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transfer of shares by NRI to non-resident entity

Sreenidhi (Company Secretary) (72 Points)

25 June 2009

ey friends...

Can a NRI who has major shareholding (99.9%) in a pvt ltd software company dealing with prepress activities, transfer his ENTIRE SHAREHOLDING to a non resident entity ??? if yes, what is the procedure ?? does the process involve approval from RBI at any stage ?

PLease advice asap...

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9 Replies

Ashis Mahapatra (Consultant-Tax & FEMA/FDI) (183 Points)
Replied 05 December 2009

Originally posted by :Sreenidhi

Transfer By

NRI to NRI-- No aproval /intimation

(PROI)Person resident out of India(Not being a NRI/OCB) To PROI/ NRI---No approval / intimation

NRI/OCB To PROI--Approval Not required if the total holding by PROI does not exceed the sectorial cap as per FDI guidelines.If exceed Prior approval of FIPB/SIA/CCEA is required.However reporting is must to RBI as per FEMA regulation/Transfer or issue of share by a person Resident Out of India.

NRI ( Indian origin) or an OCB ( Oversease corporate body of which at least 60% shareholder are such NRI/Indian origin).understand the defination & defference between NR ,NRI & OCB.

However the transaction may fall in the ambit of Tax law since the assets is situated in India.Valuation of share will be done strictly as per earstwhile CCI gudelines with joint reference to Company law for issue of share in discount/premium.

Pls read FDI Master circular jointly with above FEMA Regulation in www.rbi.org -Notification-Master circular & FEMA-Notification respectively

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Chandramouli K (Financial Controller) (30 Points)
Replied 20 May 2010

A NRI purchased some share of indian pvt company engaged in software export, has filed FCTRS for this transfer ( resident to NRI). He paid money from abroad to a resident to buy these shares, so FCTRS was filed

Now this NRI transfered these shares to another Non resident company. Does this transaction requires RBI permission?

Chandramouli, Chennai

CA. Anuj Gupta (Practices in NRI Int.Tax FEMA TP FDI/FIPB & FCRA) (7024 Points)
Replied 24 March 2011

The transaction doesn't require any permission provided the sectoral caps in FDI are not breached.

J Sridhar (Service) (23 Points)
Replied 14 April 2011

Dear Mr.Anuj gupta

can you give some reference to RBI Mastrer circular for not requiring the permission from nri to non resident entity ( Sectoral cap is complied). ( Does this apply to PIO (Person of indian origin)

With regards

J Sridhar

CA. Anuj Gupta (Practices in NRI Int.Tax FEMA TP FDI/FIPB & FCRA) (7024 Points)
Replied 16 April 2011

Mr. Sridhar Jain,

You can refer to Master Circular on Foreign Invesrment in India wherein it is clearly mentioned that no requirement of any permission provided the sectoral caps are adhered .