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Person resident in India (PRII) may permit for Transfer or Liquidation of Equity capital - FEMA Ready Reckoner - FEMAExtract Transfer or Liquidation Restructuring of Equity capital has made Overseas Direct Investment (ODI) by Person resident in India (PRII) Equity Capital Define in Rule 2(e) means equity shares or perpetual capital or instruments that are irredeemable or contribution to non-debt capital of a foreign entity in the nature of fully and compulsorily convertible instruments; Disinvestment Define in rule 2(d) means partial or full extinguishment of right, title or possession of equity capital acquired under these rules; Pricing guidelines for issue or transfer of equity capital As per Rule 16 of Foreign Exchange Management (Overseas Investment) Rules, 2022 (1) Unless otherwise provided in these rules, the issue or transfer of equity capital of a foreign entity from a person resident outside India or a person resident in India to a person resident in India who is eligible to make such investment or from a person resident in India to a person resident outside India shall be subject to a price arrived on an arm s length basis. (2) The Authorised Dealer Bank (AD bank), before facilitating a transaction under rule 16(1) , shall ensure compliance with arm s length pricing taking into consideration the valuation as per any internationally accepted pricing methodology for valuation. Transfer or Liquidation of share for Investment or Disinvestment As per Rule 17 Foreign Exchange Management (Overseas Investment) Rules, 2022 (1) Unless otherwise provided in these rules, a person resident in India (PRII) holding equity capital in accordance with these rules may transfer such investment, in compliance with the limits and subject to the conditions for such investment or disinvestment, The pricing guidelines (Rule 16) or documentation and reporting requirements, in the manner provided in these rules and the Foreign Exchange Management (Overseas Investment) Regulations, 2022. (2) A person resident in India (PRII) may transfer equity capital by way of sale to a person resident in India, who is eligible to make such investment under these rules, or to a person resident outside India. (3) In case the transfer is on account of merger, amalgamation or demerger or on account of buyback of foreign securities , such transfer or liquidation in case of liquidation of the foreign entity, shall have the approval of the competent authority as per the applicable laws in India or the laws of the host country or host jurisdiction , as the case may be. (4) Where the disinvestment by a person resident in India pertains to Overseas Direct Investment (ODI) the transferor In case of full disinvestment other than by way of liquidation , shall not have any dues outstanding for receipt, which such transferor is entitled to receive from the foreign entity as an investor in equity capital and debt; In case of any disinvestment must have stayed invested for at least one year from the date of making ODI: Exception :- This sub rule shall not be applicable in case of a merger, demerger or amalgamation between two or more foreign entities that are wholly-owned, directly or indirectly, by the Indian entity or where there is no change or dilution in aggregate equity holding of the Indian entity in the merged or demerged or amalgamated entity. (5) The holding of any investment or transfer thereof in any manner shall not be permitted if the initial investment was not permitted under the Act.
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