India is a preferred destination for investment form NRIs, Foreign Nationals and Foreign ComPANies due to its booming economy and wealth of resources. India is among the fastest-growing economies in the world, slated for tremendous growth over the coming decades with plenty of business opportunities. Foreign investment into India is at an all-time high and is pegged to grow even higher with regulatory reforms and an investor-friendly climate. In this context, we look at the pROCess and pROCedure for an NRI or Foreign National or Foreign Company to invest or start, manage and grow a business in India.
NRIs and Foreign Nationals must always choose to invest or start a Private Limited Company or Limited Company in India. Business entities like Private Limited Company and Limited Company only allow for Foreign Direct Investment (FDI) into India under the automatic route. NRIs and Foreign Nationals are not allowed to invest or start a Proprietorship or Partnership or One Person Company in India, while FDI in LLP requires prior approval from the Reserve Bank of India.
Therefore, the most ideal entity for NRIs and Foreign Nationals to invest or start a business in India would be a Private Limited Company. Limited Company can be incorporated by the Foreign promoter if the number of investors in the venture would be more than 7 and the Company would have to raise equity funds from a number of shareholders. Private Limited ComPANies can have up to 200 shareholders, while a Limited Company is allowed to have unlimited shareholders. Limited comPANies must also comply with more stringent statutory filing requirements when compared to a Private Limited Company.
Board of Directors
ComPANies Act, 2013 permits NRIs, PIOs, Foreign Nationals and Foreign Residents to act as a Director of an Indian Company. To become a Director of an Indian Company, the person must first obtain a Director Identification Number (DIN) after obtaining the Digital Signature Certificate. To obtain a Digital Signature Certificate, the foreign national or NRI must submit a self-attested and notarized copy of his/her Passport and an address proof (Drivers License, Utility Bill, Residency Card). Once, the digital signature certificate is obtained, DIN can be obtained for the foreign national or NRI and he/she may be added to the Board of Directors during incorporation.
A private limited Company must have a minimum of two Directors and can have a maximum of seven Directors. It is recommended that at least one Director be an Indian Citizen and Indian Resident, while the other Board members can be of any nationality or residency.
The shareholding of the Indian Company can be held by a foreign national or foreign entity, subject to the FDI norms in India. ComPANies Act, 2013 requires that a Private Limited Company have a minimum of two shareholders and a maximum of two hundred shareholders. Since the Reserve Bank of India allows 100% FDI in many of the sectors in India under the automatic route, the pROCess for ownership of shares of an Indian Company by a Foreign National or Foreign Entity is simple.
PROCedure for Incorporation
The pROCedure for the Incorporation of a Company with Foreign National or Foreign Entities or NRIs is very much same to that of incorporation of a private limited Company in accordance with the Indian Directors and Indian Shareholders.
One thing which must be taken care of while the incorporation is that there is a need of the foreign identity proof, address proof along with the other documents of foreign origin. This is in addition to the one mentioned above for incorporating a Company with NRIs or Foreign Entities.