In an increasingly globalised economy, cross-border share transfers have become common—whether an Indian resident is transferring shares to a non-resident or vice versa. While such transactions create attractive investment opportunities, they also involve significant regulatory compliance, primarily under India’s foreign exchange laws.

For transactions involving equity instruments of Indian companies and foreign currency, the governing legislation is the Foreign Exchange Management Act (FEMA), 1999, administered by the Reserve Bank of India (RBI).

Below is a concise overview of the key regulatory aspects to keep in mind while dealing with cross-border share transfers in the Indian context.

1. Mandatory Reporting: Form FC-TRS

Whenever there is a transfer of equity instruments of an Indian company between a Resident and a Non-Resident, the transaction must be reported to the RBI through Form FC-TRS (Foreign Currency – Transfer of Shares).

Key points:

• What is it?
  A mandatory reporting form for the transfer of equity instruments (equity shares, CCDs, CCPS) between a resident and a non-resident.
• Who files it?
  The resident party to the transaction (transferor or transferee, as applicable) is responsible for filing the form on the RBI FIRMS portal, through an Authorised Dealer (AD) Category-I Bank.
• Timeline:
  Form FC-TRS must be filed within 60 days from the date of transfer of equity instruments or the date of receipt/remittance of consideration, whichever is earlier.

2. Pricing and Valuation Guidelines

Pricing is one of the most closely scrutinised aspects of cross-border share transfers. RBI prescribes strict valuation norms to prevent misuse of foreign exchange.

• Resident → Non-Resident transfer:
  The transfer price cannot be less than the Fair Value of the equity instruments.
• Non-Resident → Resident transfer:
  The transfer price cannot exceed the Fair Value.

Valuation requirements:

• For unlisted companies:
  Valuation must be carried out by a Chartered Accountant or a SEBI-registered Merchant Banker using internationally accepted methodologies (such as DCF).
• For listed companies:
  Pricing must comply with SEBI guidelines.

A valuation certificate is a mandatory attachment for FC-TRS filing.

3. Liberalised Remittance Scheme (LRS) – Overseas Share Investments

When an Indian resident individual wishes to invest in shares of a foreign company, the transaction falls under the Liberalised Remittance Scheme (LRS).

• Annual limit:
  USD 250,000 per financial year (April–March) for all permissible capital and current account transactions.
• Eligibility:
  Applicable only to resident individuals. Companies, LLPs, and trusts follow separate overseas investment regulations.
• Source of funds:
  Must be from the individual’s own legitimate sources.

This USD 250,000 limit is the overall cap for all overseas remittances made by a resident individual in a financial year.

4. Key Documents for Cross-Border Share Transfers

To ensure smooth compliance, the following documents are typically required:

• Share Transfer Deed (SH-4) or DIS Slip (for demat shares)
• Consent letters from both buyer and seller
• Proof of inward remittance (FIRC or equivalent bank advice, along with remitter KYC as required by the AD bank)
• Valuation Certificate
• KYC documents of both resident and non-resident parties

5. Why FEMA Compliance Is Non-Negotiable

Cross-border share transfers are capital account transactions under FEMA and are therefore highly regulated. Non-compliance—such as delayed FC-TRS filing, incorrect valuation, or breach of LRS limits—can attract significant monetary penalties and compounding proceedings.

Conclusion

Cross-border share transfers are an excellent tool for portfolio diversification and global expansion, but they are not a simple DIY exercise. Regulatory precision, timely reporting, and accurate valuation are critical.

It is always advisable to consult a qualified Chartered Accountant or FEMA specialist to ensure end-to-end compliance—from valuation to final RBI reporting.