FCTRS (Foreign Currency- Transfer of Shares):
1. No fee for filing of form FC-TRS, if filed within 60 days from the date of receipt/date of payment of the amount of consideration otherwise the RBI/ AD Bank may impose the penalty for late filling by way of Late Submission fee (LSF).
2. Onus of filing of form FC-TRS lies on the transferor/transferee whosoever is resident in India.
3. The transferor/transferee filing the form needs to register itself with RBI-Firms 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.
6. Sectoral Limits applicable on the company must be taken care of before transferring shares.
Registration on RBI-FIRMS Portal
Following 2 registrations are required on RBI FIRMS portal before you can file the form:
- The Indian entities (Companies, LLPs or startup) which have received the foreign investment in the past are required to register them by filing this form. The window to enter the information in the EMF was initially opened from 28/06/2018 to 20/07/2018 but the RBI again reopened the window from 01/09/2018, for those Indian entities, which were unable to upload their details under the EMF by submitting the reason for delay along with authority letter (prescribed by RBI).
For new Companies, LLPs or startup which have been set up after 30.07.2018, the EMF window is always open for them without any delay letter.
- After getting the Entity user registration, the entity required to get the business user registration as well. For this, you need to visit on https://firms.rbi.org.in/firms/ and select Registration Form for Business User and fill the necessary details and attach the authorization letter (the format of this letter is given in user manual for SMF).
Please note that this registration can also be availed by an individual in the case where a resident individual is required to report.
Transfer of securities (such as shares, debentures, share warrants etc.)
Thus, following steps are followed for successful registration of transfer of securities from Resident to Non-Resident:
1. Receipt of consideration from non-resident.
2. Obtain FIRC (Foreign Inward Remittance certificate) and KYC (Know your customer) of person residing outside India from AD Category-I bank.
3. Submitting Security transfer deed and other documents required with the company.
4. Company registers the transfer.
5. File FC-TRS on FIRMS RBI Portal along with the attachments. (as mentioned below in Annexure 1)
6. Approval of FC-TRS by RBI.
Following documents shall be attached while filling e-form FC-TRS:
1. Consent letter for transfer/receipt of consideration duly signed by the buyer and the seller.
2. The shareholding pattern of the investee company (“the company, whose securities are transferring from one person to another”) before and after the acquisition of securities by a person resident outside India.
3. Certificate indicating fair value of securities from a Chartered Accountant.
4. Declaration from the buyer to the effect that he is eligible to acquire shares/compulsorily and mandatorily convertible preference shares/debentures under FDI policy.
5. Declaration from the non-resident transferee as per the format provided by the RBI in their SMF- user manual.
6. Requests letter from the transferee/transferor to register the transfer of securities in favor of investee Company.
7. Board Resolution of Investee Company to approve and acknowledge the securities transfer.
8. Securities Transfer Deed in form SH 4.
9. Security Purchase agreement, if any.
10. FIRC/KYC received from the AD Bank of transferor/transferee.
Valuation Aspects under Transfer of securities
- The transfer shall be made at or above fair value determined as on arm’s length basis.
- The minimum price shall be the fair value as determined by the chartered accountant.
- If the fair value, so determined, is lower than the face value of the securities of the Investee Company, then in that case the transfer shall be done at or above the face value per security.
AMOUNT OF LSF PRESCRIBED BY RBI FOR DELAY REPORTING
|The amount involved in reporting (in Rs.)||Late Submission Fee (LSF) as % of the amount involved *||The maximum amount of LSF applicable|
|Up to 10 million||0.05 percent||Rs.1 million or 300% of the amount involved, whichever is lower|
|More than 10 million||0.15 percent||Rs.10 million or 300% of the amount involved, whichever is lower|
|* The % of LSF will be doubled every twelve months.The floor (minimum applicable amount) for LSF will be Rs. 100|