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Urgent query

Richa (CS) (84 Points)

27 December 2013

Dear Friends,

There are five indian companies with 100% shareholding of a Spanish Company. Another Indian Company wants to purchase all these five Companies. Consideration would involve around 15-16 crores.

My query is that is it allowed under FEMA to go ahead with this with this much of consideration or are there any provisions for it? Since, it would involve transfer of shares.

Please help at the earliest.

Regards.

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6 Replies

Gaurav Surendra Rakhecha (CA Practice ) (58 Points)
Replied 27 December 2013

Dear Madam,

As per your question, An Indian Company is interested in acquiring other Indian Companies, which would involve share transfer of Indian Companies, the consideration of which would be paid in Indian Rupees.

Apart from that the shares of spanish companies held by Indian companies, would rest in their names even if the entire shareholding of such companies is undertaken by such company. However if all those five companies are dissolved and its assets tranferred to this Indian company, still it would not involve the question of Foreign exchange as the Purchase consideration would be paid in Indian Rupees.

So where is the question of any foreign exchange transaction involved ?

According to my view as there is no involvement of foreign exchange transaction, the provisons of FEMA doesn't apply here.

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IMAM (ARTICLE ASST.) (371 Points)
Replied 27 December 2013

Yes agree with Mr Gaurav

Richa (CS) (84 Points)
Replied 27 December 2013

Dear Gaurav,

Thank you so much for your prompt reply. But my confusion is that the shareholders from whom we will purchase the shares is a Spanish Company. So the whole consideration will go out of India. So in this case, what will be the RBI compliances and consequences for us as a purchaser.

Regards.

IMAM (ARTICLE ASST.) (371 Points)
Replied 27 December 2013

I think it may useful to you. Use the following link

https://www.rbi.org.in/scriptts/FAQView.aspx?Id=32

Gaurav Surendra Rakhecha (CA Practice ) (58 Points)
Replied 27 December 2013

As per your question 100% of shareholding of spanish company is with' indian companies, then there is no question of share purchse from foreign shareholders.