval shall be obtained for any transfer in case the company is engaged in a sector which requires Government approval.

Reporting of Transfer of Share by ROI to NRI :

1. The first step is to obtain Receipt of Consideration from NRI

2. After obtaining the receipt, the next step is to obtain Foreign Inward Remittance Certificate(“FIRC”) and KYC from AD Category –I Bank which is made necessary as per

3. The FC- TRS Form has to be filed. It is available on the RBI we The requirements and important conditions for filling the form :

a) The entity reporting the transaction has to get itself registered by visiting- firms.rbi.org.in.

b) After getting the entity user registration done, the final process is to get the business registered, by visiting- firms.rbi.org.in/firms.

c) The FC- TRS has to be filed within 60 days from the date of payment of the amount of consideration for the transfer of share.

Note-

d) If the form is filed within the prescribed time then there is no penalty at the time of filing.

e) It has to be file only by the Resident of India (ROI).

4. Documents Required :

Certificate of Fair Value by Charted Accountant.
Securities Transfer Deed, (SH4 Form).
FIRC and KYC obtained from AD Category- I Bank.
Securities purchase agreement.
Signed Consent letter for transfer of Shares between buyer and seller.

If all the requirements are fulfilled in the prescribed time, then it will be approved by the RBI. If the requirements are not complied with, there will be a notification issued by the RBI to complete the requirements. In case the RBI finds any discrepancies and irregularities in the filing then the RBI will transfer the filing into scrutiny and forward the issue to the authorized directorate to deal with the respective entity and if the directorate is also satisfied that there are some discrepancies and irregularities in the filing then in that case, investigation will be initiated against the entity.

Now, Coming to another major act-

Procedure for Share Transfer as per The Companies Act, 2013 (Effective from 30^th August, 2013)

From Resident of India(“ROI”) to Non Resident of India (“NRI”)

Sec 2(81); Sec 44 and Sec 58(2) defines Shares as a Freely Transferable and Moveable Security.

Reporting of Transfer of Share by ROI to NRI :

Section 56 of The Companies Act, 2013 defines transfer of shares will be registered by the company only if proper instrument of share transfer is filed. The prescribed form is SH-4. The insights of the form is- it contains the entire summary along with every aspect of the agreement. The form has to be filed in the company within 60 days from the date of share transfer.

The above mentioned acts, namely- FEMA’99 and The Companies Act’13 are the only acts that talk about the registration of transfer of share.