SEBI relaxes overseas share transfer norms

SEBI has made it easier for foreign residents to transfer shares to their immediate relatives in India by relaxing the documentation requirements.

Now non-residents can transfer shareholdings to India hassle-free

The Securities and Exchange Board of India (SEBI) has relaxed the requirements in case of share transfers made by non-residents (OCIs, PIOs, NRIs) to immediate relatives. Until now, non-residents and foreign nationals had to furnish a copy of their Permanent Account Number (PAN) to register the transfer of equity shares made by them in favour of their immediate relatives. 

Under the Listing Obligations and Disclosure Requirements of the SEBI, both the transferee and the transferor had to furnish copies of their PAN to the listed company whose shares were being transferred. The change has clearly been made to help non-residents, many of whom don’t have a PAN and faced genuine difficulties in transferring shares.

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However, this will be applicable only for transfers made after the 1st January 2016 and solely on non-commercial transactions. In other words, non-residents can only gift the shares to recipients. Additionally, the non-resident will have to provide a valid alternative document that authenticates the residence status and identity of the person.

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Who are the non-residents affected by this change?

Overseas Citizens of India (OCI) are citizens of another country who have Indian origins and can, therefore, hold a special OCI document that allows them to live and work in India indefinitely. It now includes Persons of Indian Origin; this status was withdrawn after it was merged with OCI on 9th January 2015. Non-resident Indians (NRI) are Indian citizens who are staying overseas and have an uncertain duration of stay overseas.

What is a transfer of shares?

Transfer of shares is the transfer of title to shares by one party to another. Shareholders are the owners of the company, so with a transfer of title the ownership of the company also changes, to the extent of the transferred number of shares. It is a deliberate and voluntary action by both parties and is done for an adequate consideration, so share transfer has to be through sale or gift and cannot be inherited. Stamp duty is paid on the market value of the shares transferred. 

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What is SEBI and who is an ‘immediate relative’ for the purpose of share transfer?

SEBI (Securities and Exchange Board of India) is a government body that regulates the securities market in India. It keeps a lookout to detect any malpractices or wrongdoings in the market and provides guidelines to facilitate the correct functioning of the securities market. Its definition of ‘immediate relative’ helps in taking action against malpractices like insider trading. For the purpose of share transfer, the spouse of the transferor, his or her parents, sibling(s), and children are considered to be immediate relatives.
 

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