Issue of share capital to nri
This query is : Resolved
02 October 2012
Can A Private limited issue 99% of its holding to a NRI.
Company not deals in restricted area of business like agriculture, real estate etc.
NRI pay share application money from his NRE account.
Is any permission is to be taken from RBI either by Company or by NRI.
Is any document is required to be filed with RBI.
Pl. give expert advice
Company not deals in restricted area of business like agriculture, real estate etc.
NRI pay share application money from his NRE account.
Is any permission is to be taken from RBI either by Company or by NRI.
Is any document is required to be filed with RBI.
Pl. give expert advice
03 October 2012
Hi
Go to the following link, it may help you:
https://www.caclubindia.com/articles/details.asp?mod_id=13412
Go to the following link, it may help you:
https://www.caclubindia.com/articles/details.asp?mod_id=13412
08 October 2012
This link is not open
Thanks
Thanks
08 October 2012
Hi
For more go to my profile and download the same.
For more go to my profile and download the same.
12 October 2012
not find in your profile, pl. give page no. and query no.
02 August 2024
Yes, a private limited company in India can issue shares to a Non-Resident Indian (NRI) up to 100% of its holding, subject to certain regulations and conditions. Here’s a detailed overview of the procedure and requirements:
### 1. **Compliance with FEMA Regulations**
The issuance of shares to an NRI falls under the purview of the Foreign Exchange Management Act (FEMA), 1999. The key regulations to consider are the Foreign Exchange Management (Transfer or Issue of Security by a Person Resident Outside India) Regulations, 2017.
#### **Procedure for Issuing Shares to an NRI**
1. **Board Approval:**
- **Pass a Board Resolution:** The board of directors should pass a resolution to approve the issuance of shares to the NRI. This resolution should specify the number of shares, the price, and the terms of issuance.
2. **Pricing and Payment:**
- **Price of Shares:** Ensure that the shares are issued at a price that is in line with the pricing guidelines stipulated under FEMA. Typically, shares should be issued at a price not less than the fair value determined as per the guidelines prescribed by the Reserve Bank of India (RBI).
- **Payment:** The NRI should pay for the shares from their NRE (Non-Resident External) or FCNR (Foreign Currency Non-Resident) account. Payment should be in foreign exchange.
3. **Approval from RBI:**
- **Automatic Route:** For most sectors, including IT, manufacturing, and trading, the issuance of shares to NRIs is allowed under the automatic route, meaning that no specific prior approval from the RBI is required.
- **Reporting:** Even though prior approval is not needed, the company must report the transaction to the RBI. This is done through Form FC-GPR (Foreign Collaboration - General Permission Route) within 30 days of the allotment of shares.
4. **Documentation and Compliance:**
- **Form FC-GPR:** File Form FC-GPR with the RBI through the authorized dealer bank (usually the bank handling the NRI’s account). This form provides details about the issue of shares and should be filed within 30 days of allotment.
- **FIRCs:** Ensure that the Foreign Inward Remittance Certificates (FIRCs) are obtained from the bank as proof of receipt of payment.
5. **Company Records:**
- **Update Share Register:** Update the register of members to reflect the shareholding of the NRI.
- **Issue Share Certificates:** Issue share certificates to the NRI as evidence of their shareholding.
6. **Annual Return:**
- **Form MGT-7:** Reflect the updated shareholding pattern in the annual return filed with the Registrar of Companies (ROC).
### **Key Points to Remember**
- **Sectoral Cap and Guidelines:** Verify that the sector in which the company operates does not have any restrictions on foreign investment. For most sectors, investment by NRIs is permissible under the automatic route.
- **Exchange Rate:** Ensure that the exchange rate for the payment is compliant with the prevailing exchange rate regulations.
- **No Prior Approval for Most Cases:** As long as the investment is under the automatic route, no specific prior approval is required from the RBI, but compliance with the reporting requirements is essential.
By following these guidelines, a private limited company can issue shares to an NRI, provided all regulatory and procedural requirements are met.
### 1. **Compliance with FEMA Regulations**
The issuance of shares to an NRI falls under the purview of the Foreign Exchange Management Act (FEMA), 1999. The key regulations to consider are the Foreign Exchange Management (Transfer or Issue of Security by a Person Resident Outside India) Regulations, 2017.
#### **Procedure for Issuing Shares to an NRI**
1. **Board Approval:**
- **Pass a Board Resolution:** The board of directors should pass a resolution to approve the issuance of shares to the NRI. This resolution should specify the number of shares, the price, and the terms of issuance.
2. **Pricing and Payment:**
- **Price of Shares:** Ensure that the shares are issued at a price that is in line with the pricing guidelines stipulated under FEMA. Typically, shares should be issued at a price not less than the fair value determined as per the guidelines prescribed by the Reserve Bank of India (RBI).
- **Payment:** The NRI should pay for the shares from their NRE (Non-Resident External) or FCNR (Foreign Currency Non-Resident) account. Payment should be in foreign exchange.
3. **Approval from RBI:**
- **Automatic Route:** For most sectors, including IT, manufacturing, and trading, the issuance of shares to NRIs is allowed under the automatic route, meaning that no specific prior approval from the RBI is required.
- **Reporting:** Even though prior approval is not needed, the company must report the transaction to the RBI. This is done through Form FC-GPR (Foreign Collaboration - General Permission Route) within 30 days of the allotment of shares.
4. **Documentation and Compliance:**
- **Form FC-GPR:** File Form FC-GPR with the RBI through the authorized dealer bank (usually the bank handling the NRI’s account). This form provides details about the issue of shares and should be filed within 30 days of allotment.
- **FIRCs:** Ensure that the Foreign Inward Remittance Certificates (FIRCs) are obtained from the bank as proof of receipt of payment.
5. **Company Records:**
- **Update Share Register:** Update the register of members to reflect the shareholding of the NRI.
- **Issue Share Certificates:** Issue share certificates to the NRI as evidence of their shareholding.
6. **Annual Return:**
- **Form MGT-7:** Reflect the updated shareholding pattern in the annual return filed with the Registrar of Companies (ROC).
### **Key Points to Remember**
- **Sectoral Cap and Guidelines:** Verify that the sector in which the company operates does not have any restrictions on foreign investment. For most sectors, investment by NRIs is permissible under the automatic route.
- **Exchange Rate:** Ensure that the exchange rate for the payment is compliant with the prevailing exchange rate regulations.
- **No Prior Approval for Most Cases:** As long as the investment is under the automatic route, no specific prior approval is required from the RBI, but compliance with the reporting requirements is essential.
By following these guidelines, a private limited company can issue shares to an NRI, provided all regulatory and procedural requirements are met.
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