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Transfer of Shares between Resident and Non-resident: Six Steps FC-TRS

March 2, 2017     by Nupur Singhal

With the increasing pace of paperless governance, Reserve Bank of India (RBI) allowed the facility to file form FC-TRS electronically on e-Biz platform vide A.P. (DIR Series) Circular No. 9 dated August 21, 2015. Filing of form FC-TRS electronically through e-biz portal is mandated discontinuing the physical filing w.e.f. February 8, 2016 vide A.P. (DIR Series) Circular No. 40 dated February 1, 2016.

SIX IMPORTANT POINTS TO REMEMBER

  1. There is no fee for filing FC-TRS through e-biz portal.
  2. The onus of filing form FC-TRS lies on the transferor/transferee whosoever is resident in India.
  3. The transferor/transferee/consultant filing the form needs to register itself with e-biz portal before filing it.
  4. It is mandatory to attach the consent letter of both buyer and seller with form FC-TRS.
  5. Valuation of shares to be transferred must be as per FDI norms. (Detailed below)
  6. Sectoral limits applicable on the company must be taken care of before transferring shares.

REGISTRATION ON E-BIZ PORTAL

Following 2 registrations are required on e-biz portal before you can file form:

  1. Firstly, the transferor/transferee/consultant filing the form shall register itself on the portal.
  2. After that, the business/company in which the investment is made shall also be registered on the portal.

Only after the above two registrations are done, the transferor/transferee/consultant can file FC-TRS.

REPORTING REQUIREMENT IN FORM FC-TRS: LEGAL PROVISION

As per the Consolidated FDI Policy 2016, reporting of transfer of shares between Residents and Non-residents and vice- versa is to be made in Form FC-TRS. The Form FC-TRS should be submitted to the AD Category – I bank, within 60 days from the date of receipt/date of payment of the amount of consideration. The onus of submission of the Form FC-TRS within the given time frame would be on the transferor / transferee, resident in India.

ACTUAL STAGE OF FILING FC-TRS WITH E-BIZ PORTAL

Case I: Sale from Non-resident to Resident

At present, since filing of FC-TRS electronically is mandated, it is practically not possible to file FC-TRS within 60 days from the date of receipt of the amount of consideration in case the sale is made from Non-resident to Resident. This is because now AD Category-I bank requires proof of submitting FC-TRS on e-biz portal before releasing the payment to the Non-resident.

Thus, practically, following steps are followed:

Six Simple Steps for Transfer from Non-resident to Resident Under e-Biz

  1. Filing FC-TRS electronically along with the attachments.
  2. Submitting the proof of filing FC-TRS to AD Category-I bank along with the application and other required documents for making payment of consideration.
  3. Remittance is made
  4. Approval of FC-TRS by RBI. (The status can always be checked online)
  5. Submitting FC-TRS, proof of payment, share certificate(s), if applicable, share transfer deed and other document required with the company.
  6. Company registers the transfer.

Case II: Transfer from Resident to Non-resident

If the transfer by way of sale is made from resident to non-resident, it becomes necessary to attach FIRC for receipt of consideration from non-resident with form FC-TRS. Thus, following steps are followed for successful registration of transfer from resident to non-resident:

Six Simple Steps for Transfer from Resident to Non-resident Under e-Biz

  1. Receipt of consideration from non-resident.
  2. Obtain FIRC for the receipt above from AD Category-I bank.
  3. File FC-TRS electronically along with the attachments. FIRC is required to be attached with the form.
  4. Approval of FC-TRS by RBI. (The status can always be checked online)
  5. Submitting FC-TRS, share certificate(s), if applicable, share transfer deed and other documents required with the company.
  6. Company registers the transfer.

SIX DOCUMENTS REQUIRED TO BE ATTACHED ALONG WITH THE FORM

Following documents shall be attached to the e-form FC-TRS:

  1. Consent letter duly signed by the buyer and seller or their duly appointed agent and in the latter case, the Power of Attorney document.
  1. The shareholding pattern of the investee company before and after the acquisition of shares by a person resident outside India along with CS certificate from investee company that FDI is within the prescribed limit and as per extant guidelines.
  1. Certificate indicating fair value of shares from a Chartered Accountant.
  1. Declaration from the buyer to the effect that he is eligible to acquire shares/compulsorily and mandatorily convertible preference shares/debentures under FDI policy and the existing sectoral limits and pricing guidelines have been complied with. If applicable, declaration from the FII/sub account to the effect that the individual FII/sub account ceiling as prescribed has not been breached.
  1. If the sellers are NRIs/OCBs, the copies of RBI approvals evidencing the shares held by them, if any.
  1. Declaration by the Non-resident along with the self-attested photo ID proof of the person signing and the board resolution from the foreign company (if Non-resident is a Company) authorising to sign FC-TRS form.

VALUATION ASPECT

Case I: Listed Companies

In terms of SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2009 as may be amended from time to time.

It is important to note that it holds good only for off market trades of listed securities. For trading on stock exchanges by Non-residents, refer to the SEBI (Foreign Portfolio Investors) Regulations.

Case II: Unlisted Companies

As per any internationally accepted pricing methodology on arm’s length basis.

PRICING OF THE SECURITIES TRANSFERRED BY WAY OF SALE

Case I: Sale from Resident to Non-resident

 The transfer shall be made at or above fair value determined as above. The minimum price shall be the fair value.

Case II: Sale from Non-resident to Resident

The transfer shall be made at or below the fair value determined as above. The maximum price shall be the fair value.

47 thoughts on “Transfer of Shares between Resident and Non-resident: Six Steps FC-TRS

  1. In case of transfer from NR to R:
    1) Buyer is a company, does that require a board resolution authorising any director to sign the consents?

    2) The seller is also a company, does that require any seperate board resolution?

    3)The buying and selling is happening from the NR seller Shareholder in an Indian company X to an Indian company Y; the procedure is still the very same?

    1. 1) & 2) Yes, in case the transferee/transferor is a Company, a Director/any other person must be authorized to sign the Transfer Deed and incidental documents.

      3) We are not clear which procedure you are referring to. However, for transfer, the provisions of section 56 of the Companies Act, 2013, has to be followed. Further, since it is transfer between NR and R, form FC-TRS (SMF) is also required to be filed on FIRMS portal by the transferee.

  2. If more than 1 resident shareholders have sold their shares to a non-resident, should all residents file FC-TRS at the same time or one after another (that is, only after the previous filing is approved)? How long does it typically take to get a approval or rejection from the ADB?

    1. The onus of reporting in FC-TRS falls on the transferor or transferee, whoever is resident. In your case, there are multiple resident transferors, therefore separate reporting has to be done by each transferor (inspite of the fact that there is single transferee).
      The criteria of filing form only after approval/rejection of the previous one is applicable only when it is filed by the same transferor. Since in your case, more than 1 transferor is involved, separate reporting to be done by each of them from their respective IDs. So, you don’t have to wait for previous approval. The form is approved/rejected by the AD Bank within 5 working days from the date of filing.

  3. FC-TRS need to be file by Transferor/ Transferee who is resident in India. As per consolidate FDI policy A NRI can sale share on stock exchange through Register Stock Broker. When NRI sold the listed entity share on stock exchange through stock broker, onus on whom to file Form FCTRS ? 1. Transferor but he is not resident. 2. Transferee, he is resident but we do not know to whom shares sold as transaction was on stock exchange. 3. Investee Company, but how Investee Company will come to know about the transaction as the transaction was on stock exchange. 4. Stock Broker ???

    1. A person resident outside India can transfer their security of an Indian Company by way of sale or gift on a recognized Stock Exchange in India through a stock broker registered with Stock Exchange or merchant banker registered with SEBI.

      As per RBI Notification No.20(R)/Nov. 07, 2017, onus of submission of Form FC-TRS is on the resident transferor or transferee.

      However in case of transfer of shares by a non-resident Indian on a recognized stock exchange, onus of reporting shall be on such non-resident person.
      In your case as the NRI has sold the shares on Stock Exchange.

      Therefore, FC-TRS should be filed by NRI.

  4. Looks like FCTRS form has again moved to RBI site. How can an individual resident investor in an Indian Startup file FCTRS after selling his shares to a non-resident buyer. FIRMS doesnt seem to have a way to create login credentials for non Business User / non Entity user.

    1. FC-TRS can be filed by an individual or a company on Firms RBI. If an individual wants to file FC-TRS, he/she will have to obtain authority letter from the concerned business entity and then create new business user to file the same. Please note that the procedure mentioned in the manual / guide to the FIRMs portal need to be followed till the time RBI clarifies the situation w.r.t. the filings to be made by individuals.

  5. 1. In case of transfer from R to NR, the CA valuation certificate needs to be done before receiving the remittance?
    2. Is any formal request required for such transfer by the R to NR

    1. CA valuation certificate shall be obtained before the remittance is received. However, the valuation shall not be older than 6 months from the date of remittance received.
      Please be more specific about which formal request you are talking about.

  6. If the Indian Company wants to buy-back the shars from the Non-resident Shareholder then:
    1. Is there is need to file FC-TRS?
    2.Is there any RBI approval is required for this?
    3. Is there any pricing guidelines involved for the buy-back of shares by Indian Company?

    Your co-operation would be highly appreciated.

    Thankyou!!

  7. Hi can you specify the exact RBI regulation where it is written company cannot register transfer from R to NR without certified FCTRS. Cause in our case the amount was received in Indian currency from NR but since no amount can come directly to indian bank from foreign it got remitted to some indian bank and then that indian bank did RTGS to beneficiaries account. The resident beneficiaries are trying to get FIRC but the beneficiary banks have already taken more than 60 days to issue FIRC and KYC as they say since amount is received in INR and RTGS no FIRC will be issued and after many deliberation they go convinced that they have to issue FIRC for such transaction.

    1. AD Bank provides you with a sanction letter or certificate if all the documents and information are satisfactory to them. This is a documentary evidence which states that FDI compliances are duly taken care off by the applicant.
      The sanction letter/certificate issued by AD bank is attached with the share transfer form and share certificate and submitted to the Company so that company may take the transfer on its record.

      https://www.bsamrishindia.com/transfer-of-shares-between-resident-and-non-resident-private-limited-companies/

  8. In case of NR to Resident Transfer,

    1. Do we need to attach NOC from CA even though 15CA part D is filed. (15CB is not applicable)

    2. What are the mandatory attachment in FCTRS in case of NR (Company) to resident (Individual) transfer.

    1. 1. There is nothing prescribed for the format of NOC/tax clearance certificate from a CA. In case 15CA and 15CB are applicable then no separate NOC/certificate is required. In your case if 15 CB is not applicable then a separate Tax Clearance certificate will be required.

      2. All the mandatory attachments are given in our blog. Further, if seller is a company then in addition to general list, a Board Resolution and its Constitution documents are required.

  9. Is there any requirement in case of issue of Shares to Foreign Creditor (Holding Co.) , against their outstanding which they have paid for expenses.

    How you will show the receipt of funds, which directly credited to the Indian Creditors and not received by the company??

    1. As per Schedule 1(1)(3)(b) to Foreign Exchange Management (Transfer or Issue of Security by a Person Resident Outside India) Regulations, 2017, such expenses termed as pre-incorporation expenses, can be capitalised by way of issue of shares. To this effect, a certificate is needed from the statutory auditor of the Indian company stating that the amount of pre-incorporation/ pre-operative expenses against which capital instruments have been issued has been utilized for the purpose for which it was received should be submitted with the Form FC-GPR.
      Please note that as per the regulations, only pre-incorporation expenses can be capitalised.

  10. IS FC-TRS is required, When a non Resident director is gifting the shares to other Resident Director in India.

    1. Yes, filing of FC-TRS is required because even though there is no consideration involved (since it ia a gift), reporting is required as there is transfer of shares held on repatriable basis to non- repatriable basis.

  11. Non resident has transferred shares to 2 indian resident amounts to Rs. 450 , so we need to take tax clearance certificate for this transaction?? and tax clearance certificate is required every time when transfer from resident to non resident and vice versa.
    Please reply.
    Thanks in advance.

    1. As mentioned in regulation 12 of Foreign Exchange Management (Transfer or Issue of Security by a Person Resident Outside India) Regulations, 2017, all transaction under these regulations shall be subject to payment of applicable taxes and other duties/ levies in India irrespective of the amount remitted.
      Therefore, it is mandatory to obtain tax clearance certificate from either Income tax Authority or from the Chartered Accountant

  12. Is there any time limit within which the shares should be transferred from resident to non resident after receipt of consideration

  13. We have submitted form fctrs thru ebiz portal and dept. has asked for some documents / clarifications. At the time of providing the clarification / documents, erronously we have filed a new application form and submitted the same also instead of giving the details in the first one. After realising, we have updated the 1st application and filed. Now, what is the procedure for withdrawing the 2nd application formwhich has been filed erronously. Please guide at the earliest.

  14. We have recevied remiitance on 01.07.2017 and effected a transfer on 30.07.2017. AD is askin us why the shares are trasnfered after receipt of money. is it even a valid question by bank.

  15. Please provide the format of declaration from the buyer to the effect that he is eligible to acquire shares/compulsorily and mandatorily convertible preference shares/debentures under FDI policy and the existing sectoral limits and pricing guidelines have been complied with incase of transfer of shares from non-resident to resident Indian

    1. There is no specified format for such a declaration. It may be mentioned in the declaration that the NR Transferee is eligible to acquire shares. It is not a transfer relating to shares of a company engaged in financial services sector or a sector where general permission is not available. Also the fact that there is no sectoral limit under FDI policy and the fact that pricing guidelines have been adhered to.

  16. Hi,

    If shares are transferred from NR to NRI and consideration is paid from NRE account, then please reply if the below needs to be complied:

    1. Whether FC-TRS to be filed?
    2. Whether valuation certificate is required and as per which method?
    3. If no valuation is required, can the transfer be done at face value?

    Thanks

    1. As per Regulation 13(4) of Foreign Exchange Management (Transfer or Issue of Security by a Person Resident Outside India) Regulations, 2017, Form FCTRS shall be filed for transfer of capital instruments between:

      (1) a person resident outside India holding capital instruments in an Indian company on a repatriable basis and person resident outside India holding capital instruments on a non-repatriable basis; and
      (2) a person resident outside India holding capital instruments in an Indian company on a repatriable basis and a person resident in India.

      With the limited facts, we are unable to say whether FC-TRS to be filed or not. Please consult a Professional with detailed facts.

      For Valuation point, you may see the regulation 11 of Foreign Exchange Management (Transfer or Issue of Security by a Person Resident Outside India) Regulations, 2017.

  17. Hi,

    In case of a NR to R transfer, does the seller needs to have a PAN to pay the capital gain tax or the buyer/any person can pay taxes on behalf of the seller?

    What is the tax rate for LTCG & STCG?

    Thanks

    1. It is not necessary for the seller to have pan card for the purpose of Depositing the LTCG or STCG with the Income Tax Dept. Resident Buyer may deduct the tax on behalf of the Non-Resident Seller at the time of making the payment in the form of Tax Deducted at source (TDS) and deposit the same with the Income Tax Dept. Earlier, there is no LTCG on sale of shares of listed Companies but as per the Finance bill 2018-19, with effect from 1st April, 2018 Rates of LTCG shall be 10% with effect while STCG on sale of shares shall be charged @ 15%.

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