NRI Shareholders Incorporating in a Private Limited Company in India
Non Resident Indian abbreviated as NRI are the people with Indian origin but live in Foreign Countries. They have their and professional and personal relation with people living in India. Let's make it more clear by making things classified as two types of Non Resident Indian
- Person do not live in India but have an Indian passport
- Non-resident Indians holding foreign passport but Person of Indian Origin (PIO)
Private Limited Company is a popular mode for the NRI or Foreign Investors to start on with business in India., This classification is done by FEMA Act, 1999.
Are NRI's allowed to establish any Company type they want in India?
Private Limited Company and other Limited Company is the only type of company that can be incorporated by NRI and Foreigners. Any NRI or Foreigner is not allowed to form One Person Company, Sole proprietorship or Partnership type of business unless its limited Company.
Registration of Business Type
Foreign Direct Investment (FDI) is allowed in Private Limited Company in India under Automatic route. It can be possible in Limited liability Partnership but there is a need of prior approval from the Reserve Bank of India for the same.
According to the Companies Act, 2013 NRI or foreigners can be Directors and Shareholders of the Private Limited Company. As you know private limited company need minimum of two shareholders and can have a maximum of 200 shareholders. As per certain FDI norms in India NRIs are subjected to the process of shareholding making things simpler as the Reserve Bank of India allows 100% FDI in many sectors in India under the automatic route.
Procedure of Incorporation
There is no difference in the process of registration of the Company for the NRIs as compare to the Indian Directors and Shareholders. There is a need of at least one Director and one shareholder of Indian Origin. The documents are same as of the Indian Shareholders, but all must be notarized. The ID-proof, Address Proof and other documents of foreign documents need to be Notarized by a licensed professional.
Purchase & Transfer of Shares by NRIs in a Private Limited Company
There are several conditions on which the purchase of the shares of NRI depends, a person staying out of India can purchase share/equity/stock/preference shares/convertible debentures that are offered by an Indian Company based on the following conditions:
- It is permitted under FDI Scheme should not increase with the purchase of shares by the NRI or the percentage of the Foreign Equity which is already approved.
- Sectored cap of FDI for the share should not be exceeded.
- Stock Purchase should be by a person who is already staying out of India
- Indian shareholders should not amount of share more than NRI or Foreigner.
Transfer of shares depends on who is transferring the share to whom. It can be the following situations
NRI to another NRI
The Reserve Bank of India has given permission to carry forward this transfer of shares of a Company from one NRI to another NRI/PIO.
NRI to Person Resident in India
This needs prior permission from the Reserve Bank of India as the shares are being transferred to person resident outside India to a person resident in India.
NRI to Indian Resident
The transfer of share by NRI to an Indian Resident is permissible by the Reserve Bank of India, and can be done by way of gift to a resident of India.