Transfer Of Equity Shares – Cases Where RBI Permission Is Mandatory:

1) Transfer from Resident to Nonresidents by way of sale where:

1. Transfer is at a price which falls outside the pricing guidelines and the transaction does not fall under specific exceptions;
2. Purchase of shares by a Non-resident involves deferment of payment of the amount of consideration. However, the deferment of payment is permitted for up to 25% of the total consideration payable within a period of 18 months from the date of transfer agreement.

2) Transfer by way of gift by a Resident to Non-resident:

1. The proposed transferee, the Non-resident, is eligible to hold such shares under FEMA regulations as amended from time to time;
2. The gift value does not exceed 5 per cent of the paid-up capital of the Indian company;
3. The applicable sectoral cap limit in the Indian company, if any, is not breached;
4. The transferor and the proposed transferee are "close relatives" as defined in Section 2(77) of Companies Act, 2013;
5. The value of shares to be transferred together with value of any other capital instruments already transferred by the Resident transferor, as gift, to any person residing outside India does not exceed the USD 50,000 during the financial year.

Details and documents to be submitted in such cases:

1. Name and Address of donor and done
2. Relationship between them
3. Reasons for making the gift
4. A certificate from a Chartered Accountant on the value of such shares
5. A certificate from the Indian Company stating that the proposed transfer would not breach the applicable sectoral cap under FDI and that the proposed number of shares to be held by Non-resident transferee shall not exceed 5% of the paidup capital pf the company.
6. An undertaking from the Resident transferee that the value of the shares to be transferred together with value of any other capital instruments already transferred by him, as gift, to any person residing outside India does not exceed the USD 50,000 during the financial year.
7. In case the shares in question are partly paid, a declaration from the Nonresident transferee that he is aware of the liability as regards calls in arrear and consequences thereof.

3) Transfer of shares from NRI to non-resident:

RBI permission is mandatory in all cases of transfer of shares from a Non-resident Indian to a Nonresident.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.