RBI/2008-09/447
A. P. (DIR Series) Circular No.63
April 22, 2009
To
All Category-I Authorised Dealer Banks
Madam / Sir,
Foreign Direct Investment in India -
Transfer of Shares / Preference Shares / Convertible Debentures
by way of Sale - Modified Reporting Mechanism
Attention of the Authorised Dealer Category – I (AD Category - I) banks is
invited to paragraph 6 of the Annex to
A. P. (DIR Series) Circular No.16 dated
October 4, 2004, wherein, it has been stipulated that in case of transfer of
shares from a resident to a non-resident / non-resident Indian and vice versa,
the transferee / his duly appointed agent is required to approach the investee
company to record the transfer in their books along with the certificate in form
FC-TRS from the designated AD branch that the remittances have been received by
the transferor / payment has been made by the transferee. In addition, the
designated AD branch is also required to submit two copies of the form FC-TRS
received from their constituents / customers together with the statement of
inflows / outflows on account of remittances received / made in connection with
transfer of shares, by way of sale, to IBD/FED or the nodal office designated
for the purpose by the AD Category – I bank. The IBD/FED or the nodal office of
the AD Category – I bank in turn submits a consolidated monthly statement in
respect of all the transactions reported by the branches to the Reserve Bank, in
the prescribed proforma. Further, it may be noted that in terms of Regulation 2
of Notification No. FEMA 20/2000-RB dated 3rd May 2000, as amended from time to
time, "preference shares" mean compulsorily and mandatorily convertible
preference shares and "debenture" means compulsorily and mandatorily convertible
debentures.
- In order to capture the details of investment received by way of transfer of
the existing shares / compulsorily and mandatorily convertible preference shares
(CMCPS) / debentures [hereinafter referred to as equity instruments], of an
Indian company, by way of sale, in a more comprehensive manner, the form FC-TRS
has been revised
(format in Annex I). Accordingly, the proforma for reporting of
inflows / outflows on account of remittances received / made in connection with
the transfer of equity instruments by way of sale, submitted by IBD/FED/nodal
branch of the AD Category – I bank to the Reserve Bank has also been modified
(format in Annex III).
- The sale consideration in respect of equity instruments purchased by a person
resident outside India, remitted into India through normal banking channels,
shall be subjected to a KYC check
(format in Annex II) by the remittance
receiving AD Category – I bank at the time of receipt of funds. In case, the
remittance receiving AD Category – I bank is different from the AD Category - I
bank handling the transfer transaction, the KYC check should be carried out by
the remittance receiving bank and the KYC report be submitted by the customer to
the AD Category – I bank carrying out the transaction along with the form
FC-TRS.
- Further, in order to ensure that the form FC-TRS is submitted within a
reasonable timeframe, it has been decided that henceforth, the form FC-TRS
should be submitted to the AD Category – I bank, within 60 days from the date of
receipt of the amount of consideration. The onus of submission of the form
FC-TRS within the given timeframe would be on the transferor / transferee,
resident in India.
- In case of transfer of equity instruments where the non-resident acquirer
proposes deferment of payment of the amount of consideration, prior approval of
the Reserve Bank would be required, as hitherto. Further, in case approval is
granted for a transaction, the same should be reported in form FC-TRS, duly
certified by the AD Category – I bank, within 60 days from the date of receipt
of the full and final amount of consideration.
- These directions will become operative with immediate effect.
- AD Category – I banks may bring the contents of this circular to the notice of
their constituents and customers concerned.
7.The directions contained in this circular have been issued under sections
10(4) and 11(1) of the Foreign Exchange Management Act, 1999 (42 of 1999) and is
without prejudice to permissions / approvals, if any, required under any other
law.
Yours faithfully,
Salim Gangadharan
Chief General Manager-in-Charge