Private Ltd. Co. (NRIs & Foreign Nationals with FDI)

FDI is allowed for non-resident entities, subject to the FDI Policy and sectoral caps. FDI in a Private Limited Company falls under two routes:

• Automatic route- Prior approval of Government is not required for the non resident Indian as well as Indian entity.
• Approval route- Prior approval of Government is required.

Automatic Route:

If the proposed business activity where FDI is sought to be made does not come under FDI prohibited category or approval category, FDI under automatic route is permissible. Under the Automatic route, the Indian companies can issue capital instruments to non-resident Indians/ foreign entities/ foreign citizens without any prior approval from FIPB or RBI for the investment. 

Certain filings relating to FDI is required to be made with RBI only after receipt of the subscription money from the foreign or non-resident investor and issuance of shares.

Under Automatic Route, FDI is not permitted in a company:-

• where industrial license is required under the Industries Act, 1951 or 
• transfer of stake by existing investor to new foreign investor or
• resulting in change in ownership pattern of company

Majority of the sectors in India are eligible for 100% FDI under the automatic route. Therefore, the process of starting a business in India for Foreign Nationals and Non-Resident Indians is very smooth and easy.

Approval Route:

Under the Approval Route, prior approval of Government is necessary for investment. In this case, FDI proposals are considered by respective Administrative Ministry/ Department on case to case basis. For this, the company in which such FDI is sought to be made would have to make an application on the Foreign Investment Facilitation Portal (FIFP).

• Citizens/entities of Bangladesh or Pakistan can invest in India, only under the approval route.

Indian companies desirous of getting FDI can issue equity instruments or equity linked instruments namely convertible preference shares and convertible debentures subject to the norms as prescribed by the DIPP.

Issue of equity shares under FDI must be made at fair value. However, in case of a newly incorporated entity, an NRI or foreigner may subscribe to its shares at face value.

As per DIPP guidelines, FDI is fully prohibited in the following sectors:

• Lottery Business including Government and online lotteries
• Gambling and betting including casinos
• Chit funds 
• Nidhi Company
• Trading in Transferable Development Rights (TDRs) 
• Real Estate Business or Construction of Farm Houses excluding development of townships, construction of residential /commercial premises, roads or bridges and Real Estate Investment Trusts (REITs)
• Manufacturing of cigars, cheroots, cigarillos and cigarettes, of tobacco or of tobacco substitutes
• Activities/sectors not open to private sector investment e.g.
  • Atomic Energy and 
  • Railway operations(other than Mass Rapid Transport Systems)

In the following sectors, FDI under automatic route is not permitted. Therefore, prior approval of Govt. authorities is required:-

• Mining
• Defence
• Broadcasting
• Print Media
• Civil Aviation
• Satellites
• Telecommunication
• Private Security Agencies
• Trading (single brand, multi brand, food product retail trading)
• Financial services activity not regulated by any Financial Sector Regulator
• Application for foreign investment in a core investment company
• Banking
• Pharmaceuticals

Documents Required:

• Description of proposed business activity in few words
• 4 proposed names for company in order of preference
• Authorized and Paid up capital & sharing proportion of subscribers
• DIN (Director Identification numbers) of all directors (if available)
• DSC (Digital Signature) of all directors and subscribers
• Self attested PAN Card copy of directors and subscribers
• Self attested ID Proofs of all directors & subscribers (Driving License/Voter ID/ Passport)
• Self attested address proof of directors & subscribers (Utility Bill/ Bank Statement/ Bank passbook copy)
• Passport size color photo of directors in JPEG format

Note: In case of foreign director, all documents as above to be notarized/apostile in home country;

Documents for proposed registered office:

• NOC from owner of premises or
• Rent/ Lease agreement (if leased/ rented)
• Utility bill in name of owner not older than 2 months

Other Info. of directors & subscribers :

• Occupation and educational qualification, place of birth and nationality
• Duration of stay at present residential address of directors and subscribers
• Mobile no. and email id of directors and subscribers