# Transfer and Issuance Rules
## NDI Rules 2019 — Rules 7, 9, 13, 18; Schedule I(1)

*Always verify provisions against the current NDI Rules PDF before advising.*

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## Fresh Issuance — Modes and Conditions

*Legal basis: Rule 6(a) and Schedule I(1), NDI Rules 2019.*

### Recognised modes of issuance

**(i) Cash subscription**
Standard mode. Investor pays consideration and receives newly issued equity instruments.
No special approval beyond sectoral requirements.

**(ii) Against import of capital goods or machinery**
No separate approval required beyond sectoral requirements.

**(iii) Against pre-incorporation or pre-operative expenses**
No separate approval required beyond sectoral requirements.

**(iv) Against swap of equity instruments of a foreign company**
Government approval is required where the sector requires Government approval.
Even if the sector is otherwise Automatic Route, if the instrument involves a swap of
shares in a foreign company, the approval requirement follows the sector's route.

**(v) Rights issue or bonus issue — Rule 7 / Schedule I(1)(d)**
Subject to the applicable sectoral cap. The existing non-resident shareholding is the
baseline — the rights or bonus issue must not result in total non-resident holding
exceeding the cap. NRI and OCI shareholders can subscribe on both repatriation and
non-repatriation basis.

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## Transfer Rules — Rule 9 and Rule 13

### Rule 9 — General transfer provisions

**(i) Non-resident transferor → non-resident transferee (sale) — Rule 9(1)(i)**
- No prior Government or RBI approval required for Automatic Route sectors
- Government approval required for Government Route sectors
- Transfer price must comply with FEMA fair market value norms — independently
  certified by a SEBI-registered merchant banker or chartered accountant
- Pricing rule: price must not be less than the fair market value

**(iii) Resident transferor → non-resident transferee (sale) — Rule 9(3)**
- No prior Government approval required for Automatic Route sectors
- Government approval required for Government Route sectors
- Transfer price must not be less than fair market value (independently certified)
- Sectoral cap must not be breached post-transfer

**(iv) Resident transferor → non-resident transferee (gift) — Rule 9(4)**
- Prior specific approval required
- Conditions (all must be satisfied):
  (a) The donee is eligible to hold such security under the relevant Schedules
  (b) The gift does not exceed 5% of the paid-up capital of the investee company (or
      each series of debentures/mutual fund scheme) — on a cumulative basis, from a
      single donor to a single donee
  (c) The applicable sectoral cap in the investee company is not breached
  (d) The donor and donee shall be "relatives" within the meaning of Section 2(77),
      Companies Act, 2013
  (e) The value of securities transferred by the donor to persons resident outside India
      as gift in the financial year does not exceed the INR equivalent of USD 50,000
  (f) Such other conditions as the Central Government may specify in public interest

### Rule 13 — NRI and OCI transfers

**NRI or OCI holding equity instruments on a repatriation basis:**
- May transfer by way of sale or gift to any person resident outside India
- Prior Government approval must be obtained where the investee company operates in a
  sector that requires Government approval

**NRI or OCI holding equity instruments on a non-repatriation basis:**
- May transfer to a person resident outside India by way of gift with the prior approval
  of the Reserve Bank of India, subject to all of the following conditions:
  (a) The donee is eligible to hold such security under the relevant Schedules
  (b) The gift does not exceed 5% of the paid-up capital of the investee company or each
      mutual fund scheme — on a cumulative basis, from a single person to another single
      person
  (c) The applicable sectoral cap in the investee company is not breached
  (d) The donor and donee shall be "relatives" within the meaning of Section 2(77),
      Companies Act, 2013
  (e) The value of securities transferred by the donor to persons resident outside India
      as gift in the financial year does not exceed the INR equivalent of USD 50,000
  (f) Such other conditions as the Central Government may specify in public interest

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## Bangladesh and Pakistan Restrictions — Rules 8 and 18

**Rule 8 — ESOPs and sweat equity:**
Citizens and entities of Bangladesh and Pakistan are restricted from receiving ESOPs or
sweat equity in Indian companies.

**Rule 18 — Convertible notes:**
Citizens and entities of Bangladesh and Pakistan are restricted from receiving convertible
notes issued by startups.

*Note: Pakistani entities and citizens require Government approval for all FDI in Indian
companies (see Press Note 2 of 2026). FDI from Pakistan may be entirely prohibited in
the defence, space, and atomic energy sectors.*

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## FOCC Downstream Investment — Rule 23

**Rule 23(1):** Investment by a FOCC in another Indian company is treated as indirect
foreign investment and is subject to the same sectoral caps and entry routes as direct
FDI from a PROI.

**Ownership test (Rule 23 Explanation I):** An Indian company is "owned" by PRO if more
than 50% of its equity interest is beneficially held by persons resident outside India.
Where ownership exceeds 50%, control is assumed — the control limb need not be
separately tested.

**Control test (Rule 2(da)):** Same meaning as Section 2(27), Companies Act, 2013.

**FOCC-LLP restriction:** Downstream investment by a FOCC-LLP is allowed only in
sectors where FDI up to 100% is permitted under the Automatic Route and there are no
FDI-linked performance conditions.

**Form DI — Rule 23(3):** File Form DI with the RBI within 30 days of the downstream
investment. Portal: RBI FIRMS (firms.rbi.org.in).

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## Pricing Rule — Rule 21 (For Reference)

For fresh issuances: issue price must not be less than the fair market value as
determined by an independent SEBI-registered merchant banker or chartered accountant
using an internationally accepted valuation methodology (DCF, NAV, comparable
companies, etc.). Valuation report must be contemporaneous — typically within 6 months.

For transfers to non-residents: transfer price must not be less than fair market value.
For transfers from non-residents to residents: transfer price must not be more than fair
market value.

**Note:** Under no circumstances should this assessment opine on what the valuation
should be. If a user asks for the % stake based on a given monetary amount, explain the
Rule 21 valuation requirement and ask for the % stake instead.
