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NRI
INVESTMENT
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 Transfer of existing shares from non-residents to residents
The term ‘transfer’ is defined under FEMA as including “sale, purchase, acquisition, mortgage, pledge, gift, loan or any other form of transfer of right, possession or lien”. {Section 2 (ze) of FEMA, 1999}.
Transfer by way of sale: A person resident outside India can freely transfer share/convertible debenture by way of sale to a person resident in India as under. Any person resident outside India (other than NRIs/OCBs) can transfer by way of sale the shares/convertible debentures to any person resident outside India; subject to the condition that the acquirer or transferee does not have any previous venture or tie up in India in the same field or sector. An NRI or an erstwhile Overseas Corporate Body may transfer by way of sale, the shares/convertible debentures held by him to another NRI only. Any person resident outside India may sell share/convertible debenture acquired in accordance with FEMA Regulations, on a recognized Stock Exchange in India through a registered broker.
Transfer by way of Gift: A person resident outside India can freely transfer share/convertible debenture by way of gift to a person resident in India as under. Any person resident outside India (not being an NRI or an erstwhile OCB), can transfer by way of gift the shares/convertible debentures to any person resident outside India; subject to the condition that the acquirer or transferee does not have any previous venture or tie up in India in the same field or sector. An NRI may transfer by way of gift, the shares/convertible debentures held by him to another NRI only. Any person resident outside India may transfer share/convertible debenture to a person resident in India by way of gift.
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 Transfer of existing shares from Resident to Non-Resident
Transfer by way of sale: General permission under Regulation 10 of Notification No. FEMA 20/2000-RB dated May 3, 2000. This general permission is not available where an Indian company whose shares or convertible debentures are proposed to be transferred is in financial service sector (financial services sector means service rendered by banking and non-banking companies regulated by the Reserve Bank, insurance companies regulated by Insurance Regulatory and Development Authority and other companies regulated by any other financial regulator, as the case may be).
Transfer by way of gift: A person resident in India can transfer by way of gift shares to a person resident outside India in the following ways. A person resident in India who proposes to transfer to a person resident outside India (other than erstwhile OCBs) any security, by way of gift, shall make an application to the Central Office of the Foreign Exchange Department, RBI, furnishing the following information, namely: reasons for making the gift. The gifts are permissible up to a limit of: (i) 5% of the paid up capital of the company per donee, and (ii) Amount does not exceed $25,000 per calendar year for each donor. The valuation of these shares shall be in accordance with pricing guidelines prescribed.
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The guidelines on issue and valuation of shares in case of existing companies
Allotment of shares on preferential basis shall be as per the requirements of the Companies Act, 1956, which will require special resolution in case of a public limited company. In case of listed companies, valuation shall be as per the RBI/SEBI guidelines as follows:
i) The average of the weekly high and low of the closing prices of the related shares quoted on the stock exchange during the six months preceding the relevant date or
ii) The average of the weekly high and low of the closing prices of the related shares during the two weeks preceding the relevant date. In case of unlisted companies, valuation shall be done in accordance with the guidelines issued by the erstwhile Controller of Capital Issues.
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 Indian companies issue Foreign Currency Convertible Bonds (FCCBs)
FCCBs can be issued by Indian companies in the overseas market in accordance with Scheme for Issue of Foreign Currency Convertible Bonds and Ordinary Shares (Through Depository Receipt Mechanism) Scheme, 1993. The FCCB issue needs to conform to External Commercial Borrowing guidelines, issued by RBI vide Notification No. FEMA 3/2000-RB dated May 3, 2000 as amended from time to time.
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