CA. Manthan Ruparelia (Chartered Accountant) (94 Points)
15 January 2009Hey friends,
I wanted to transfer my shares to foreign company which is 70% of the total paid up share capital of the company.
Nature of Business is Film Production House, so can any one tell me what is the proceedure required for transfer ? Prior approval of RBI is required ? What is the compliance of RBI & ROC
9821295748
Sandeep
(Self Employed)
(125 Points)
Replied 15 January 2009
There is no restriction to transfer shares from Pvt Ltd company to a foreign company. The foreign company must ascertain that the investment in your company is allowed under automatic route and is not in an area where prior FIPB (Foreign Investment Promotion Board) clearance is required. If FIPB clearance is required then they must first make a detailed application to FIPB for the same and only after receiving the clearance can they buy your shares. The whole process may take 8 to 12 weeks depending on the area, clarifications sought, etc. Meanwhile you should agree with the foreign company as to what is the valuation of your shares - this can be either by methods specified by the erstwhile CCI (controller of capital issues india) or it can be mutually agreed. Normally a CA's report is needed to show the basis of the valuation, if the agreed valuation is less than the actual valutation as per CCI norms then an explaination for the same should also be in the CA's report. Thereafter a share purchase agreement should be drawn up between you and the foreign company with the details of the transaction. After that just execute the agreement get your money and endorse the share certificates in the name of the foreign company. They will then approach your company to update the register of members.
Make sure that your current company does not restrict the transfer of shares without consent or it may have a first buy clause etc. It is good to do this transparently with knowledge of the current board and management to avoid hassles during the transfer.
No compliance or paperwork is required from your end once the shares are transfered. Your company will have to inform ROC and the foreign company will have to file the transation details with the RBI within 30 days of the transfer of money to you alongwith the FIRC (Foreign Inward Remittance Certificate). Other agencies, in case the clearance was through FIPB, may also need to be informed as specified in the letter of clearance from FIPB.
Make sure you ask for and keep copies of all the documents (Agreement, CA's valuation report, FIRC, FIPB letter, RBI filing, endorsed share certificate, etc).
Hope this helps. Cheers. Sandeep
PS Mani
(Accountant)
(31 Points)
Replied 28 January 2009
Hello
I jest went to RBI on the same problem as my banker was not able to get clarified about this issue. You need to submit FC TRS as per fema act. - But then again whther the shares are transferreed by company or by share holder is to be acertained and accordingly you will have to take action. - FC TRS is used where:
- Transfer by a person resident in india to person outside india
Tranfer by a person resident outside india to a person in India for this eccept for certain indusstries - for more info go to RBI site - ask for FC TRS guidelines
Sreenidhi
(Company Secretary)
(72 Points)
Replied 25 June 2009
| Originally posted by :Sandeep | ||
| " |
Dear Sandeep, you havementioned that there is no restriction on private ltd companies to transfer shares to a foreign co.. based on wt Section of FEMA or any other applicable law have u stated this... pls reply... |
" |
Ajay Mishra
(Company Secretary)
(74337 Points)
Replied 25 June 2009
Hi
Please find enclosed herewith procedure for transfer of shares.
Regards
Sreenidhi
(Company Secretary)
(72 Points)
Replied 25 June 2009
Dear Ajay,
Thank you for the attachment. I have one more query. Can a NRI, holding 99.9% of shares of an Indian Pvt Ltd. co , transfer his entire shareholding toa non-resident entity (a person resident outside India acc to FEMA 99)
CAclubindia
