Fema related query

NRI to NRI (Sale / Gift): NRIs may transfer by way of sale or gift the shares or convertible debentures held by them to another NRI. 

No Prior approval is needed.. This comes under General Permission. 

 

The information provided by you is insufficient for giving any reply/guidance... Send detailed mail to kssastry51@gmail.com

Thanks for your prompt reply Sir. Can you please give the refernce of the relevant document, where is it mentioned.

RBI Master Circular on Foreign Investment in India... RBI/2012-13/15 dated 2nd July 2013 ... Page 10

There is an Indian Co.-A. There are shareholders including NR holding approx. 2%. Out of total, 4 shareholders were resident, who now has acquired the status of NRIs, who are holding approx. 50%. Now, we can say that NRs and NRIs are holding 52% shareholding (because of the status of 4 residents changed to NRIs). Now is there any implication of it on Indian Co. Do we need to comply anything under FEMA, RBI regulations. ALso, A is having 100% subsidiary in India. Does B also get affected, or any impliaction on it as well?

As per the details provided, I understand that the NRIs have made investment in the Company prior to becoming NRIs. So it amounts to investment by Resident Category... Since they became NRIs now their inveastments/bank accounts will guided by RBI Circular on NRO accounts... I am still not clear with your query... Give me full details i.e. whether the comapny is private limited or not...whether existing NR who hold 2% was on repatriable basis or non repatriable basis. I can guide you after seeing all papers..

The Co. is an unlisted public Co. An investment done was under the automatic route. In FC-GPR, we mentioned it under the Non-resident Investment- Others (that is other than NRI/ OCBs).

In India, all transactions that include foreign exchange were regulated by Foreign Exchange Regulations Act (FERA),1973. The main objective of FERA was conservation and proper utilisation of the foreign exchange resources of the country. It also sought to control certain aspects of the conduct of business outside the country by Indian companies and in India by foreign companies. It was a criminal legislation which meant that its violation would lead to imprisonment and payment of heavy fine. It had many restrictive clauses which deterred foreign investments. FEMA permits only authorised person to deal in foreign exchange or foreign security. Such an authorised person, under the Act, means authorised dealer,money changer, off-shore banking unit or any other person for the time being authorised by Reserve Bank. The Act thus prohibits any person who:- Deal in or transfer any foreign exchange or foreign security to any person not being an authorized person; Make any payment to or for the credit of any person resident outside India in any manner; Receive otherwise through an authorized person, any payment by order or on behalf of any person resident outside India in any manner; Enter into any financial transaction in India as consideration for or in association with acquisition or creation or transfer of a right to acquire, any asset outside India by any person is resident in India which acquire, hold, own, possess or transfer any foreign exchange, foreign security or any immovable property situated outside India.

Dear Isha Chawla,

The 2% investment is by a Foreign National/firm... You must have taken UIN and filed FC-GPR with FIRCs... Is there any lock in period stipulated while allotting the shares... You wish to say that some of the other share holders have become NRIs now... Their investment in the company was made when they were residents... Now what exact clarification you need... Please mention..

Yes, FC-GPR along with FIRcs was filed with RBI. Is UIN be given in this case, i think that is required in case of investment by CO. in WOS abroad. My specific question is- because of change in status of resident to NRIs, around 59% of sharholding is in the hands of NRIs. Do we need to disclose this to RBI, if yes, then the relevant refernce, where it is mentioned and also the implication of it on its 100% indian subsidiary as well.

Dear Isha,

Your reply is not appearing here... UIN must have been received from RBI... RBI rules are as under:

Quote:
 Indian companies are required to report the details of the receipt of the amount of consideration for issue of shares / convertible debentures, through an AD Category - I bank, together with a copy/ies of the FIRC/s evidencing the receipt of the remittance along with the KYC report on the non-resident investor from the overseas bank remitting the amount. The report would be acknowledged by the Regional Office concerned, which will allot a Unique Identification Number (UIN) for the amount reported

Unquote.

Now your doubt is since total NR and NRI investment is more than 51% what is to be done... Your Chartered Accountant will advise you. OR simply write to nearest Regional Office of RBI, Foreign Exchnage Dept for guidance.

Thanks alot Sir, for replying promptly and pateintly, my all queries. Thanks alot!!!