NRI Investment in Private Limited Company

Narendra Kumar

31 Mar, 2023

NRI Investment in Private Limited Company – NRI stands for Non-Resident Indians. As per FEMA Act, 1999 Non-resident Indians are classified into two categories which are as below:

• A person who holds an Indian passport but is not a resident of India.
• A Person who holds foreign passport known also as of Indian Origin (PIO).

Since India is developing a country and having booming economy attracts the NRI’s and Foreigners to invest in India. Many relaxations of regulatory regimes have encouraged NRIs to enter into Indian Market. With faster, simplified procedures and electronic submission of documents, NRIs are finding it convenient to start businesses in India. Private Limited Company is a popular mode for the NRI or Foreign Investors to start on with business in India. Compliances of a private limited company are much simpler compared to that of a Public limited company.

Investment in a Registration of Business:

NRI’s are permitted to subscribe to the Memorandum and Articles of Association and to take up the shares of Indian companies for their incorporation. NRI can start a business type of private limited company or limited liability of the company. Investment in private homes under the automatic route. NRI can invest in a business only who have limited company.

Shareholding:

• NRI’s are allowed to be part of Private Limited Company as a Director or Shareholder as prescribed under the Companies Act 2013.
• As per Companies act 2013 private limited company can have a minimum number of 2 up to maximum 200 shareholders.
• RBI has allowed 100% FDI through automatic route in many sectors which resulted in a simple process.

The procedure of Incorporation:

• Incorporation is regulated by the Companies Act 2013. Since the procedure for incorporation is online it is an advantage to NRI.
• The procedure is same as for Indian Director or shareholders are registering. Some below additional requirement NRI need to follow while registering the Company:
• At least one Director or Shareholder shall be of Indian Origin.
• Copies of passport and address proofs shall be attested at their respective Indian Embassies, High Commissions or Consulates as the case may be.
• Apart from above all the procedure are same. Acquire DIN or DSC, get approval for name reservation, incorporation of MOA and AOA thorough Spice, get incorporation certificate, Obtain PAN and Tan.

Purchase & Transfer of Shares/Debentures by NRIs in a Private Limited Company:

Investment in shares and debentures by non-residents in Indian companies are as a foreign direct investment and regulated by the reserve bank of India. NRI are allowed to invest in accordance with the policy laid down by the RBI. The following are the conditions to be followed by the NRI while purchasing share/equity/stock/preference shares/convertible debentures.

• The percentage of the Foreign Equity which is already approved or that is permitted under FDI Scheme should not increase with the purchase of shares by the NRI.
• It should be under the sectored cap of FDI for the share.
• The purchase of stock should be by a person who is already staying out of India.
• The amount of share cannot be less than that of the Indian shareholders.

Transfer of Shares:

Following are the three situations of transfer:

• NRI to Indian Resident:

Such transfer shall be in accordance with the RBI guidelines. The RBI permission is required for such transfer. It can also be done by way of gift to a resident in India.

• NRI to Person Resident in India:

This needs prior permission from the Reserve Bank of India as the shares are being transferred to a person resident outside India to a person resident in India.

• 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.

Conclusion:

In India, a Private limited company is a most popular mode of investment by NRI. Non-Resident Indians can make direct investment in Private Limited Company. The compliance provision and incorporation procedure are simple. India has diverse nature and huge population which gives the large market to investors.

Also Read: An overview of the NRI Portfolio Investment Scheme