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Transfer of Debentures or Shares

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Transfer of Debentures or Shares

Share transfer in the below mentioned types of cases is permitted under automated route:

  • Share transfer from a resident to a non-resident included of share acquisition in an existing organization subject to the sect oral scheme on the Foreign Direct Investment (FDI) when consent from SEBI/RBI/IRDA is needed and also subject to the recommended pricing rules.
  • Conversion of loan or ECB into an equity provided activities of the organization has coverage under the automated route, the foreign equities followed by such conversion fall under sect oral cap and comply with the recommended pricing instructions.
  • Instances of rise in the foreign equity involvement by the fresh issue of share and conversion of the preference shares into the equity capital subject to increase within sect oral cap in the related fields, are amongst the automated route and abide by the recommended pricing instructions.

General consent form RBI has been approved to the Non Residents/NRIs for the transfer of the shares as well as the convertible debentures of an India-based organization as follows:

  1. An individual residing outside India (except OCB and NRI) may transfer convertible debentures of shares through gift or sale to an individual residing outside India included of the NRIs; provided the transferee has got prior consent from the FIPB or SIA, in respect of Press Note No. 1 (2005 series) to get the shares if the person already has a venture or tie-up in India in the similar sector in which the India-based organization whose shares are got transferred is involved.
  2. The OCB or NRI may transfer his convertible debentures or shares as a gift or sale to another NRI; provided the transferee has got the prior consent from the Central Government of India in respect to the Press Note No. 1 (2005 series) to obtain shares if the person has already got a venture or tie-up in the country in the similar arena in which the India-based organization whose shares are got transferred, is involved.
  3. An individual residing outside India shall sell translatable debentures and shares on an India-based organization listed on Indian Stock Exchange through a licensed share broker.

GDR/ADR

  • An India-based company may raise it foreign currency sources overseas by issuing American Depository Receipt (ADR) or Global Depository Receips (GDR) through issue of Rupee denominated share to an individual residing outside the country being the depository for issuing GDRs and or ADRs, subject to the following conditions:
  • GDRs or ADRs are issued according to the scheme for issuing Foreign Currency Convertible Bonds as well as Ordinary Shares (By Depository Receipt Mechanism) Scheme of 1993 and ruled made by Central Government of India there under periodically.
  • The India-based organization issuing these shares has the approval from Finance Ministry, Government of India for issuing GDRs and/or ADRs or is entitled for issuing GDRs/ADRs in respect to the related scheme in effect or notification issued by Finance Ministry of Government of India and the India-based company issuing these shares is not otherwise disallowed for issuing such shares to the individuals residing outside India according to these guidelines.

There is no such perimeter up to what an India-based organization may raise GDRs/ADRs. But, the company needs to be otherwise entitled to pull foreign equities under the existing FDI policy.

Also, there is no such end-use limitation on ADR/GDR issuing procedures, excluding for the express prohibition on investing in real estate property and/or stock market.

The FCCB issuing procedures require matching with the external commercials borrowing end-use requirements. Moreover, 25% of FCCB procedures may be used for general company restructuring.

An organization involved in manufacturing of goods covered under the automated route, whose Foreign Direct Investment after the proposed ADRs/GDRs/FCCBs issue is probably to surpass equity limit under automated route, or which is applying a project that comes under the government approval route, may require to get prior permission from the Government of India by FIPB prior to seeking ultimate consent from the Finance Ministry, Government of India.

Related Topics:

  • Indian Foreign Direct Investment Policy

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