Presently, transfer of shares from a Resident to a Non-Resident requires the prior approval of RBI in the following cases:
(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. Similarly, transfer of shares from a Non-Resident to a Resident which does not conform to the pricing guidelines as stipulated by the RBI also requires prior approval of RBI.
This Circular provides that prior approval of RBI will not be required in the following cases:
A. 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, conditions (such as minimum capitalisation, 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, buyback).
(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. B.
Transfer of shares from Resident to Non- Resident:
(i) Where the transfer of shares requires the prior approval of the FIPB — provided that:
(a) The requisite approval of the FIPB has been obtained; and
(b) The transfer of share adheres with the pricing guidelines and documentation requirements as specified by the RBI 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 RBI from time to time.
(iii) Where the pricing guidelines under the Foreign Exchange Management Act (FEMA), 1999 are not met provided that:
(a) The resultant FDI is in compliance with the extant FDI policy and FEMA regulations in terms of sectoral caps, conditions (such as minimum capitalisation, etc.), reporting requirements, documentation, etc.
(b) 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).
(c) 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:
(a) NOC are obtained from the respective financial sector regulators/regulators of the investee company as well as transferor and transferee entities and such NOC are filed along with the form FC-TRS with the AD bank.
(b) The FDI policy and FEMA regulations in terms of sectoral caps, conditions (such as minimum capitalisation, etc.), reporting requirements, documentation etc., are complied with.
