Hi, freinds...... I have posted query for transfering shares to non-resident, some how I didnt got much eloborated reply on the same.
In the process, I found out some inputs for the same which I thought, I should share..., I splitted transfer under two heads first normal transfer and other one transfer under ESOP. Yes, I know suddenly question will come in mind why transfer is required in ESOP. So.....It is required when Company governs ESOP through Trust Route.
A. Transfer of shares from Resident to Non-Resident:
Transfer of shares by way of sale - General Permission under Regulation 10 of Notification No. FEMA 20/2000-RB dated May 3, 2000
A person resident in India may transfer by way of sale to a person resident outside India any shares of an Indian company whose activities (other than financial service sector activities) fall under the Automatic Route of the FDI Scheme provided the parties concerned comply with the FDI sectoral limits, pricing guidelines, documentation and reporting requirements for such transfers, as may be specified by the Reserve Bank of India, from time to time.
However, the above general permission is not available where:
a) The transfer of shares falls within the provisions of SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 1997, as amended from time to time.
b) The transfer of shares is at a price which does not adhere to the pricing guidelines specified by the Reserve Bank of India from time to time
c) The activity of the Indian investee company falls outside the automatic route and where FIPB approval has been obtained for the said transfer.
This transaction should be reported by submission of form FC-TRS to the AD Category – I bank, within 60 days from the date of receipt/remittance of the amount of consideration. The onus of submission of the form FC-TRS within the given timeframe would be on the person resident in India.
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B. Issue / Transfer of shares under Employees Stock Options Scheme to person’s resident outside India
Issue of shares under ESOP by Indian companies to its employees or employees of its joint venture or wholly owned subsidiary abroad who are resident outside India directly or through a Trust up to 5% of the paid up capital of the company. [RBI Notification No. FEMA 20 dated May 3, 2000]
Reg 8. Issue of shares under ESOP:-
(1)An Indian company may issue shares under the Employees' Stock Options Scheme, by whatever name called, to its employees or employees of its joint venture or wholly owned subsidiary abroad who are resident outside India, directly or through a Trust:-
Provided that
a) the scheme has been drawn in terms of regulations issued under the Securities Exchange Board of India Act, 1992; and
b) face value of the shares to be allotted under the scheme to the non-resident employees does not exceed 5% of the paid-up capital of the issuing company.
(2) The issuing company shall furnish to the Reserve Bank , within thirty days from the date of issue of shares under the scheme, a report giving the following particulars/documents, -
i) names of persons to whom shares are issued under the scheme and number of shares issued to each of them;
ii) a certificate from the Company Secretary of the issuing company that the value of shares issued under the scheme does not exceed 5% of the paid up capital of the issuing company and that the shares are issued in compliance with the regulations issued by the SEBI in this behalf.
Report by the Indian company for above;
(1) An Indian company issuing shares in accordance with these Regulations shall submit to Reserve Bank,
A) not later than 30 days from the date of receipt of the amount of consideration, a report indicating:
i) Name and address of the foreign investors
ii) Date of receipt of funds and their rupee equivalent
iii) Name and address of the authorised dealer through whom the funds have been received, and
iv) Details of the Government approval, if any.
B) not later than 30 days from the date of issue of shares, a report in form FC-GPR together with,
(i) a certificate from the Company Secretary of the company accepting investment from persons resident outside India certifying that;
(a) all the requirements of the Companies Act, 1956 have been complied with;
(b) Terms and conditions of the Government approval, if any, have been complied with;
(c) The company is eligible to issue shares under these Regulations; and
(d) The company has all original certificates issued by authorised dealers in India evidencing receipt of amount of consideration in accordance with paragraph 9;
(ii) A certificate from Statutory Auditors or Chartered Accountant indicating the manner of arriving at the price of the shares issued to the persons resident outside India.
Pricing Regulations - [Annex to A. P. (DIR Series) Circular No. 49 dated May 4, 2010]
Where shares of an Indian company are listed on a recognized stock exchange in India, the price of shares transferred by way of sale shall not be less than the price at which a preferential allotment of shares can be made under the SEBI Guidelines, provided that the same is determined for such duration as specified therein, preceding the relevant date, which shall be the date of purchase or sale of shares.
Pricing of equity shares - SEBI Guidelines.
Equity shares shall be allotted at a price not less than higher of the following:
(a) The average of the weekly high and low of the closing prices of the related equity shares quoted on the recognized stock exchange during the six months preceding the relevant date; or
(b) The average of the weekly high and low of the closing prices of the related equity shares
quoted on a recognized stock exchange during the two weeks preceding the relevant date.
Please share any comments...
Regards
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CAclubindia
