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Frequently Asked Questions on Private Limited Company Registration in India with Foreign Directors & Members

Registration of Private Limited Company in India with foreign Directors and Members is more or less similar to that of normal private limited company with Indian Directors and shareholders except that if foreign nationals are incorporating a company in India there is compliance requirement of Companies Act, FEMA applicable in case of foreign nationals are required to be complied with, here we have listed some frequently asked questions on private limited company registration with Foreign nationals in India

Private Limited Company Registration in India with Foreign Directors

Can two  Foreign Companies form a Company in India?

 Yes, representatives of these companies may be appointed as Directors in Indian Company, one of them should be Indian Resident.

Can a Company may be registered without any object?

No, as per Indian laws a Company must have a lawful object at the time of Incorporation.

Is foreign National is required to visit India for registration of Company?

No, Company registration is 100% online process, they just need to send scanned copy of documents required.

Is the Company required to hold Compulsory Board Meeting and if so does foreign national is required to come India for such meetings?

Yes, Company is required to hold 4 Board Meetings during the financial year BUT foreign directors are not required to visit India for attending the meeting. A meeting may be held through video conferessing.

Can registered office may be situated outside India?

No, it must be situated in India Only.

Can a foreign Company register a Wholly Owned Subsidiary Company in India?

Yes, a foreign company may do so but the new company must have a resident Indian Director.

Who is resident in India?

Every Company shall have at least one Director who has stayed in India for a total period of not less than 182 days in the previous calendar year.

Is there is any RBI Compliance required to be done when there is Foreign Capital Inflow in Company?

In  Sectors where 100% FDI is allowed under Automatic Route, there is no requirement for RBI Approval but Company is required to make reporting of these transaction to RBI to Authorized Dealer Bank.

What documents are required from Foreign National to get Digital Signature and Director Identification Number ?

Notarized or apostilled Copy (if a Commonwealth country) of Passport in support of address and identity proof along with duly.

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How Indian company can an receive foreign investment

The routes under which foreign investment can be made is as under:

  1. Automatic Route: Foreign Investment is allowed under the automatic route without prior approval of the Government or the Reserve Bank of India, in all activities/ sectors as specified in the Regulation 16 of FEMA 20 (R).
  2. Government Route: Foreign investment in activities not covered under the automatic route requires prior approval of the Government. Procedure for applying for Government approval is given at http://fifp.gov.in/Forms/SOP.pdf


What are the Capital instruments permitted for receiving foreign investment in an Indian company

‘Capital Instruments’ means equity shares, debentures, preference shares and share warrants issued by the Indian company.

Equity shares: Equity shares are those issued in accordance with the provisions of the Companies Act, 2013 and will include partly paid equity shares issued on or after July 8, 2014.

Share warrants: Share warrants issued on or after July 8, 2014 will be considered as capital instruments.

Debentures: ‘Debentures’ means fully, compulsorily and mandatorily convertible debentures.

Preference shares: ‘Preference’ shares means fully, compulsorily and mandatorily convertible preference shares.

Non-convertible/ optionally convertible/ partially convertible preference shares issued as on and up to April 30, 2007 and optionally convertible/ partially convertible debentures issued up to June 7, 2007 till their original maturity are reckoned to be FDI compliant capital instruments. Non-convertible/ optionally convertible/ partially convertible preference shares issued after April 30, 2007 and optionally convertible/ partially convertible debentures issued after June 7, 2007 shall be treated as debt and shall require conforming to External Commercial Borrowings guidelines regulated under Foreign Exchange Management (Borrowing and Lending in Foreign Exchange Regulations), 2000, as amended from time to time.


What is meant by Foreign Investment, Foreign Direct Investment and Foreign Portfolio Investment?

Foreign Investment means any investment made by a person resident outside India on a repatriable basis in capital instruments of an Indian company or to the capital of an LLP.

Foreign Direct Investment (FDI) is the investment through capital instruments by a person resident outside India (a) in an unlisted Indian company; or (b) in 10 percent or more of the post issue paid-up equity capital on a fully diluted basis of a listed Indian company.

Foreign Portfolio Investment is any investment made by a person resident outside India in capital instruments where such investment is (a) less than 10 percent of the post issue paid-up equity capital on a fully diluted basis of a listed Indian company or (b) less than 10 percent of the paid up value of each series of capital instruments of a listed Indian company.

Source : https://www.rbi.org.in  (FAQ issued by RBI )

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