Date June 3, 2016
Reserve Bank of India permits deferred consideration in cross border share transfers

The Reserve Bank of India has on 20 May, 2016, notified the Foreign Exchange Management (Transfer or Issue of Security by a Person Resident outside India) (Seventh Amendment) Regulations, 2016 (Amendment Regulations) pursuant to which:

(i) a purchaser in a cross border share transfer is permitted to make payment of up to 25 per cent of the total consideration on a deferred basis within a period not exceeding 18 months from the date of the share transfer agreement;

(ii) an escrow arrangement may be made between the purchaser and seller for an amount not more than twenty five per cent of the total consideration for a period not exceeding 18 months from the date of the share transfer agreement;

(iii) if the total consideration is paid by the purchaser, then the seller may furnish an indemnity for an amount not more than twenty five per cent of the total consideration for a period not exceeding 18 months from the date of the payment of the full consideration; and

(iv) the total consideration finally paid for the shares must be compliant with the applicable pricing guidelines.

The Amendment Regulations may be accessed at:

https://rbi.org.in/Scripts/BS_FemaNotifications.aspx?Id=10431