One of our readers wrote to us with this query:
I am an individual ARN holder and doing business for the last 3 years. Recently, I have floated a private limited company and I am a director of the company with 55% ownership. I would like to understand if I could change my ARN and transfer existing asset to the private limited company.
Ashish Shah and Hitesh Maluka
I Hub, Bhavnagar
Dear Ashish and Hitesh,
Yes, it is possible to transfer your assets from individual to private limited company.
AMFI norms say that distributors can initiate change in ARN if they change their name or legal status such as proprietorship, LLP, private limited and so on.
However, before transferring your assets, you will have to ensure that your new ARN i.e. ARN of your private limited company is valid and KYD compliant.
For this, you will have to first surrender your existing ARN and apply for fresh ARN for your new company. AMFI will honour such transfer even if existing ARN is surrendered or not valid. However, you will have to make such a transfer request within six months of cancellation of the existing ARN.
Ensure that you clear the NISM Mutual Fund Distributors Certification Examination. Once you clear this examination, you will be required to submit registration certification of your company, your PAN, address proof and bank details to apply for fresh ARN. In addition, you will have to undergo biometric KYDs twice – individual and corporate.
Also, you will be required to send a demand draft of Rs.3540 in favour of Association of Mutual Funds in India payable at your location and self-declaration form provided by CAMS.
Since this is private limited company, you will have to submit a separate application to obtain fresh EUIN. You can opt to obtain EUIN for yourself or your employee. In both the cases, you will be required to submit PAN, Aadhaar, two passport size colour photos, DD of Rs.1770 in favour of Association of Mutual Funds in India, ARN registration form, KYD form and NISM pass certificate. If EUIN is in your employee’s name, he will have to undergo biometric for KYD.
Once you get ARN of your private limited company, you will have to make a transfer of assets request within six months of cancellation of your previous ARN.
You will have to inform your clients in writing via letter or email informing them about the change in ARN and the rationale behind it along with the details of new distributor. In addition, you will have to highlight that if the clients have any objection for the change in distributor code, they must write to the respective AMCs directly. AMCs will have to effect changes to ARN within 15 days if they do not receive any objection from clients.
In case a client raises objection, distributor should immediately inform the AMC.
The transfer application must have reason for transfer supported by evidence and certification that letters/emails have been sent to all existing clients intimating them of change of distributor. You will have to attach a sample of such communication along with a list of clients.
The new distributor i.e. your company would get trail commission only after transfer of valid assets (KYC compliant accounts). AMCs would pay commission to new distributors only after cancellation of old ARN.
On brokerage, trail commission rate for the new distributor will be in line with the trail commission rate of old distributor.
Note 1: It is better to obtain ARN of your company before surrendering your existing ARN to ensure smooth transition.
Note 2: This guidance is based on existing AMFI norms as on September, 17 2020. These norms are subject to change.
