RBI/2011-12/247
A.P. (DIR Series) Circular No. 43
November 04, 2011
To,
All Category – I Authorized Dealer banks
Madam / Sir,
Foreign Direct Investment – Transfer of Shares
Attention of Authorized Dealers Category-I (AD Category-I) banks is invited to
Regulations 9 and 10 of the Foreign Exchange Management (Transfer of Issue of
Security by a Person Resident outside India) Regulations, 2000 notified vide
Notification No.FEMA 20/2000-RB dated May 3, 2000, as amended from time to time.
Accordingly, the transfer of shares from a Resident to a Non Resident where i)
the transfer does not conform to the pricing guidelines as stipulated by the
Reserve Bank from time to time; or ii) the transfer of shares requires the prior
approval of the FIPB as per the extant Foreign Direct Investment (FDI) policy;
or iii). the Indian company whose shares are being transferred is engaged in
rendering any financial service; or iv) the transfer falls under the purview of
the provisions of SEBI (SAST) Regulations, require the prior approval of the
Reserve Bank of India.
Further, 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 requires 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, it has now been 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:-
- 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.;
- 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
- 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:
- where the transfer of shares requires the prior approval of the FIPB as per
the extant FDI policy provided that:
- the requisite approval of the FIPB has been obtained; and
- the transfer of share adheres with the pricing guidelines and documentation
requirements as specified by the Reserve Bank of India from time to time.
- 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.
- where the pricing guidelines under the Foreign Exchange Management Act
(FEMA), 1999 are not met provided that:-
- 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.;
- 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
- 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.
- where the investee company is in the financial sector provided that:
- 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
- The FDI policy and FEMA regulations in terms of sectoral caps,
conditionalities (such as minimum capitalization, etc.), reporting requirements,
documentation etc., are complied with.
- Necessary amendments to the Foreign Exchange Management (Transfer of Issue of
Security by a Person Resident outside India) Regulations, 2000 notified vide
Notification No. FEMA 20/2000-RB dated May 3, 2000 are being notified
separately.
- AD Category – I banks may bring the contents of the circular to the notice of
their constituents.
- The directions contained in this circular have been issued under Sections
10(4) and 11(1) of the Foreign Exchange Management Act, 1999 (42 of 1999) and
are without prejudice to permissions / approvals, if any, required under any
other law.
Yours faithfully,
(Meena Hemachandra)
Chief General Manager in Charge