According to Regulations 9 and 10
of the Foreign Exchange Management (Transfer of Issue of Security by a Person
Resident outside India) Regulations, 2000 (Click here
to view) prior approval of the Reserve Bank of India was required in case of transfer
of shares from a Resident to a Non Resident where:
1. the
transfer does not conform to the pricing guidelines as stipulated by the
Reserve Bank from time to time; or
2. the
transfer of shares requires the prior approval of the FIPB as per the extant
Foreign Direct Investment (FDI) policy; or
3. the
Indian company whose shares are being transferred is engaged in rendering any
financial service; or
4. the
transfer falls under the purview of the provisions of SEBI (SAST) Regulations,
require the prior approval of the Reserve Bank of India.
The transfer of shares from a Non
Resident to a Resident which does not conform to the pricing guidelines as
stipulated by the Reserve Bank of India from time to time also required the
prior approval of the Reserve Bank of India.
As a measure to further
liberalize and rationalize the procedures and policies governing FDI in India,
the RBI vide a circular dated November 4th 2011, has decided to
allow the following without the prior approval of the Reserve Bank of India :
Transfer of shares from a Non
Resident to Resident under the FDI scheme where the pricing guidelines under
FEMA, 1999 are not met provided that :-
(i) The
original and resultant investment are in line with the extant FDI policy and
FEMA regulations in terms of sectoral caps, conditionalities (such as minimum
capitalization, etc.), reporting requirements, documentation, etc.;
(ii) The
pricing for the transaction is compliant with the specific/explicit, extant and
relevant SEBI regulations / guidelines (such as IPO, Book building, block
deals, delisting, exit, open offer/ substantial acquisition / SEBI SAST, buy
back); and
(iii) Chartered
Accountants Certificate to the effect that compliance with the relevant SEBI
regulations / guidelines as indicated above is attached to the form FC-TRS to
be filed with the AD bank.
Transfer of shares from
Resident to Non Resident :
(i) where
the transfer of shares requires the prior approval of the FIPB as per the
extant FDI policy provided that :
o
the requisite approval of the FIPB has been
obtained; and
o the transfer of share adheres with the pricing
guidelines and documentation requirements as specified by the Reserve Bank of
India from time to time.
(ii) where
SEBI (SAST) guidelines are attracted subject to the adherence with the pricing
guidelines and documentation requirements as specified by Reserve Bank of India
from time to time.
(iii) where
the pricing guidelines under the Foreign Exchange Management Act (FEMA), 1999
are not met provided that:-
o
The resultant FDI is in compliance with the
extant FDI policy and FEMA regulations in terms of sectoral caps,
conditionalities (such as minimum capitalization, etc.), reporting
requirements, documentation etc.;
o
The pricing for the transaction is compliant
with the specific/explicit, extant and relevant SEBI regulations / guidelines
(such as IPO, Book building, block deals, delisting, exit, open offer/
substantial acquisition / SEBI SAST); and
o
Chartered Accountants Certificate to the effect
that compliance with the relevant SEBI regulations / guidelines as indicated
above is attached to the form FC-TRS to be filed with the AD bank.
(iv) where
the investee company is in the financial sector provided that :
o
NOCs are obtained from the respective financial
sector regulators/ regulators of the investee company as well as transferor and
transferee entities and such NOCs are filed along with the form FC-TRS with the
AD bank; and
o
The FDI policy and FEMA regulations in terms of
sectoral caps, conditionalities (such as minimum capitalization, etc.),
reporting requirements, documentation etc., are complied with.
Click
here to view the Circular.
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