The Indian government has created possibilities for Non-Resident Indians (NRIs) and foreign nationals to invest in India, to increase Foreign Direct Investment (FDI), a critical driver of economic growth. The International Exchange Management Act (FEMA), 1999 regulations, FDI policies, and Reserve Bank of India (RBI) recommendations have made conducting business in India easier, allowing international investors and NRIs to create companies and contribute to the country’s development.

This blog is a comprehensive guide for all non-resident Indians and foreign nationals to help them understand the process of Company Registration in India and its benefits and legal environment.

Why Should NRIs and Foreign Nationals Consider Investing in India?

India’s fast-growing economy and business-friendly policies make it an appealing location for foreign investment. The Indian government encourages NRIs and foreign nationals to invest in entrepreneurship and business ventures by streamlining the FDI process with FEMA legislation and automatic routes in certain sectors.

FDI (Foreign Direct Investment) is important in increasing capital inflow into India, creating jobs, developing infrastructure, and stimulating overall economic progress. NRIs and foreign nationals can avail the benefits by investing or setting up new businesses in companies in India that allow 100% FDI under the automatic route.

Types of Companies NRIs and Foreign Nationals Can Register

Indian entities that are registered by foreigners and non-resident Indians (NRIs) include private limited companies, public limited companies, and limited liability partnerships (LLPs). Let’s look at the details:

1. Private Limited Company.

Private limited businesses are a popular choice for NRIs and foreign nationals. It allows 100% FDI in most sectors through the automated mechanism, without requiring government approval. This makes it easier for investors to establish and expand businesses in India.

• Minimum Number of Members: A private limited corporation can be created with as few as two members (shareholders).
• The maximum number of shareholders: It is up to 200, making it suited for small to medium-sized firms.
• Directors: The company requires at least two directors, one of whom must be an Indian resident.

1. Public Limited Company.

A public limited company is suitable for businesses with more investors. It provides for an unlimited number of shareholders, making it perfect for companies seeking to raise significant funds from the general public or investors.

• Minimum number of members: at least seven shareholders.
• Directors: A public limited company must have at least three directors, one of whom must be an Indian resident.
• FDI Route: It allows for FDI in most sectors via the automated route.

1. Limited Liability Partnership (LLP)

An LLP provides its partners with the benefit of limited liability and allows 100% FDI via the automatic method, but only in sectors that permit such investments. However, foreign direct investment (FDI) in an LLP is less flexible than in private or public limited firms.

Entities Not Permitted for FDI

According to FEMA regulations, NRIs and foreign nationals are not permitted to establish some types of business entities such as sole proprietorships, partnership partnerships, or one-person businesses. These entities do not allow FDI and are thus not viable options for foreign investors.

Recommended Business Entity

Considering the ease of regulations and FDI allowances, NRIs and foreign nationals are best suited to register either a Private Limited Company or a public limited company in India, as these entities permit FDI under the automatic route in most sectors.

Prerequisites for Registering a Company in India

Before starting a company registration in India, NRIs and foreign nationals should meet many prerequisites. These include hiring directors, shareholders, and establishing a legal office address in India.

Directors

• • Eligibility: NRIs, foreign residents, and foreign nationals can act as directors of an Indian company under the Companies Act, 2013.
  • Requirements: To become a director, foreign nationals and NRIs must obtain a Director Identification Number (DIN) and a Digital Signature Certificate (DSC).

Number of Directors:

• • A private limited company must have a minimum of two directors.
  • A public limited company must have a minimum of three directors.
• Indian Resident Director: It is mandatory to have at least one Indian resident as a director for companies established by NRIs or foreign nationals.

Shareholders

• Private Limited Company: Requires at least two shareholders but can have up to 200.
• A public limited company: It requires a minimum of seven shareholders and has no upper limit.
• FDI Shareholding: NRIs and foreign nationals are permitted to own shares in an Indian company under FDI criteria. Many sectors allow 100% FDI through the automatic route, making ownership transfer easier for foreign investors.

Office Address

The proposed company must have a registered office address in India. The company’s office can either be owned or rented, but a rental agreement or property deed must be submitted during the incorporation process. If the property is rented, a No Objection Certificate (NOC) from the property owner is also required.

Documents Required for Company Registration

Documentation requirements to Register A Company in India may vary if the foreign national or NRI resides within India or foreign countries. Here is a list of documents needed.

For foreign nationals who are non-resident of their country:

• Passport (notarized and apostilled by relevant country govt in their country)
• Proof of residence Two months old or less (dvl, bank statement, or electric bill)
• All the documents will be notarized by a Public Notary and apostille.

For Foreign Nationals Residing in India:

• Resident permit
• Passport
• Business visa
• Address proof (bank statement or utility bill not older than two months)
• All documents must be attested by the Consulate of the Foreign Embassy in India.

For NRIs:

• Proof of identity (PAN card)
• Aadhaar card, driving license, or voter ID (if available)
• Current address proof (bank statement, driving license, or utility bill not older than two months)
• All address proof documents must be notarized by a Public Notary and apostille by the Indian Embassy in the foreign country.

Process of Company Registration in India

NRIs and foreign nationals follow a similar approach to Indian residents while registering a company in India. Here’s a step-by-step guide for the procedure:

1. Obtain a Digital Signature Certificate: The prerequisite for NRIs and foreign national directors is that they have to obtain a DSC through which one would sign the electronic documents required in completing the Company Registration Process.
2. Obtain the DIN Number: It is the last step where after DSC is obtained, would-be directors have to obtain a DIN. A DIN is a mandatory unique identification number for any person wanting to serve as a director in an Indian company.
3. Register on the MCA portal: Immediately, after the applicant will need to register on the MCA portal. Registration on the MCA portal consists of filing SPICe+ Form – Simplified Proforma for Incorporating Company Electronically Plus that would encompass a range of services. Such services would include name reservation, incorporation, and acquiring PAN/TAN.
4. UPLOAD DOCUMENTS: All important documents such as e-MoA (Memorandum of Association) and e-AoA (Articles of Association) will be uploaded. These documents lay out the company’s structure, objectives, and rules.
5. Incorporation Certificate: After verifying the application and documents, the Registrar of Companies (ROC) will issue the Certificate of Incorporation. This certificate verifies that the company has been legally incorporated in India.

Conclusion

The registration process for an NRI or foreign citizen has been simplified by numerous government rules and legislation. However, whether you want to form a private or public limited company, knowing the regulatory framework of FEMA, FDI, and RBI laws is important for ensuring compliance.

This automatic route for FDI enables both the NRIs and foreign citizens to invest and make their own respective businesses operational in India, thereby contributing to the growth of the Indian economy and the overall market potential.