DIVIDEND
Remittance of dividends to
non-resident Indian shareholders of Indian companies - Procedure therefor
1. Attention of authorised
dealers is drawn to paragraph 24A.1A(iii) of the Exchange Control Manual in
terms of which applications for remittance of dividend on equity shares where
the company paying dividend is not a foreign company and the equity shares held
by each non-resident shareholder exceed Rs.5 lakhs in face value of 25 per cent
of the total issued equity capital of the company concerned, whichever is less, are required to be submitted to
Reserve Bank for prior approval. In order
that dividend is remitted promptly to the non-resident shareholders, it has
been decided that authorised dealers may henceforth allow remittances towards
equity dividend, including interim dividend, in all cases where the company
paying the dividend is not a foreign company, i.e., a company in which
non-resident interest does not exceed 40 per cent provided that requirements
laid down under items (a) to (e) of paragraph 24A.13(i), ibid, are complied
with. In cases where the shares on
which dividend has become payable exceed Rs. 5 lakhs in face value or 25 per
cent of the total issued equity capital of the concerned company, it will be
necessary for authorised dealers to obtain from the company concerned an
application in the revised Form RCD-2 (in duplicate) and the particulars of
non-resident share-holding, amount of dividend to be remitted to each
shareholder, etc., in the revised Form
RCD-3. As and when such remittances are
allowed, authorised dealers should forward a copy each of the application in Form RCD-2 and its enclosures to the office of
Reserve Bank within whose jurisdiction the head office/registered office of the
company is situate, after signing the certificate incorporated in the Form.
Applications may sometimes be received by authorised
dealers from the non-resident shareholders or their mandatee bankers in India
and not from the Indian companies paying the dividend. In such cases full details of the remittance
together with the particulars/documents indicated under items (1) to (5) of
paragraph 24A.14(iii) of the Exchange Control Manual may be obtained from the applicants. Applications together with the required
particulars/ documents may be obtained in such cases by letter in
duplicate. The remittances may be allowed by authorised dealers on being
satisfied that the requirements laid down under items (a) to (e) of paragraph
24A.13(1) of the Manual are complied with.
A copy of the letter together
with the required particulars/documents maybe sent to Reserve Bank.
2. Authorised dealers may also
allow remittances towards interim dividend to non-resident shareholders on the
above basis. Applications in such cases
may be called for from companies by letter enclosing only revised Form
RCD-3. In cases where the application
is made by a non-resident shareholder or his mandatee bankers in India,
particulars/documents listed at items (2) to (5) of paragraph 24.14(iii) of the
Manual may be called for. A copy of
Form RCD-3 and/or the applicant's letter, as the case may be, should be sent to
Reserve Bank as and when any remittance of interim dividend is allowed.
3. Authorised dealers should
specifically confirm on form A2 covering remittance of dividend allowed in
terms of this circular that the conditions prescribed under items (a) to (e) of
paragraph 24A.13(i) of the Manual have been complied with. Form A2 should be
submitted to Reserve Bank along with 'R' Return for the relevant period as
hitherto.
4. There is no change in the existing
powers delegated to authorised dealers to effect remittances of dividend
(including interim dividend) on small holdings, i.e., upto Rs. 5 lakhs in face
value of 25 per cent of the issued equity capital of the company, whichever is
less, covered by paragraph 24A.13 of the Manual. Similarly, applications for remittance of dividend on investments
made by non-residents of Indian nationality/origin or overseas corporate bodies
owned to the extent of at least 60 per cent by such persons under the '40 per
cent Scheme' should continue to be referred to Reserve Bank in terms of
paragraph 24B.6(iii) of the Manual.
5. Authorised dealers may take
a careful note of the above changes against paragraph 24A.14 of the
Manual. Necessary amendments will be
issued in due course. Meanwhile, the
existing Forms RCD2 and RCD3 appearing on pages 332 to 335 of Vol. II of the
Exchange Control Manual may be cancelled and replaced by the enclosed revised
forms.
6. The directions contained in
this circular have been issued under section 73(3) of the Foreign Exchange
Regulation Act, 1973, and any contravention or non-observance thereof is
subject to the penalties prescribed under the Act.