TRANSFER OF SHARES TO NON-RESIDENT

Transfer of shares between two residents (of India) involves payment of consideration (buyer to the seller) and execution of share transfer deed. Share transfer deed to be duly stamped @ 0.25% of the consideration amount. When the transaction is between a resident and a non-resident, there are regulations concerning inward and outward remittance of funds, valuation of shares and submission of form FC-TRS on RBI FIRMS portal. The Reserve Bank of India (RBI) through Notification No. FEMA 20(R)/ 2017-RB dated November 07, 2017, made Foreign Exchange Management (Transfer or Issue of Security by a Person Resident outside India) Regulations, 2017 to regulate investment in India by a Person Resident outside India.

Form Foreign Currency-Transfer of Shares (FC-TRS):

Form FC-TRS is required to be filed for transfer of capital instruments (Equity Shares, Fully and Compulsory Convertible Securities) of an Indian Company in the following cases:

When the transfer is made between a person resident outside India (repatriable basis) and a person resident outside India (non-repatriable basis)
When the transfer is made between a person resident outside India (repatriable basis) and a person resident in India.

Who is to file form FC-TRS?

Transfer of capital instruments prescribed above shall be reported on receipt of every tranche of payment. One of the important dilemma between public at large is that who has to file this form with Authorised Dealer Bank?
The onus of reporting FC-TRS shall be on the resident transferor/ transferee or the person resident outside India holding capital instruments on a non-repatriable basis, as the case may be.

What is the Time Limit for filing FC-TRS?

The form FCTRS shall be filed with the Authorised Dealer bank within sixty days of transfer of capital instruments or receipt/ remittance of funds whichever is earlier.

What is the Procedure for filing FC-TRS?

The following steps are included in filing of FC-TRS form:

1. Execution of Share Transfer Deed and Payment of Stamp Duty: The parties should execute the following documents for transferring their shares:
  - i) Share Transfer Deed as per SH-4
  - ii) Duly signed Consent letters from the buyers and seller.

Note: While executing the share transfer deed, stamp duty @ 0.25 % on the consideration amount is to be paid by purchasing the share transfer stamps, affixing those on the SH-4 and then crossing the same.

Self-Declaration contains: The funds should be transferred through proper Banking channels. Copy of FIRC and copy of KYC of person resident outside India should be obtained from Authorised Dealer Bank.
Registration on RBI FIRMS portal: it is mandatory to register the details of the person filing form along with his/her digital signatures (DSC) on RBI FIRMS portal.
Scrutiny from AD Bank: Post submitting form on RBI FIRMS portal, AD bank scrutinize each and every application and it may send the form for re-submission if any documents/information is incorrect or missing.
Sanction letter/ Certificate issued by AD Bank: AD Bank provides you with a sanction letter or certificate if all the documents and information are satisfactory to them. This is a documentary evidence which states that FDI compliances are duly taken care off by the applicant.
Take on record by the Indian Company: The sanction letter/certificate issued by AD bank is attached with the share transfer form and share certificate and submitted to the Company so that company may take the transfer on its record.

Additional Step may be required in delay submission of FC-TRS: In case the applicant fails to file FC-TRS within 60 days of transfer, then the AD Bank will forward the application to RBI for its approval.

Is there any Statutory Fees for filing FC-TRS?

There is no upfront (like MCA portal) statutory fees for filing FC-TRS on RBI FIRMS portal, but AD Bank may charge for processing FC-TRS. The processing fees may vary from Bank to Bank. The bank may ask for an authorisation from Applicant in order to deduct the bank charges from account.

What are the Attachments to be filed with form FC-TRS on RBI FIRMS portal?

Form FC-TRS is an online form that is to be filled and filed through RBI FIRMS portal along with the following important documents:

Consent Letter from Buyer and Seller.
Copy of FIRC in cases of foreign remittance is received by resident Indian.
Copy of KYC of the buyer (NRI) on the letterhead of the bank.
Valuation Report from the Certified Valuer certifying the value of shares.

Is there any prescribed method for valuation of shares?

Price of share shall be decided on the basis of valuation of Shares as per any internationally accepted pricing methodology for valuation on an arm’s length basis duly certified by a Chartered Accountant or a SEBI registered Merchant Banker or a practicing Cost Accountant.

While transferring shares from resident to non-resident, the minimum bar on price is set. The price cannot be less than the price determined from the valuation report.
In case the shares are transferred from non-resident to resident investor, the upper cap for price is set. The price cannot be more than the price determined from the valuation report.