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Transfer of Shares between Resident and Non-Resident

Narendra Kumar

| Updated: Sep 01, 2017 | Category: Company Share Transfer

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Reserve Bank of India (RBI) allowed the facility to file form FC-TRS electronically on e-Biz platform with the intention of increasing pace of paperless governance.

Important Points to be Remembered

  • There is no fee for filing FC-TRS through the e-biz portal.
  • The obligation of filing form FC-TRS lies on the transferor/transferee whosoever is resident in India.
  • Before filing the form one needs to get register itself with the e-biz portal.
  • It is mandatory to attach the consent letter of both buyer and seller with form FC-TRS.
  • Valuation of shares to be transferred must be as per FDI norms.
  • Sectoral limits applicable to the company must be taken care of before transferring shares.

Registration on e-Biz Portal

Following 2 registrations are required on e-biz portal before you can file form:

  • Firstly, the transferor/transferee/consultant filing the form shall register itself on the portal.
  • After that, the business/company in which the investment is made shall also be registered on the portal.

Once the above two registrations are done, the transferor/transferee/consultant can file FC-TRS.

Reporting Legal Provisions Requirement in Form FC-TRS 

As per the Consolidated FDI Policy 2016, reporting of transfer of shares between Residents and Non-residents and vice- versa is to be made in Form FC-TRS. Within 60 days from the date of receipt/date of payment of the amount of consideration, the Form FC-TRS should be submitted to the AD Category – I bank. The obligation of submission of the Form FC-TRS within the given time frame would be on the transferor/transferee, resident in India. 

Stages of Filing FC-TRS with e-Biz Portal 

Case I: Sale from Non-resident to Resident

At present, since the filing of FC-TRS electronically is mandated, it is practically not possible to file FC-TRS within 60 days from the date of receipt of the amount of consideration in case the sale is made from Non-resident to Resident. Before releasing the payment to the Non-resident, the AD Category-I bank requires proof of submitting FC-TRS on the e-biz portal.

Thus, practically, following steps are followed:

Steps for transfer from nonresident to resident under e-biz

  • Filing FC-TRS electronically along with the attachments.
  • Submitting the proof of filing FC-TRS to AD Category-I bank along with the application and other required documents for making payment of consideration.
  • Remittance is made
  • Approval of FC-TRS by RBI. (The status can always be checked online)
  • Submitting FC-TRS, proof of payment, share certificate(s), if applicable, share transfer deed and other document required by the company.
  • Company registers the transfer.

Case II: Transfer from Resident to Non-resident

It becomes essential to attach FIRC for receipt of consideration from non-resident with form FC-TRS if the transfer by way of sale is made from resident to non-resident. Thus, following steps are followed for successful registration of transfer from resident to non-resident:

Steps for transfer from resident to non-resident under e-biz

  • Receipt of consideration from non-resident.
  • Obtain FIRC for the receipt above from AD Category-I bank.
  • File FC-TRS electronically along with the attachments. FIRC is required to be attached to the form.
  • Approval of FC-TRS by RBI. (The status can always be checked online)
  • Submitting FC-TRS, share certificate(s), if applicable, share transfer deed and other documents required by the company.
  • Company registers the transfer.

Documents Required to be Attached Along With the Form

Following documents shall be attached to the e-form FC-TRS:

  • Consent letter duly signed by the buyer and seller or their duly appointed agent and in the latter case, the Power of Attorney document.
  • The shareholding pattern of the investee company before and after the acquisition of shares by a person resident outside India along with CS certificate from Investee Company that FDI is within the prescribed limit and as per extant guidelines.
  • Certificate indicating fair value of shares from a Chartered Accountant.
  • Declaration from the buyer to the effect that he is eligible to acquire shares/compulsorily and mandatorily convertible preference shares/debentures under FDI policy and the existing sectoral limits and pricing guidelines have been complied with. If applicable, declaration from the FII/sub account to the effect that the individual FII/sub account ceiling as prescribed has not been breached.
  • If the sellers are NRIs/OCBs, the copies of RBI approvals evidencing the shares held by them if any.
  • Declaration by the Non-resident along with the self-attested photo ID proof of the person signing and the board resolution from the foreign company (if Non-resident is a Company) authorizing to sign FC-TRS form.

Valuation Aspect

Case I: Listed Companies

In terms of SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2009 as may be amended from time to time.

It is important to note that it holds well only for off-market trades of listed securities. For trading on stock exchanges by Non-residents, refer to the SEBI (Foreign Portfolio Investors) Regulations.

Case II: Unlisted Companies

As per any internationally accepted pricing methodology on arm’s length basis.

Pricing of the Securities Transferred by Way of Sale

Case I: Sale from Resident to Non-resident

The transfer shall be made at or above the fair value determined as above. The minimum price shall be the fair value.

Case II: Sale from Non-resident to Resident

The transfer shall be made at or below the fair value determined as above. The maximum price shall be the fair value.

To know more about share transfer between Resident and Non-resident, visit enterslice.com.

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Narendra Kumar

Experienced Finance and Legal Professional with 12+ Years of Experience in Legal, Finance, Fintech, Blockchain, and Revenue Management.

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