A nominee only holds shares as a trustee

dubai - Nomination is only to ensure that a shareholder is represented by a person after his death

Q: My father has shares in certain public companies in India. He has given my name as a nominee to the depository. However, I am not sure to whom the shares are bequeathed in his will. Will I still be entitled to inherit the shares, being the nominee?
- P. Mangesh, Dubai

A: A nominee holds the shares as a trustee on behalf of the heirs mentioned in the will of the deceased. Courts have taken the view that nomination made is only to ensure that the shareholder is represented by a person after his death, pending the establishment of the rights of succession. In short, section 72 of the Companies Act, 2013, does not override the succession laws where the shareholder dies intestate or where a will is made by him. The nominee holds the shares after death in favour of the legal heirs as per the will or law of succession as may be applicable.

Therefore, though your name has been nominated by your father and registered with the depository, you will hold the shares on behalf of the heirs mentioned in the will.  Of course, if you are one of the heirs mentioned in the will, you will inherit such number of shares as bequeathed to you personally.

Q: Can a company incorporated in India merge with a foreign company? I was informed that this is not possible.
- T.S. Vishwanath, Doha

A: Until last month, foreign companies were permitted to merge with Indian companies, subject to certain approvals. A notification issued on April 13 by the Ministry of Corporate Affairs now permits Indian companies to merge with companies incorporated outside India. Once such merger is complete, the merged company will be eligible for being listed on foreign stock exchanges.

Under this recent guideline, prior approval of the Reserve Bank of India will have to be obtained by the Indian company which wishes to merge with the foreign company. Further, the merger is permitted only with companies incorporated in countries which have adopted Financial Action Task Force rules and whose central banks are members of the Bank for International Settlements. Before these mergers can take place, other laws such as tax laws, securities laws and the foreign exchange regulation law will have to be amended.

Q: Once the Goods and Services Tax is introduced in India, will Indian businessmen importing goods be liable to customs duty?
- A.S. Kamath, Sharjah

A: In the last session of Parliament, several laws pertaining to GST were passed. Under the GST framework, basic customs duty on imports will still be payable. In short, customs duty has not been subsumed in the Goods & Services Tax. However, the Integrated Goods & Services Tax will replace the countervailing duty which is currently payable. IGST will be levied on reverse charge mechanism basis. Therefore, the importer will initially bear the tax.

The Customs Act has been amended to include a warehouse in the definition of 'customs area'. This will ensure that an importer will not be required to pay the IGST at the time of removal of goods from a customs station to a warehouse.

The writer is a practising lawyer specialising in tax and exchange management laws of India. Views expressed are his own and do not reflect the newspaper's policy.