October 2018

Analysis of Recent Compounding Orders

Bhaumik Goda
Saumya Sheth
Chartered Accountants


FEMA Focus is a new feature where the authors will cover important changes in FEMA with brief analysis. This first one covers important compounding orders with a short analysis.

An analysis of some interesting compounding orders passed by Reserve Bank of India in April and May 2018 and uploaded on the website1  are given below.

 

Foreign Direct Investment (FDI) compounding orders

 

A. Shri Harsha Chigurupati

 

Date of order: 13th April 2018

 

Regulation: FEMA 20/2000 Foreign Exchange Management (Transfer or Issue of Security by a Person Resident Outside India) Regulations, 2000 (FEMA 20)

 

Issue: Transfer of shares of an Indian company from NRI to another foreign company which was not permissible under earlier FDI Regulations

 

Facts

-     The applicant, an NRI, held 9999 shares of Chigurupati Technologies Private Limited, an Indian Company (ICO). Shares of ICO were allotted to the applicant, as a promoter and Director when he was resident in India. Applicant since then became NRI.

-     Applicant transferred shares to non-resident company (FCO) without prior approval of Reserve Bank of India.

 

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