SPA requirement in case of Transfer of Shares between Resident and Non-Resident

?Share Purchase Agreement (“SPA”) is a legal contract between buyer and seller for sale of shares. This agreement generally stipulate terms regarding the consideration amount involved in transfer of shares and rights & obligations of parties. In case of transfer of shares between resident and non-resident, as per FEMA provisions, form FC-TRS is required to be filed within 60 days of transfer of shares or remittance of funds, whichever is earlier.

As per the guidelines provided by RBI, if a duly executed and stamped share transfer form (“Form SH-4”) is attached with the form FC-TRS, then there is no requirement to attach SPA. Thus, it is not mandatory to have this agreement in place as per FEMA provisions. But in case the Company is not attaching the form SH-4 then its mandatory to attach the SPA. However, it is always advisable to execute SPA in order to protect the interest of both the parties to agreement.

?There may be instances where the AD bank may ask for SPA as part of their internal processing. But since the same is not mandatory, we can request them to waive off this requirement and we can provide them with a duly executed and stamped Form SH-4.

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?Disclaimer: The contents of this write up is based on the relevant provisions and as per the information existing at the time of preparation. In no event I shall be liable for any direct, indirect, special or incidental damage resulting from, arising out of or in connection with the use of the above information.