Query on FEMA compliance - transmission of shares

[pavithra madhwesh]

Dear members.

 

This mail is relating to FEMA Compliance in case of transmission of shares between non resident and resident.

 

As is aware, in case of transfer of shares between the non-resident and residet the India party is required to file form FCTRS with RBI.

 

So far as my knowledge goes, the transmission of share is not governed under the notification dealing with filing of FCTRS.

 

In this regard,request the members veiw on the following:

 

1. whether the transfer includes transmission under FEMA - though is different under Companies Act

2. If yes, please quote the provisions.

3, wherther the transmission of share (which not by way of sale or gift as dealth in FEMA notification dealing with filing of Form FCTRS) but by operation of Law requires intimation ( FCTRS or otherwise) to RBI.

 

Please note that there is no exchange of foreign currency in case of transmissin of shares.

 

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Thanks and regards,

 

Pavithra and Madhwesh

 

9535574123 / 9972072349 / 9980672126

[R V SECKAR]

Hello,

Even though ,there is no outward flow of Forex in this case of transmission between non-resident to resident , to me , it is necessary to file Form FC-TRS to your regional RBI through your authorised dealer.

The Company has to file Form FC-TRS which  is meant to inform RBI that liability in foreign currency is not there pertaining to that shares and to that extent liability for RBI is not covered .

There is no specific provision or circular from RBI in this regard.and it is better , you have to approach your regional RBI and get advise on this issue.


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R.V.Seckar

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[Suresh Kumar Vaishraj]

Dear Friend,

 

- I agree with the views of Mr. Seckar to the extent of intimation to RBI, as RBI being the nodal agnecy in case of FEMA compliances and related issues.

 

- However, form form FC-TRS has to be filed with the authorised dealer (which in turn submits it to RBI) through whom money is actually paid to the transferor/ transferee. Form FC-TRS is only for the transfers by way of sale it is quite clear in the form itself. Moreover, there are fields in the FC-TRS form which require the information viz. price of transfer etc. As in the present case there is no actual flow of money, how would we intimate to authorised dealer. And who will the authorised dealer? These are questions.

 

- I feel the best way will be intimate to RBI, by way of letter from the transferee (who is proposed to get the shares by way of transmission) and then wait till the responds on that or else seek an opinion from concerned dept. of RBI itself.

 

- Unless there is some clarity on the FEMA front, the concerned company will not register such tranmission of shares.

 

I request other members to correct me if I am wrong and enlight this further.

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Suresh Kumar V
Company Secretary
91-9849991201

[R V SECKAR]

Dear Mr.Suresh Kumar,

Thanks. I also agree with your views.

There is no specific guidance or circular from RBI side on transmission from non-resident to resident.

However , I feel strongly that it is better to file FC-TRS as in the case of transmission , the value of shares transmitted will be always nil ( without consideration due to operation of law).

The important point  here is that transmission makes the RBI liability in foreign currency to nil to that extent of value of shares transmitted. Hence , RBI would definitely need information as to the face value of shares transmitted and hence I suggested to file FC-TRS through banker.

Further , I also advised that it is better to approach the regional RBI before filing FC-TRS and get their advise on the subject as there is no specific circular or press note on the subject.

Regards,

[Abhishek Lakhotia]

Dear Mr. Seckar,

What if the case is of transmission between NRI. Do we need to file FC-TRS or filing FLA will do?

Thanks 

Abhishek Lakhotia

[R V Seckar]

Dear Mr Abishek ,

Filing FLA will be enough

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