Clarification on Treatment of Funds Transferred by NRI to Private Limited Company

[abhishek anand]

An NRI has transferred a total amount of INR 7 lakh from his NRE account to the company’s bank account over a period of six months. The company is a private limited company with an authorised share capital of INR 1 lakh.

Can this amount be treated as a simple, interest-free loan by executing a loan agreement? Alternatively, would it be advisable to treat it as an unsecured Compulsorily Convertible Debenture (CCD) for a period of five years?

Regards,

Abhishek Anand & Associates

Practicing Company Secretaries

A Peer Reviewed Firm

Contact: - +91-9560763721

 Add:- Ashok Kunj, Ashok Nagar, Ranchi

[CS Manendra Singh]

Since the amount came from an NRE account, it is not permitted as a simple INR loan unless it qualifies as ECB (External Commercial Borrowing). So, you cannot legally treat this as a simple interest-free INR loan from NRI without prior FEMA compliance.

Issuance of CCDs must be under the automatic route, if your company’s activity is not in a restricted sector.

File Form FC-GPR within 30 days of allotment with RBI.

Pricing must be at or above the fair value determined by a CA/merchant banker.

Best Regards,
✦ CS Manendra Singh

🔹 Manendra Singh & Associates | Company Secretaries
📍 Office No. 817, Laxmi Deep Building,
      Nirmaan Vihar, Near V3S Mall, Delhi-110092
📞 M: +91 9540701081 | Ph: +91 11-45700667

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[CA Rajesh Sewlani]

dear sir

apart from FEMA compliance this is also in violation of Section 73 of the Companies Act 2013 unless NRI person is director of the Company

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Regards,

CA Rajesh Sewlani

 Chartered Accountants

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