Transfer of Share under FEMA laws include "sale, purchase, acquisition, mortgage, pledge, gift, loan or any other form of transfer of right, possession or lien". FEMA law requires approvals and compliances for few matters as per Reserve Bank of India guidelines.
The following share transfers are allowed without the prior approval of the Reserve Bank of India:
a. Transfer by way of sale or gift between a person resident outside India (not being a NRI or an OCB) and any person resident outside India; however prior Government approval shall be obtained for any transfer in case the company is engaged in a sector which requires Government approval.
b. Transfer of shares by way of sale or gift by a NRI to any NRI; however prior prior Government approval shall be obtained for any transfer in case the company is engaged in a sector which requires Government approval
c. Transfer by way of gift by a person resident outside India to a resident;
d. Transfer by way of sale on a recognized stock exchange by a person resident outside India;
e. Transfer by way of sale or gift by a resident to a person outside India subject to conditions prescribed in Regulation 10 of FEMA 20;
The following share transfers require Prior Approval of Reserve Bank of India
a. Transfer of Shares by Resident which requires Government approval
(i) Transfer of shares of companies engaged in sector falling under the Government Route.
(ii) Transfer of shares resulting in foreign investments in the Indian company, breaching the sectoral cap applicable.
b. Transfer of shares requiring prior permission of the Reserve Bank
(i) A person resident in India, who intends to transfer any security, by way of gift to a person resident outside India, has to obtain prior approval from the Reserve Bank.
(ii) Any other case not covered by General Permission.
Legaljini team of company secretaries can advise and assist you for approval and/or compliances for transfer of shares where one of the party is foreign person.