May 8th, 2012 — Investment in India
A. P. (DIR Series) Circular No.117
May 07, 2012
All Authorised Dealer banks and Authorised banks
Transfer of Funds from Non-Resident Ordinary (NRO) account to Non-
Resident External (NRE) Account
The Committee to Review the Facilities for Individuals Under FEMA, 1999 (Chairperson : Smt. K.J.Udeshi) has recommended that the NRIs/PIOs may be permitted, subject to payment of applicable taxes, to transfer repatriable funds from their NRO account within the overall ceiling of US $ 1 million per financial year, for credit to their NRE account in India. At present transfer of funds from NRO to NRE account is not permissible.
2. On a review, it has been decided that henceforth NRI as defined in Foreign Exchange Management (Deposit) Regulations, 2000 contained in Notification No. FEMA.5/2000-RB dated 3rd May 2000, as amended from time to time, shall be eligible to transfer funds from NRO account to NRE account within the overall ceiling of USD one million per financial year subject to payment of tax, as applicable (i.e. as applicable if funds were remitted abroad). Such credit of funds to NRE account shall be treated as eligible credit in terms of paragraph 3(j) of Schedule-1 of Notification No. FEMA.5/2000-RB dated 3rd May 2000.
3. All Authorised Dealer banks and Authorised banks may bring the contents of this circular to the notice of their constituents and customers concerned.
4. The directions contained in this circular have been issued under Sections 10(4) and 11(1) of the Foreign Exchange Management Act, 1999 (42 of 1999) and are without prejudice to permissions/approvals, if any, required under any other law.
(Rudra Narayan Kar)
Chief General Manager
October 22nd, 2010 — Company Law, Income Tax, Investment in India
The Limited Liability Partnership Act, 2008 (herein after called “Act”) has brought a new kind of business vehicle in the Country called LLP, allowing small business and entities to carry on business under a flexible business model. The Act is silent about Dividend Distribution Tax, Minimum Alternative Tax, allowing number of corporate houses to escape tax by converting their investment and holding companies (herein after called “Investment Company”) into LLP, which are spared of above mentioned tax incidence, resulting to pay higher payout as dividend to their promoters.
Further, at the time of conversion of Investment Company into LLP, Registrar of Companies ask for a “No Objection Certificate” form the Central Bank of India since the porposed LLP wold be dealing with investment activities. However, Reserve Bank of India is not willing to give NOC for the reason as these Investment Company would be out of the perview of supervision of RBI.
Adding to this, there is a need to amend the exixting Act in line with the requrirement of RBI. The Officials of RBI are in talk with Ministry of Corporate Affairs to arrive at a workable solution.
May 10th, 2010 — Company Law, Investment in India
In terms of Schedule 1 of the Notification, an Indian company may issue equity shares/compulsorily convertible preference shares and compulsorily convertible debentures (equity instruments) to a person resident outside India under the FDI policy, subject to inter alia, compliance with the pricing guidelines. Further, in terms of the A. P. (DIR Series) Circular No.16 dated October 4, 2004 and A. P. (DIR Series) Circular No. 63 dated April 22, 2009, general permission is available for transfer of equity instruments, by way of sale, from residents to non-residents (including transfer of subscriber’s shares) of an Indian company in sectors other than financial service sector (i.e. Banks, NBFCs, Insurance, Asset Reconstruction Companies, Infrastructure companies in securities market namely, Stock Exchanges, Depositories and Clearing Corporations, Credit Information Companies and Commodity Exchanges) from residents to non-residents and vice versa. NEW_PRCING_GUIDELINES
The extant guidelines have been reviewed in consultation with the Government of India and accordingly the pricing guidelines in respect of issue of shares including preferential allotment have been revised
||Transfer by Resident to Non-resident (i.e. to incorporated non-resident entity other than erstwhile OCB, foreign national, NRI, FII)
Transfer of shares by way of sale, by resident to non-resident shall be at a price not less than
a) the ruling market price, in case the shares are listed on stock exchange,
b) fair valuation of shares done by
|Transfer by Resident to Non-resident (i.e. to foreign national, NRI, FII and incorporated non-resident entity other than erstwhile OCB)
(a) where shares of an Indian company are listed on a recognized stock exchange in India, the price of shares transferred by way of sale shall not be less than the price at which a preferential allotment of shares can be made under the SEBI Guidelines, as applicable, provided that the same is determined for such duration as specified therein, preceding the relevant date, which shall be the date of purchase or sale of shares.
(b) where the shares of an Indian
||Transfer by Non-resident (i.e. by incorporated non-resident entity, erstwhile OCB, foreign national, NRI, FII) to Resident.
Sale of shares by a non-resident to resident shall be in accordance with Regulation 10 B(2) of Notification No. FEMA 20/2000-RB dated May 03,2000 which is as below:
a) Where the shares of an Indian company are traded on stock exchange
i) The sale is at the prevailing market price on stock exchange and is effected through a merchant banker registered with the SEBI or through a stock broker registered with the stock exchange.
ii) if the transfer is other than that referred to in clause (i), the price shall be arrived at by taking the average quotations (average of daily high and low) for one week preceding the date of application with 5 per cent variation.
Where, however, the shares are being sold by the foreign collaborator or the foreign promoter of the Indian company to the existing promoters in India with the objective of passing management control in favour of the resident promoters the proposal for sale will be considered at a price which may be higher by up to a ceiling of 25 per cent over the price arrived at as above.
(b) Where the shares of an Indian company are not listed on stock exchange or are thinly traded,
i) if the consideration payable for the transfer does not exceed Rs.
20 lakh per seller per company, at a price mutually agreed to between the seller and the buyer, based on any valuation methodology currently in vogue, on submission of a certificate from the statutory auditors of the Indian company whose shares are proposed to be transferred, regarding the valuation of the shares, and
ii) if the amount of consideration payable for the transfer exceeds Rs.20 lakh per seller per company, at a price arrived at, at the seller’s option, in any of the following manner, namely:
A) a price based on earning per share (EPS) linked to the Price Earning (P/E) multiple ,or a price based on the Net Asset Value (NAV) linked to book value multiple, whichever is higher,
B) the prevailing market price in small lots as may be laid down by the Reserve Bank so that the entire shareholding is sold in not less than five trading days through screen based trading system
C) where the shares are not listed on any stock exchange, at a price which is lower of the two independent valuations of share, one by statutory auditors of the company and the other by a Chartered Accountant or by a Merchant Banker in Category 1 registered with Securities and Exchange Board of India.
|Transfer by Non-resident (i.e. by incorporated non-resident entity, erstwhile OCB, foreign national, NRI and FII) to Resident
Price of shares transferred by way of sale, by non-resident to resident shall not be more than the minimum price at which the transfer of shares can be made from a resident to a non-resident as given in para 2.2 above.
(b) where the shares of an Indian company are not listed on a recognized stock exchange in India, the transfer of shares shall be at a price not less than the fair value to be determined by a SEBI registered Category-I-Merchant Banker or a Chartered Accountant as per the discounted free cash flow method.
The price per share arrived at should be certified by a SEBI registered Category-I-Merchant Banker / Chartered Accountant.
March 11th, 2010 — Income Tax, Investment in India
UBD (PCB) BPD.Cir.No. 48/13.01.000 / 2009-10
March 4, 2010
Chief Executive Officer
All Primary (Urban) Cooperative Banks
Payment of Interest on Savings Bank Account on Daily Product Basis
Please refer to our circular UBD (PCB) BPD.Cir.No. 7/13.01.000/2009-10 dated September 1, 2009 advising banks to put in place requisite infrastructure so that transition to the revised procedure of calculating interest on balances in savings bank accounts on a daily product basis could be implemented smoothly.
2. We advise that payment of interest on savings bank accounts may be made by banks on a daily product basis with effect from April 1, 2010.
Chief General Manager-in-Charge
September 23rd, 2008 — Investment in India
Foreign companies who are engaged in manufacturing and trading activities outside India are allowed, by Indian law, to set up branch offices in India for the following purposes:
- Export/Import of goods
- Rendering professional or consultancy services
- Carrying out research work, in which the parent company is engaged.
- Promoting technical or financial collaborations between Indian companies and parent or overseas group company.
- Representing the parent company in India and acting as buying/selling agents in India.
- Rendering services in Information Technology and development of software in India.
- Rendering technical support to the products supplied by the parent/ group companies.
- Foreign airline/shipping Company.
The branch office is not allowed to carry out manufacturing activities on its own but is permitted to subcontract these to an Indian manufacturer.
Branch offices, which are established with the approval of RBI, may remit part of the profit of the branch outside India, after deducting applicable Indian taxes and subject to RBI guidelines. Permission for setting up branch offices is granted by the Reserve Bank of India (RBI).
For obtaining approval from RBI and to register with the Registrar of Companies, the following documents are required for opening a branch in India:
- A copy of Board Resolution for opening Branches in India. (Notary and consulate by Indian embassy)
- A copy of Certificate of incorporation of your company abroad
- A copy of Memorandum of the company.
- List of Directors/Key Persons of the company
- List of Branches in other countries if any
- Brief profile of the business activity
- Proposed address of the branch in India.
All the documents are required in duplicate.
New guideline issued by the RBI