Foreigners as Shareholders in Private Limited Company

  • July 28, 2017
  • Dushyant Sharma
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Foreign Direct Investment (FDI)

Foreign direct investment (FDI) is the controlling ownership in a business enterprise in one country by a share based in another country. FDI is either in the form of business operations or acquiring business assets in the other country, such as ownership or controlling interest in a foreign company.

Private Equity Capital

The value which implies shares issued by an organization and Private Equity is the load of capital that is not insinuated on an open trade rather it is the immediate interest in the venture. The private value capital originates from the retail and organization financial specialists.

Since India has constantly kept up the budgetary development and the decent variety in India pulls in outside nationals to put resources into the Indian Market. There are certain facilities for Private Limited Companies as Foreign Direct investment upto 100% into this sector is under automatic route and there is no need for the approval of Government. Therefore,Private Limited Company Incorporation is the best form of company recommended for foreign nationals Since, its quickest and easiest way to enter into Indian Market.

There are certain restrictions on Foreign Direct Investment in Private Limited Company that needs government approval.

  1. Petroleum sector, Natural gas/LNG pipelines (this excludes private sector oil refining)
  2. Investing in Companies' infrastructure.
  3. Defense and strategic industries, Broadcasting, Print Media, Tea Sector
  4. Asset Reconstruction Companies, Courier Services, Postal Services, Atomic Minerals

There are certain steps associated with the incorporation of an Indian Private Limited Company for foreign nationals.

  1. The company need to have a minimum of two shareholders and two directors and the shareholder can be a person or a corporate entity but the director needs to be a person.
  2. A foreign national is permitted to be the director of the company. Among the directors, it is must to have at least one director of Indian origin i.e. both citizen and resident of India.
  3. There can be a combination of Foreign Nationals or Foreign Companies holding 100% shares of the Indian Company. Hence one corporate entity cannot hold all the shares of the Indian Private Limited Company.

DSC for Foreign National Directors

This is a very important and fundamental application form in the process of Registration, hence it is needed for all the directors associated with the Company.

Documents to be attached for Foreign Nationals are:

  • Copy of Passport is mandatory as an ID Proof.
  • Address Proof :It should not be older than one year from the date of filing the form.
  • Rest of the documents are all same as for the Indian National.

For a foreign national all the documents are to be notarized.

For the foreigners residing in India, the documents required are:

  • Passport
  • Visa
  • Application form
  • Passport photograph

Resident Permit: All the above documents from the single embassy

DIN and Name Approval

Director Identification Number (DIN) should be obtained for the directors of the Company. As per the Companies Act, 2013, Once the DSC (Digital Signature Certificate) is obtained it is easy to get the DIN for the Directors.

There must be a minimum of two DIN numbers

Filing for Incorporation of a Private Limited Company

Another important step is name approval and once it is done documents can be filed with the Ministry of Corporate Affairs (MCA) for Company Incorporation.

Following documents are required:

  • Affidavits & declaration from the Directors.
  • Memorandum of Association and Article of association
  • Address Proof of Registered Office.

Finally, the company will receive the incorporation certificate after noticing all the documents have been notarized by both the Indian and Foreign Directors. An Indian Company can finally apply for the Company PAN Card and also open a Bank Account in India.



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Dushyant Sharma
Author: Dushyant Sharma

Hey there, I'm Dushyant Sharma. With the extensive knowledge I've gained in past 8 years, I have been creating content on various subjects such as banking, insurance, telecom, and all the important registration and licensing processes for various companies. I'm here to help everyone with my expertise in these areas through my articles.

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