Comments and Photos taken at FULL DAY FEMA WORKSHOP HELD AT BENGALURU ON 21 JANUARY 2017 AT HOTEL CHALUKYA , RACE COURSE ROAD , BENGALURU

Comments and Photos taken at Full Day Workshop on FEMA  Held At Bengaluru on 21st January 2017 at Hotel Chalukya 

We enjoy learning from you. Wish you all the very best.-

Naresh Kumar K  - Asst. Manager | Corporate Secretarial & Compliance, Wipro Limited

CS - ASHOK KUMAR TRIPHTHY - PCS - Thank you So much for seminar and also sharing for PPT. I hope the Seminar will helps us  a lot .

CS Suresh Sitaram - Thanks a lot for the sharing your valuable knowledge and expertise.

FORMALITIES FOR THE TRANSFER OF SHARES OF A PRIVATE / UNLISTED COMPANY FROM RESIDENT TO NON-RESIDENT

FORMALITIES FOR THE TRANSFER OF SHARES OF A PRIVATE / UNLISTED COMPANY FROM RESIDENT TO NON-RESIDENT

a) Is the transfer of shares allowed to non-residents?

·         Subject to the FDI Sectoral Cap policy, non-resident investors can invest in Indian Companies by purchasing/acquiring existing shares from resident shareholders.

·         A person resident in India can transfer shares by way of sale under private arrangement to a person resident outside India subject to the FDI guidelines issued in this regard.

·          

b) What are the RBI reporting obligations under FEMA in a case of transfer of shares between resident and non-resident?

·         The transaction of transfer of shares between resident and non-resident should be reported by submission of form FC-TRS to the AD Category – I bank, within 60 days from the date of receipt/remittance of the amount of consideration. The onus of submission of the form FC-TRS within the given timeframe would be on the person resident in India, i.e. the transferor in the case of sale of shares by a resident to non-resident.

c) What are guidelines for valuation of shares in case of transfer of shares of existing companies?

·         In case of unlisted companies/Private Companies, the valuation of shares shall not be less than the fair value of shares arrived at as per the internationally accepted pricing methodology on arm’s length basis to be determined by a SEBI registered Category-I Merchant Banker/Chartered Accountant.

·         The most common methodology used for the valuation of shares is Direct Cash flows method.

·         A certificate from a practising Chartered Accountant/SEBI registered Category-I Merchant Banker for determining the value of shares is required in this regard.

d) What is the method of payment or remittance/credit of sale proceeds in case of transfer of shares between resident and non-resident?

·         The sales consideration in respect of the shares purchased by a person resident outside India shall be remitted to India through normal banking channels.

·         The sales consideration so remitted into India shall be subject to the Know Your Customer (KYC) check by the AD-I Category Bank receiving the remittance.

·          

e) What are the documents required for transfer of shares from resident to non-resident under the existing RBI/FEMA Guidelines?

·         The documents required for transfer of shares from resident to non-resident will be as follows:

1) Share Valuation certificate by a SEBI registered Category-I Merchant Banker/Chartered Accountant.

2) (Share Purchase agreement between the buyer and the seller of shares.

3) KYC documents of non-resident making the remittance of sales consideration.

4) Foreign Inward remittance certificate (FIRC) issued by the recipient bank.

5) Consent Letter duly signed by the seller and buyer or their duly appointed agent and in the latter case the Power of Attorney Document.

6) The shareholding pattern of the investee company after the acquisition of shares by a person resident outside India.

7) Declaration from the buyer to the effect that he is eligible to acquire shares / compulsorily and mandatorily convertible preference shares/debentures/others under FDI policy and the existing sectoral limits and Pricing Guidelines have been complied with.

8) No Objection/Tax Clearance Certificate from Income Tax Authority/ Chartered Account.

f) What are the compliances to be done under the Companies Act’2013 in respect of the transfer of shares?

·         Once the transaction is settled, the transferee or his duly appointed agent shall approach the investee company to record the transfer in their books/registers along with the certificate in Form FC-TRS from the AD Bank branch.

·         The transfer of shares shall be done through form SH-4 (instrument of transfer) duly stamped, dated and executed as prescribed under section 56 of The Companies Act’ 2013 within 2 months from the date of transfer of shares.

·         On receipt of the certificate from the AD Bank (FC-TRS) and duly signed, stamped and dated Form SH-4, the company may record the transfer in its books/registers by delivering the share certificates of all securities transferred within a period of one month from the date of receipt by the company of the instrument of transfer.

·          

g) What is tax implication of transfer of shares from resident to non-resident?

·         The transfer of shares of an unlisted company from resident to non-resident will attract capital gains for the seller.

·         Here the fair market value of shares has to be determined by the prescribed methods.

·         Any sale of shares above the fair market value will be subject to capital gains tax.

·         Capital gains will be calculated as follows:

Capital gains= Price at which shares are sold Less Fair market value

·         The gains will be taxed @ 20% or 30% depending on the whether it is Long term capital gain or short term. Long terms gains are taxed at 20% while short term at 30% (or at the slab rates in case of an Individual transferor).

·         Since, here we are analysing the sale of shares of an unlisted/private company therefore period of holding to determine whether the gains are long term or short term will be 24 months. So, if the transferor held the shares for more than 24 months before transfer, the capital gains will be long term and will be subjected to 20% tax otherwise it will be short term.

Article Courtesy: CA Pratik Anand

Will the Reserve Bank of India honour the Press Note No 7 (2015 series) dated 18.6.2015 issued by the Ministry of Commerce and Industry thereby treating the investments made by the NRIs will be considered at par with Investments made by Resident Indians?

Will the Reserve Bank of India honour the Press Note No 7 (2015 series) dated 18.6.2015 issued by the Ministry of Commerce and Industry thereby treating the investments made by the NRIs will be considered at par with Investments made by Resident Indians?

There is always ambiguity when the NRIs invest in Indian companies from their NRO account or from their Indian bank accounts, whether there is a need to report such investments to RBI or not?

To obviate the ambiguity on the subject, the Ministry of Commerce and Industry of Government of India came out with a Press Note No 7 (2015 series) dated 18.6.2015 issued by the Ministry of Commerce and Industry treats investments by NRIs under schedule 4 of FEMA (Transfer or Issue of Security by Persons Residents Outside India) Regulations  and it will be deemed to be domestic investment at par with investment made by residents.

Press Note also says a copy forwarded to, among others, RBI for suitably incorporating the policy changes in FEMA (Transfer or Issue of Security by Persons Residents outside India) Regulations 2000 and relevant schedules thereof.

However, necessary modification in the Regulations is not yet issued by Reserve Bank of India  as on date as one can learn from by the latest Regulations down loaded from RBI web site.

RBI officials at various branches also say RBI has not accepted Press Note. This is really perplexing!!!

When Prime Minister of India, Mr. Modiji is more interested in NRIs investments in India as proclaimed by him in the recent NRIs Meet at Bengaluru , the attitude of Reserve Bank of India is not tune with the Prime Minister’s anticipations, aspirations and policies.

Will the Reserve Bank of India will come with the immediate notification in confirming the Press Note No 7 (2015 series) dated 18.6.2015 issued by the Ministry of Commerce and Industry  thereby treating the  investment by NRIs from their NROs accounts or from their Indian bank accounts as investment under non-repatriation basis and will be treated as similar to investments by Indian residents.

It is to be noted when NRIs have transferred the FDI amount from their NRE accounts and if specifically express that they are making the investments with the repatriation benefits , then , investee companies in India , has to report the same to RBI under FEMA.

This will remove doubts on the subject that such investments ( NRIs NRO account or from their Indian bank accounts)  will not require any reporting formalities such as ARF or FC-GPR by investee companies in India.

Will the RBI clarify on the subject on war footing basis?

ONE FULL DAY SEMINAR ON FEMA AT BENGALURE on JANUARY 21, 2017 SATURDAY

ONE FULL DAY SEMINAR ON FEMA AT BENGALURE   on 

 JANUARY 21, 2017 SATURDAY

By R V Seckar, F.C.S, ICSA (UK), LLB

DATE: JANUARY 21, 2017 SATURDAY

FEE: Rs 1000/= per participant including lavish Lunch ¸two tea-breaks and materials

HOTEL CHALUKYA ,

44, Racecourse Road , High Grounds , Sampangi Rama Nagar , 

Bengaluru – Phone 22256576

Payment to be sent to: Axis Bank - Koyambedu branch- Savings Bank Account Number  910010030395067 -IFSC Code : UTIB0001009- Beneficiary Name - R V Sekar

Or

You can pay through your mobile through

SBI BUDDY – 9848915177

Or

BHIM -9848915177@UPI

Morning Session

10 A.M to 11.30 A.M – Various Compliances under FEMA – useful to Compliance officers of Listed Companies , Public companies and private limited companies which has FDI , ECB , ODI , etc.

11.45 A.M To 12.15 Noon – How to Make Compounding Application to RBI? What are all to be included in the pleadings?

12.15 Noon to 1 P.M – RECENT AMENDMENTS IN FEMA AND WHAT THE follow-up actions to be taken by the  PROFESSIONALS LIKE COMPANY SECRETARIES , CHARTERED ACCOUNTANTS , CMAS & ADVOCATES in compliance of the same

Afternoon Session

2 P.M to 2.30 PM   How to Upload FC-GPR, FC-TRS in the ebiz Portal and what are the practical issues faced by the professionals and how to over-come

2.3O-3.30 AVAILING ECB, MAKING ODI – PROCEDURES , COMPLIANCES

3.30 to 4.30 P.M  -Compliance for Investment by NRI & Foreign Entities and Transfers

4.30 P.M to 5.00 P.M – Questions and answers on the topic discussed in the seminar

Feedback of my full day seminar on FEMA at Chennai held on 17^th September 2016- click here

http://rvseckarfema.blogspot.in/2016/09/feedback-on-my-seminar-on-fema-held-at.html

Feedback on my FEMA seminar at Mysore ICSI chapter on 2nd December 2016, click here

http://rvseckarfema.blogspot.in/2016/12/my-fema-seminar-at-mysore-icsi-chapter.html

Seminar will be handled by

R.V.Seckar, F.C.S, ICSA (UK), LLB, M.com

Director, Chandra Oil & Gas Project Services Private Limited, Kakinada

Interested can contact: 09848915177, rvsekar2007@gmail.com

Please rush your registration as limited seats only available

http://rvseckarfema.blogspot.in/

MY FEMA SEMINAR AT MYSORE ICSI CHAPTER ON 2 DECEMBER 2016

ICSI , Mysore Chapter has organised a seminar on FEMA under the heading Compliance for Investment by NRI & Foreign Entities and Transfers on 2nd December 2016 at Mysore Chapter of ICSI.


It is really honour to receive a memonto from Mr Siva Kumar , Chairman of the ICSI -SIRC at Mysore on 2nd December 2016 at my FEMA Seminar at ICSI MysoreChapter .

I wish to thank the Mysore chapter present Chairman CS Bhansali M C, CS Ajay Madaiah B B, Mr Sunil Kumar , Mr Dhanapal and other participants who made the event as successful one.

Comments by Mr Sunil Kumar  CS , Past President of ICSI Mysore Chapter 

FEMA seminar was very useful . I never knew that lot of amendments have been implemented by RBI in FEMA. After attending the FEMA seminar at Mysore , I now understood the practical implementation on core issues under FEMA. 

FEEDBACK ON MY SEMINAR ON FEMA HELD AT CHENNAI ON 17th SEPTEMBER 2016 AT HOTEL VIJAY PARK

FEEDBACK ON MY SEMINAR ON FEMA HELD AT CHENNAI ON 17^th SEPTEMBER 2016 AT HOTEL VIJAY PARK

Mrs.Ramela Rangaswamy , PCS , Coimbatore

I can see genuine effort and hard work from your side. Definitely your effort will not escape for honour at any day.I am very small in knowledge. I have gained.

You have voluntarily and individually organized the programmed. Can understand and also can see the pain in you as well as effort contributed by you to conduct the seminar with success. Expecting further programmes from you. All the best.

Mr.Rajaraman Ravichandran PCS, Chennai

Thank you very much for the PPT.

I understand from my team members that the programme was very informative, useful and lively. 

Mr.OM DAGA, ACS, CALCUTTA

Thank you for sending the presentation.

I express my sincere gratitude and appreciation for sharing your knowledge and rich experience on FEMA for the benefit of members of profession and congratulate you for conducting and organizing the seminar voluntarily and at your individual level with grand success.  

I am immensely benefitted from the deliberation and truly enriched with the shared knowledge and experience.

Thank you once again Sir and I wish you all the best for all your future endeavours.

Om Daga

N.Kumar,Finance head and CS ,Hyundai Wia Private Limited Chennai

Thanks for sharing the photos taken at the training session and also the PPT 

we look forward to new programs in future at Chennai

Mr.P V Venkataramana , Supreme Court Lawyer , New Delhi

Heartiest congratulations to Shri.R.V.Sekhar and other colleges. Right spirit. Institute should applaud such sterling efforts to disseminate post-qualification, real-life knowledge from experienced members of an esteemed profession.

Mr.R RAJESH, BANGALORE

I have attended your seminar sometime back in Mysore chapter. it is beneficial.  Wish you good luck for future too.

Mr.ALOK RUDRA, FCS , BANGALORE

Great Going Mr. RVS ... don't bow down before your critics ... use it as a tool to make yourself strong. Miles to go. 

Mrs.JayashreeChandrasekaran,,PCS ,Chennai

Dear Seckar,I am glad seminar was well attended and went off well I am sure you will achieve greater heights

. ESTABLISHMENT OF OVERSEAS OFFICES BY INDIAN COMPANIES and Investment in overseas Joint Ventures (J/V)

.
ESTABLISHMENT OF OVERSEAS 

OFFICES BY INDIAN COMPANIES

In the globalised scenario where the Companies export products and/or execute projects abroad, it is inevitable for Indian firms and companies to open offices in foreign countries. Such offices can be doing trading activities or non-trading activities such as liaison work, marketing etc. The Indian firms and companies may post a representative abroad for promotion of their business.

Such companies have to comply with the laws of the foreign country where they are opening offices. Since opening office abroad involves by an Indian company the use of foreign exchange outside India, such Indian companies have to follow procedures prescribed by the Reserve Bank of India.

The Indian companies can also participate in overseas Joint Ventures (J/V). "Joint Venture (JV)" means a foreign entity formed, registered or incorporated in accordance with the laws and regulations of the host country in which the Indian party makes a direct investment.

They can also set up wholly owned subsidiaries (WOS) abroad. "Wholly Owned Subsidiary (WOS) "means a foreign entity formed, registered or incorporated in accordance with the laws and regulations of the host country, whose entire capital is held by the Indian party.

Under automatic route the Company (Indian Party) can invest up to 400% of the net worth (paid up capital + free reserves) in the overseas JV/WOS. However if the investment is made through EEFC (Exchange Earners’ Foreign Currency) Account the limit of 400% is not applicable. The investment has to be routed through normal banking channels and the same has to be reported to RBI in Form ODI in the stipulated time frame.

The approval of RBI is required in case of investment exceeding the above limit.

Note that under the automatic route there is no need to have track record in India before making the investment. That mean to say a new Company without having any past track records can make investment. But under approval route past track record is one of the criteria for RBI while considering the application. Start ups may not be in a position to get the approval of RBI.

No prior permission of Reserve Bank is required to open offices (trading or non-trading) abroad or post representatives abroad by Indian firms/companies.

The Indian firm/companies should submit applications to their bankers (authorized dealers) in form OBR along with the particulars of their turnover duly certified by their auditors and also a declaration to the effect that they have not approached/would not approach any other authorized dealer for the facility being applied for. The application form OBR needs to be filled in with necessary details along with supporting documents.  After which the foreign exchange is released by the authorized dealer (bank).

Foreign Exchange released by the Bank Authorized dealers may release exchange towards initial expenditure as also for recurring expenses of the office as under, provided the applicant fulfils the following conditions:  Category Initial Expenditure Recurring Expenditure (per annum) (a) EEFC Account(Exchange Earners’ Foreign Currency account) No limit for remittances out of EEFC funds. No limit for holders’ remittances out Of EEFC funds. Firms/companies not having EEFC accounts or not having sufficient funds EEFC accounts. Up to 15% of the average annual sales / income or turnover during the last two financial years or up to 25% per cent of the net worth, whichever is higher Up to 10% of their average  annual sales/income turnover during last two years.

In the case of newly established 100% EOUs or Units in EPZs and Hardware/Software Technology Parks, exchange may be released as per their estimated requirements for initial as well as recurring expenses on verification of suitable documentary evidence during the first two years of their operation. From third year onwards, exchange may be released as per item (a) or (b) above. Thus for first two years such units can get more foreign exchange released than the limits for other Indian companies.

The recurring (expenditure) remittance facilities are allowed initially for a period of two years only, after obtaining confirmation form the applicant that they have completed all legal and other formalities in India and abroad in connection with the opening of trading/non-trading office or for posting a representative abroad. The renewal of remittance facility after two years may be granted, provided proper accounts of utilisation of foreign exchange released are furnished to the authorized dealer.

You may note that if you are a new Company you may not be able to get the approval of Authorized Dealer to open offices aboard.

The Firstever  overseas branch office in India was the East India Company Limited of Britishers.

The general terms and conditions for opening the offices abroad normally are:

a.     The overseas office should not create any financial liabilities contingent or otherwise for the head Office in India.

b.     Exchange released by the authorized dealer should be strictly utilized for the purpose(s) for which it is released. They unused exchange may be repatriated to India under advice to the authorized dealer.

c.      The details of bank account opened in the overseas countries should be promptly reported to the authorized dealer.

d.     The approval granted for the purpose should be made valid for 6 months from the date thereof, within which time the applicant should open its overseas office or post representative abroad. In case the overseas office is not opened or the representative is not posted abroad within this period, intimation in writing to the effect should be sent to the authorized dealer immediately after expiry of 6 months period. Fresh application for release of exchange should be submitted to the authorized dealer as and when the overseas office is desired to be opened.

e.     Profits, if any, earned by the overseas office/s should be repatriated to India.

f.       The following statements should be submitted by the applicant to the authorized dealer:

A.    A statement showing details of initial expenses incurred together with suitable documentary evidence, wherever possible, within three months from the date of release of exchange for that purpose.

B.     Annual account of trading/non-trading office abroad duly certified by statutory Auditors/Chartered Accountants.

Temporary Site/Project Offices Abroad

Indian firms/companies executing contracts/projects abroad with the approval of the appropriate authority are permitted under a general permission granted by Reserve Bank to set up site/project offices abroad provided that such offices are maintained out of project receipts and remittances from India are not required. These offices are required to be closed down and surplus foreign exchange earnings repatriated to India after completion of the project.

Credit facilities for overseas trading offices of Indian companies

Reserve Bank considers, on merits, request from Export Houses/Trading Houses/Star Trading Houses/Super Star Trading Houses to avail of fund based/non-fund based facilities for their trading offices abroad from overseas banks. Application in such cases should be made to the Chief General Manager, Reserve Bank of India, Exchange Control Department (Export Division), Mumbai together with full particulars of the exchange facilities availed of for maintenance of the overseas office concerned, full details of terms and conditions subject to which the facilities are being extended by the overseas bank and the need for availing of the credit facilities by the overseas trading office.

Application for permission to post a representative in Overseas Branch Office 

Establish office/branch overseas

·         The application is to be made in form OBR to the Bank with supporting documents.

·         The estimates of foreign exchange expenditure should be given in units of foreign currency and the appropriate rupee equivalent furnishing the exchange rate applied.

Documents to be submitted along with the Form OBR

Correspondence, if any, in original together with photocopies regarding the arrangement made in foreign country for posting of representative/establishment of branch/office.

Bank certificates, in form BCX (certificate of export), together with photocopies thereof for the immediately preceding four calendar half years in support of export realizations.

Other Conditions to be followed

a) The overseas branch/office has been set up or representative is posted overseas for conducting normal business activities of the Indian entity;

b) The overseas branch/office/representative shall not enter into any contract or agreement in contravention of the Act, Rules or Regulations made there under;

c) The overseas office (trading / non-trading) / branch / representative should not create any financial liabilities, contingent or otherwise, for the head office in India and also not invest surplus funds abroad without prior approval of the Reserve Bank. Any funds rendered surplus should be repatriated to India.

(iii) The details of bank accounts opened in the overseas country should be promptly reported to the AD Bank.

(iv) AD Category – I banks may also allow remittances by a company incorporated in India having overseas offices, within the above limits for initial and recurring expenses, to acquire immovable property outside India for its business and for residential purpose of its staff.

(v) The overseas office / branch of software exporter company/firm may repatriate to India 100 per cent of the contract value of each ‘off-site’ contract.

(vi) In case of companies taking up ‘on site’ contracts, they should repatriate the profits of such ‘on site’ contracts after the completion of the said contracts.

(vii) An audited yearly statement showing receipts under ‘off-site’ and ‘on-site’ contracts undertaken by the overseas office, expenses and repatriation thereon may be sent to the AD Category – I banks.

Courtesy : CS Vivek Hegde,B.com, ACS, CWA