The pricing guidelines with respect to the issue and transfer of shares from a resident to a non-resident and vice-versa has been revised by the Reserve Bank of India (RBI) through a notification issued on 7 April. This was followed by a circular on 4 May.
Before this revision the issue and transfer of unlisted shares to non-residents was based on the price determined according to the guidelines issued in 1990 by the erstwhile Controller of Capital Issues (ex-CCI valuation). However, they have now been revised to a more progressive discounted free cash flows (DCF) method.
These revised pricing guidelines create a new category of preferential allotment – the price of which should be no lower than the price as applicable to transfer of shares from residents to non-residents.
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The legislative and regulatory update is compiled by Nishith Desai Associates, a Mumbai-based law firm. The authors can be contacted at nishith@nishithdesai.com. Readers should not act on the basis of this information without seeking professional legal advice.
