A person moves to abroad for employment purposes, he was holding shares in Private Limited companies. Please advise for the following queries: 1. Can he continue to hold the shares in Indian Company. 2. Is there any liability on him to inform RBI regarding his holdings. 3. Do the companies, in which he held shares are required to intimate RBI on him becoming NRI. If yes, is there any requirement to file any form with RBI. 4. Out of the companies mentioned above one company also have foriegn shareholder, the company is now in process of filing RBI annual return - Assets and Liabilities, do the company required to show the shares held by NRI in "NRI" column, if yes than there will be a diiference when RBI cross checks the data with the form FC GPR already filed by the company. If it does not show the same than there will be wrong disclosure on the part of coampnay.
The status of Resident or Non- Resident is checked at the time of allotment of shares by the Company. If somebody acquired shares out of his earnings in Indian Rupee and subsequently moved to abroad, it doesn't mean that a Non Resident acquired the shares.
RBI and FEMA are only attracted when there is a foreign exchange involved in any transaction. In the given case, the person would have acquired shares out of his proceeds from Indian Rupees. No matter whether he stays in India or Not in future.
Please find point wise reply to your queries: 1. Yes 2. No 3. No, A Company can not track all its shareholders and is also not responsible for subsequent change in status. 4. No. That person shall not be covered under the annual return. As I said above, status is at the time of allotment of shares.
I hope I am being able to reply to your queries satisfactorily.
30 June 2011
Thanks Mr. Jatin, but I am not able to understand, if he subsequently transfers his shares to resident than what is the procedure and if the same are transferred to non resident than what would be the procedure.
As per my understanding, the annual return requires the status as on balance sheet date, it is no way related with the date of allotment.
30 June 2011
See first step is - he has not acquired shares in foreign currency and he was also not the NRI at that moment.
Secondly, in case if he transfers the shares to a resident....then there is no RBI Compliance as its a transfer from Resident to Resident.
But in case he transfers his shares to a Non resident....then this is a transfer from Resident to Non-resident and thus the Company will have to file Form FC-TRS.
But in both the cases, the sale proceeds shall go to his normal bank accounts in India and not to his NRE/NRO Account.
Please also note that practically it is not possible for a company to track whether its shareholders are in Indian or have attained NRI Status.
By status at the time of allotment I meant Resident or Non resident status and Not the timing of Annual Return.
03 July 2011
The provisions of sec.6(5) of FEMA also support the view of other expert,"A person resident outside India may hold, own, transfer or invest in Indian currency, security or any immovable property situated in India if such currency, security or property was acquired, held or owned by such person when he was resident in India or inherited from a person who was resident in India."
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