Transfer of Equity Shares

SEBI has vide its circular dated 11th February, 2019 relaxed the mandatory requirement of providing Permanent Account Number (PAN) in respect of transfer of equity shares in listed entities. Hitherto it was a mandatory requirement for all transferees to provide PAN in respect of physical transfer of shares. Now it has been relaxed for Non Resident Indians (NRIs), Overseas Citizens of India (OCIs), Persons of Indian Origin (PIOs) and foreign nationals, subject to some conditions.

The conditions are:

a. The relaxation shall only be available for transfers executed after January 01, 2016.

b. The relaxation shall only be available to non-commercial transactions, i.e. transfer by way of gift among immediate relatives.

c. The non-resident shall provide copy of an alternate valid document to ascertain identity as well as the non-resident status.

d. The transfer of shares is to their immediate relatives only.

For the purpose of Para 3(b) above, the term “immediate relative” shall shave the same meaning as defined in Regulation 2(1)(l) of SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 2011.

A copy of this circular can be found here

SEBI bans physical transfer of shares

SEBI has vide its notification dated june 8, 2018 effectively banned physical transfer of shares. This has been made via an amendment to the Listing Obligations and Disclosure Requirements, Regulations, 2015

Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) (Fourth Amendment) Regulations, 2018

1.      These regulations shall come into force on the one hundred and eightieth day from the date of its   publication in the Official Gazette i.e. from 5^th Day of December, 2018

2.      Requests for effecting transfer of securities shall not be processed unless the securities are held in the dematerialized form with a depository.

o   This means with effect from 5^th December, 2018 all the securities which are held in physical from shall be prohibited for transfer and shall be required to be done compulsorily in dematerialized form

o   Securities shall only be processed if it is in dematerialized form

*However this shall not affect the transmission or transposition of shares in physical form

3.      With effect of above following shall be omittedfrom Schedule 7 i.e. Transfer of securities

(For securities market transactions and/or for off-market or private transactions involving transfer of shares in physical form, the transferee(s) as well as transferor(s) shall furnish copy of PAN card to the listed entity for registration of such transfer of securities.)

4.      With effect of change in regulation 40(1) the following change in 7(2) shall take place:

The listed entity shall ensure that all activities in relation to both physical and electronic share transfer facility are maintained either in house or by Registrar to an issue and share transfer agent registered with the Board

https://www.sebi.gov.in/legal/regulations/jun-2018/securities-and-exchange-board-of-india-listing-obligations-and-disclosure-requirements-fourth-amendment-regulations-2018_39263.html

* with inputs from my team member Amita Jadav.

Revised pricing guidelines on issue/ transfer of securities to non residents

RBI has vide its circular no. 4 dated 15th July 2014 revised the pricing guidelines in respect of issue/ transfer of shares to non residents.

While the pricing guidelines in respect of listed companies will remain the same i.e. SEBI guidelines, the changes have been made in respect of unlisted companies.

In such unlisted companies, the fair valuation of shares shall be done as per any internationally accepted pricing methodology for valuation of shares on arm's length basis duly certified by a chartered accountant or a SEBI registered merchant banker. The guiding principle is that the non resident is not guaranteed any assured exit price at the time of making such investment/ subscription and shall exit at fair price subject to lock in period requirement, if any.

The Indian company recording the sale of its shares or convertible debentures from resident to non resident or vice versa shall record in its balance sheet for the financial year in which the transaction takes place the details of the valuation of shares or debentures, the pricing methodology adopted for the same and the agency which gave the certificate/ valuation.

The RBI circular is available here