In a bid to strengthen know your customer (KYC) norms, on Friday, the Reserve Bank of India(RBI) released draft guidelines on the revised procedures for the reporting the transfer of shares or convertible debentures, by way of sale, from resident to non-resident and vice versa under the foreign direct investment (FDI) scheme. The procedure has been revised to capture the details of investment in a more comprehensive manner. Accordingly, the proforma for reporting of inflow or outflow details on account of remittances received or made in connection with the transfer of shares or convertible debentures, by way of sale, submitted by the bank to the RBI has also been modified.
The banks receiving the remittance are required to submit a KYC report on the non-resident investor. The KYC check should be carried out by the bank receiving remittance and should be forwarded to the bank to whom form is submitted by the Indian company.
For sale of shares by a person resident in India, consent letter duly signed by the seller and buyer or their duly appointed agent and in the latter case the Power of Attorney is needed.
The shareholding pattern of the investee company after the acquisition of shares by a person resident outside India, certificate indicating fair value of shares from a chartered accountant, copy of broker’s note if sale is made on Stock Exchange, undertaking from the buyer to the effect that he is eligible to acquire shares or convertible debentures under FDI policy and the existing sectoral limits and pricing guidelines have to be complied with, said RBI.
Additional documents like if the sellers are NRIs or OCBs, the copies of RBI approvals, if applicable, evidencing the shares held by them on repatriation or non-repatriation basis and no objection or tax clearance certificate from Income Tax Authority or chartered account is needed in respect of sale of shares by a person resident outside India.
