One of the corporate client having foreign shareholders. The company requires additional share capital from foreign share holders.

My doubts are:

1. What procedures should company follow to issue the additional share capital?

2. Which are the documents company need to obtain?

3. Whether proof of foreign remittance against share capital is compulsory to issue shares?

4. When Share valuation certificate is required to be obtained from a Chartered Accounted?

5. Is FIRC compulsory for share valuation certificate?

Posted 5 years, 11 months ago by CA Pulkit Sharma

To answer you questions in a row.

All investments to a corporate / non corporate enterprises are governed by FEMA under current account transactions / capital account transaction route. Any investment to be made has to pass through the litmus test of FIPB ( Foriegn Investment Promotion Board) and guidelines specified as per Industry policy as notified from time to time by DIPP ( Department of industry policy and promotion).

a. All investments to india should necessarily follow a banking channel and FIRC route.

b. If there are no sectoral caps, the investment route would be automatic or else FIPB ( Foreign Investment promotion board approval needs to be taken before funds are infused).

c. FIRC it self is a proof of funds have drived in and documentation on valuation of shares ( As issue is to non resident) is mandatory as per the method prescribed under FEMA.

d. Reporting of inflow of funds along with valuation report an Form FCGPR should be done with 30 days from inflow of amount to bank account.

I hope my answers have brought in a lot insight, though subject is broad enough for me to depict here


CA.S Kamath

Posted 5 years, 9 months ago by CA Sundeep Kamath

Thank you for your answer to the question. This areas is very big and needs a lot of time to understand.

Is it possible for you to write the overview of fema and other rules applicable to these kind of transactions and what procedure one need to follow?

I know we should read lot of books to understand and it is recommended but if you can give an idea so accordingly i/others can understand what laws or acts one need to refer to deeply understand the subject matter.

Once again thank you very much.

Posted 5 years, 9 months ago by CA Pulkit Sharma

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