Share Transfer to Non resident : RBI Relaxes Payment norms under FEMA

By | May 25, 2016
(Last Updated On: May 25, 2016)

NOTIFICATION NO.FEMA.368/2016-RB/GSR 537(E),

DATED 20-5-2016

In exercise of the powers conferred by clause (b) of sub-section (3) of section 6 and section 47 of the Foreign Exchange Management Act, 1999 (42 of 1999), the Reserve Bank of India hereby makes the following amendments in the Foreign Exchange Management (Transfer or Issue of Security by a Person Resident outside India) Regulations, 2000 (Notification No. FEMA. 20/2000-RB, dated 3rd May, 2000) namely:-

Short Title and Commencement

1. (i) These Regulations may be called the Foreign Exchange Management (Transfer or Issue of Security by a Person Resident outside India) (Seventh Amendment) Regulations, 2016.

(ii) They shall come into force from the date of publication in the official Gazette.

New Regulation

2. In the Principal Regulations, after Regulation 10, the following shall be inserted, namely:—

“10A. In case of transfer of shares between a resident buyer and a non-resident seller or vice-versa, not more than twenty five per cent of the total consideration can be paid by the buyer on a deferred basis within a period not exceeding eighteen months from the date of the transfer agreement. For this purpose, if so agreed between the buyer and the seller, an escrow arrangement may be made between the buyer and the seller for an amount not more than twenty five per cent of the total consideration for a period not exceeding eighteen months from the date of the transfer agreement or if the total consideration is paid by the buyer to the seller, the seller may furnish an indemnity for an amount not more than twenty five per cent of the total consideration for a period not exceeding eighteen months from the date of the payment of the full consideration:

Provided the total consideration finally paid for the shares must be compliant with the applicable pricing guidelines.”

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