The Reserve Bank of India (RBI) has liberalized the rules that apply to certain types of share transfer transactions between persons resident in India and persons not resident in India.
Previously, RBI approval was required to make the following four types of share transfers: (i) share transfers between a non-resident and a resident that did not meet RBI specified pricing guidelines, (ii) share transfers from a resident to a non-resident that required prior approval from India's Foreign Investment Promotion Board (FIPB), (iii) share transfers from a resident to a non-resident that were subject to the takeover regulations issued by the Securities and Exchange Board of India (SEBI), and (iv) share transfers from a resident to a non-resident in respect of a company engaged in the financial sector.
Under the new rules, the RBI has dispensed with the requirement for RBI approval for these share transfers, if certain other conditions are met.
For example, in the case of share transfers that do not meet the RBI pricing guidelines, no RBI approval will be required for the transfer if the foreign shareholding is compliant with applicable rules on foreign direct investment, if the pricing meets any other applicable rules issue by SEBI, and an independent chartered accountant certifies compliance with the applicable SEBI rules. Similarly, for resident to non-resident transfers subject to FIPB approval, no RBI approval will be required if FIPB approval is obtained and the transfer complies with RBI pricing rules and documentation requirements; for resident to non-resident share transfer that are subject to the takeover regulations, RBI approval will not be needed if the transfer complies with RBI pricing rules and documentation requirements; and for resident to non-resident share transfers relating to the financial sector, prior RBI approval will not be required if the financial regulators of the transferor, the transferee and the investee companies do not object to the transfer and the no-objection certificates issued by such regulators are submitted to the RBI with other required transfer documentation.