Regulation 10 - Prior permission of Reserve Bank in certain cases for transfer of security - Foreign Exchange Management (Transfer or Issue Of Security By A Person Resident Outside India) Regulations, 2000

These rules have been superseded vide New Regulations New Regulations of 2017 10. 9 [Permission] of Reserve Bank in certain cases for transfer of security :- A. Transfer by way of gift or sale by a person resident in India 1 [not being erstwhile OCBs] A person resident in India who proposes to transfer to a person resident outside India not being erstwhile OCBs: - 5 [( a) (i) any security, by way of gift, shall make an application to the Reserve Bank for its approval. (ii) The Reserve Bank may grant such approval on being satisfied of the following conditions: (a) The donee is eligible to hold such a security under Schedules 1, 4 and 5 of these Regulations. (b) The gift does not exceed 5% of the paid up capital of the Indian company/each series of debentures/each mutual fund scheme. (c) The applicable sectoral cap/ foreign direct investment limit in the Indian company is not breached. (d) The donor and the donee are relatives as defined in section 6 of the Companies Act, 1956. 7 [ e) The value of security to be transferred by the donor together with any security transferred to any person residing outside India as gift during the financial year does not exceed the rupee equivalent of US $ 50,000. ] (f) Such other conditions as considered necessary in public, interest by the Reserve Bank. (iii) The application for approval referred to in sub clause (i) shall contain the following information/ documents: (a) Name and address of the donor and the donee. (b) Relationship between the donor and the donee. (c) Reasons for making the gift. (d) In case of Government dated securities and treasury bills and bonds, a certificate issued by a Chartered Accountant on the market value of such securities. (e) In case of units of domestic mutual funds and units of Money Market Mutual Funds, a certificate from the issuer on the Net Asset Value of such security. 16 [(f) In case of shares or convertible debentures or warrants, a certificate from a Chartered Accountant or Merchant Banker registered with Securities Exchange Board of India (SEBI) on the value of such securities according to the pricing guidelines stipulated by the Reserve Bank from time to time.] (g) Certificate from the concerned Indian company certifying that the proposed transfer of 17 [shares or convertible debentures or warrants], by way of gift, from resident to the non-resident shall not breach the applicable sectoral cap/FDI limit in the company and that the proposed number of 18 [shares or convertible debentures or warrants ] to be held by the non-resident transferee shall not exceed 5% of the paid up capital of the company.] 19 [h. A declaration from the donee accepting partly paid shares or warrants that donee is aware of the liability as regards calls in arrear and consequences thereof. ] 10 [(b) any 20 [shares or convertible debentures or warrants] of an Indian company under the Foreign Direct Investment Scheme, whose activities fall under Annex B to Schedule 1, shall, subject to sectoral limits specified therein, transfer such 21 [shares or convertible debentures or warrants] without prior approval of the Reserve Bank if the same is by way of sale, subject to the following: (i) that the parties concerned adhere to the pricing guidelines, documentation and reporting requirements for such transfers, stipulated by the Reserve Bank from time to time (ii) where the transfer of 22 [shares or convertible debentures or warrants] requires the prior approval of the Foreign Investment Promotion Board (FIPB) as per the extant Foreign Direct Investment (FDI) policy: (a) the requisite approval of the FIPB has been obtained; and (b) the transfer of 23 [shares or convertible debentures or warrants] adheres with the pricing guidelines and documentation, reporting requirements as stipulated by the Reserve Bank from time to time. (iii) where SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 1997 are attracted, the pricing guidelines and documentation, reporting requirements as stipulated by SEBI are complied with: Provided howsoever that in case the SEBI guidelines as aforesaid are not complied with, for the purposes of this Regulation, compliance with pricing guidelines, reporting and documentation requirements as stipulated by RBI shall be sufficient. (iv) where the pricing guidelines under the Foreign Exchange Management Act, (FEMA) 1999 are not complied with - (a) The resultant FDI is in compliance with the requirements of Schedule 1, other than pricing guidelines; and (b) The pricing for the transaction is compliant with the applicable SEBI Regulations/guidelines; and (c) Chartered Accountants Certificate to the effect that compliance with the applicable SEBI regulations/ guidelines as indicated above is attached to the form FC-TRS to be filed with the AD bank. (v) where the investee company is in the financial services sector (a) 15 [***] (b) The requirements of Schedule 1 are complied with. Explanation : For the purpose of this Regulation, financial services , shall mean service rendered by banking and non-banking companies regulated by the Reserve Bank, insurance companies regulated by Insurance Regulatory and Development Authority (IRDA), pension funds regulated by the Pension Fund Regulatory and Development Authority, other companies regulated by any other financial regulator and such other services as may be directed by Reserve Bank from time to time,] 11 [(c) any 24 [shares or convertible debentures or warrants] by way of sale, shall make an application to the Reserve Bank for its approval if (i) the transfer is to take place at a price which is not in conformity with the pricing guidelines stipulated by either the Reserve Bank or the SEBI, or (ii) it is not covered by clause (b) above.] 12 [(d) any 25 [shares or convertible debentures or warrants] by way of sale, shall make an application to the Reserve Bank for its approval if the non-resident acquirer proposes deferment of payment of the amount of consideration ] B. Transfer by way of sale not covered by Regulation 9 by a person resident outside India] 3 [1. deleted] 4 [2. A person resident outside India, may transfer share or convertible debenture of an Indian company, without the prior permission of the Reserve Bank, by way of sale, to a person resident in India subject to the adherence to pricing guidelines, documentation and reporting requirements for such transfers as may be specified by Reserve Bank from time to time.] 13 [(3) Where pricing guidelines under the Foreign Exchange Management Act, (FEMA), 1999 are not complied with, a person resident outside India, may transfer 26 [shares or convertible debentures or warrants] of an Indian Company, by way of sale, to a person resident in India, without the prior permission of the Reserve Bank, subject to the following (a) The original and resultant investment are in conformity with the requirements of Schedule 1, other than pricing guidelines; and (b) The pricing for the transaction is compliant with the applicable SEBI regulations/guidelines; and (c) Chartered Accountants Certificate to the effect that compliance with the applicable SEBI regulations/guidelines as indicated above is attached to the form FC-TRS to be filed with the AD bank.] 8 [ C. A person resident outside India may open an Escrow account with an authorized dealer bank in Indian Rupees in India, subject to the terms and conditions as specified in the Foreign Exchange Management (Deposit) Regulations, 2000 , as amended from time to time for acquisition of 27 [shares or convertible debentures or warrants] through open offers/delisting/exit offers, subject to compliance with the relevant SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 2011, as amended from time to time. Such Escrow account may be funded by way of inward remittance through normal banking channel and/or by way of guarantee issued by an authorized dealer bank, subject to terms and conditions as specified in the Foreign Exchange Management (Guarantees) Regulations, as amended from time to time.] 14 [D. A non-resident including Non Resident Indian may acquire shares of a listed Indian company on the recognised stock exchange through a registered broker under FDI Scheme provided that; a. The non-resident investor has already acquired the control in accordance with SEBI (Substantial Acquisition of Shares and Takeover) Regulations and continues to hold such control; b. The amount of consideration for purchase of shares on the recognised stock exchange for transfer to non-residents may be paid as specified in para 8 of Schedule 1 to Notification No. FEMA.20/2000-RB dated 3 rd May, 2000 or out of the dividend payable by Indian investee company in which the non- resident has acquired and continues to hold the control in accordance with SEBI (Substantial Acquisition of Shares and Takeover) Regulations, provided the right to receive dividend is established and the dividend amount has been credited to specially designated non-interest bearing rupee account for acquisition of shares on the recognised stock exchange.] ---------------------- Note: 1. The words 'not being erstwhile OCBs has bee added vide Notification No. 131/2005 dated 17/3/2005 2. Has been substituted vide Notification No. Supra , before it was read as, any share/convertible debenture of an Indian company, by way of sale, shall obtain the Government approval for the transfer and thereafter apply to the Reserve Bank for its approval, which may be granted subject to such conditions as are considered necessary by Reserve Bank, including the price at which such sale may be made. 3. Has been deleted vide Notification No. Supra before deletion it was read as, Transfer by way of sale not covered by Regulation 9 by a person resident outside India of the shares/convertible debentures held by him to a person resident in India, shall require prior permission of the Reserve Bank, for which application in form TS 1 may be made to the Reserve Bank. 4. Has been substituted vide Notification No. Supra , 5. Has been substituted vide Notification No. 137/2005 dated 22/7/2005 , before it was read as, a) any security, by way of gift, shall make an application to the Reserve Bank furnishing the following information, namely: i) Name and address of the transferor and the proposed transferee ii) Relationship between the transferor and the proposed transferee iii) Reasons for making the gift. 6. Has been inserted vide Notification No. 179/2008 dated 22/08/2008 w.e.f. 10-2-2006 7. Substituted vide Notification No. FEMA 236/2012-RB, dated 25-9-2012 , before it was read as;- The value of security to be transferred by the donor together with any security transferred to any person residing outside India as gift in the calendar year does not exceed the rupee equivalent of USD 25,000. 8. Inserted vide NOTIFICATION No. 265/2013-RB March 5, 2013 9. Substituted vide Notification No. FEMA. 242/2012-RB Dated 19-10-2012 w.e.f. 4th day of November 2011, before it was read as Prior permission 10. Substituted vide Notification No. FEMA. 242/2012-RB Dated 19-10-2012 w.e.f. 4th day of November 2011, before it was read as 2 [( b) any share/convertible debenture of an Indian Company whose activities fall under Annexure B to Schedule 1, other than items nos. 1, 2, and 3 and subject to the Sectoral Limits specified therein, shall transfer such shares/debentures without prior approval of Government and RBI if the same is by way of sale subject to the following: (i) that the Indian Company whose shares or convertible debentures are proposed to be transferred is not engaged in rendering any financial service; (ii) that the transfer does not fall within the purview of the provisions of SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 1997; and (iii) that the concerned parties adhere to pricing guidelines, documentation and reporting requirements for such transfers as may be specified by Reserve Bank, from time to time. 11. Substituted vide Notification No. FEMA. 242/2012-RB Dated 19-10-2012 w.e.f. 4th day of November 2011, before it was read as 6 [(c) any security by way of sale, shall make an application to the Reserve Bank for its approval if, (i) the activity of the Indian company, whose securities are being transferred, falls outside the Automatic Route, and the approval of the FIPB has been obtained for the said transfer; (ii) the activity of the Indian company whose securities are being transferred, falls under the financial services sector; (iii) the transfer falls within the purview of the provisions of SEBI (Substantial Acquisition of Shares and Takeovers) Regulation 1997;and (iv) the transfer is to take place at a price which falls outside the pricing guidelines specified by Reserve Bank, from time to time] Explanation:- For the purpose of this Regulation, financial services shall mean service rendered by banking and non-banking companies regulated by the Reserve Bank, insurance, companies regulated by Insurance Regulatory and Development Authority (IRDA) and other companies regulated by any other financial regulator as the case may be. 12. Inserted vide Notification No. FEMA. 242/2012-RB Dated 19-10-2012 w.e.f. 22nd day of April 2009. 13. Inserted vide Notification No. FEMA. 242/2012-RB Dated 19-10-2012 w.e.f. 4th day of November 2011. 14 . Inserted vide NOTIFICATION No. 279/2013-RB dated 10 th July, 2013 15. Deleted vide NOTIFICATION No. FEMA. 290/2013-RB Mumbai, the 4 th October, 2013, before it was read as, (a) No Objection Certificates (NOCs) are obtained from the respective financial sector regulators/regulators of the investee company as well as transferor and transferee entities and such NOCs are filed along with the form FC-TRS with the AD bank; and 16. Substituted vide Notification No. FEMA. 308/2014-RB, dated June 30, 2014 , before it was read as, (f) In case of shares and debentures, a certificate from a Chartered Account on the value of such securities according to the guidelines issued by the Securities Exchange Board of India or the erstwhile CCI with regard to listed companies and unlisted companies respectively. 17. Substituted vide Notification No. FEMA. 308/2014-RB, dated June 30, 2014 , before it was read as, shares/convertible debentures 18. Substituted vide Notification No. FEMA. 308/2014-RB, dated June 30, 2014 , before it was read as, shares/convertible debentures 19. Inserted vide Notification No. FEMA. 308/2014-RB, dated June 30, 2014 20. Substituted vide Notification No. FEMA. 308/2014-RB, dated June 30, 2014 , before it was read as, shares/convertible debentures 21. Substituted vide Notification No. FEMA. 308/2014-RB, dated June 30, 2014 , before it was read as, shares/ debentures 22. Substituted vide Notification No. FEMA. 308/2014-RB, dated June 30, 2014 , before it was read as, shares or convertible debentures 23. Substituted vide Notification No. FEMA. 308/2014-RB, dated June 30, 2014 , before it was read as, shares or convertible debentures 24. Substituted vide Notification No. FEMA. 308/2014-RB, dated June 30, 2014 , before it was read as, shares or convertible debentures 25. Substituted vide Notification No. FEMA. 308/2014-RB, dated June 30, 2014 , before it was read as, shares or convertible debentures 26. Substituted vide Notification No. FEMA. 308/2014-RB, dated June 30, 2014 , before it was read as, shares or convertible debentures 27. Substituted vide Notification No. FEMA. 308/2014-RB, dated June 30, 2014 , before it was read as, shares or convertible debentures