Until 1992, transfer of shares of a company registered in India made by a person resident

outside India to another person also resident outside India was required to be confirmed by Reserve Bank in terms of Section 19(5) of FERA 1973. After the amendment to FERA 1973 made in January 1993, no such confirmation of Reserve Bank is required to be obtained for transfer of shares (as also bonds or debentures) between two non-residents. The non-resident transferee, however, requires permission under Section 29(1)(b) of FERA 1973 for purchase of the shares or the Indian company for registering the transfer in favour of another non-resident under Section 19(4) of FERA 1973. Such transfers will, therefore, not be registered by the Indian company unless the non-resident purchaser has obtained the necessary permission under Section 29 ibid (Also see paragraph 10A.5).

In terms of Section 19(5) of FERA 1973, no transfer of shares/bonds/debentures of a company registered in India made by a person resident outside India to another person

resident in India will be valid unless the transfer is confirmed by Reserve Bank on an application made to it by the transferor or the transferee. Reserve Bank has, however, exempted transfer of shares, bonds or debentures of Indian companies held by persons of Indian nationality/origin(NRIs) on both repatriation and non-repatriation basis to residents as also transfer of shares, bonds or debentures by way of gift from the purview of Section 19(5) through issue of Notifications under Section 19(6) of the Act, subject to fulfilment of certain conditions. The scope of the exemption has been explained in paragraphs 10C.26 to 10C.28.

In terms of clause (a) of Section 19(4) of FERA 1973 no person can enter transfer of securities in any register or book in which securities are registered or inscribed, if he has any ground to

suspect that the transfer involves a contravention of the provisions of Section 19, i.e. issue, transfer or creation of interest in any security to/in favour of a person resident outside India. Clause (b) of this Section prohibits the registration of the foreign address of the holder of a security except by way of substitution for any such address in the same country or for which permission has been granted by Reserve Bank. Before registering any transfer of shares/securities in the names of non-residents, companies concerned must obtain permission of Reserve Bank except where such permission has already been obtained by transferor/transferee.

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