FDI IN PRIVATE LIMITED COMPANY

By
DOBIZ INDIA

Overview of FDI in India

Foreign Direct Investment (FDI) in India is
undertaken as per the FDI Policy which is
formulated and announced with the
Government of India.
Investment in Indian companies can be
done by both non-resident including
resident Indian entities. Any non-resident
investment within aIndian companyis
Direct Foreign Investment.

Overview of FDI in India

Investment by resident Indian entities
could again comprise both resident and
non-resident investments. Thus, this kind
of Indian company can have Indirect
Foreign Investment if the Indian investing
company has foreign investment in it. The
indirect investment may also be a
cascading investment, i.e. through multilayered structure.

FDI in Private Limited Company

Foreign direct investment in private
limited company is considered
under two routes:
FDI under Approval route.
FDI under Automatic route.

FDI under Approval route

The Foreign Direct Investment in
private limited companyunder approval
route is notautomatic route of investment
in the country and require prior approval of
government.
The approval becomes necessary about the
proposals that involves investment or some
technical collaboration with Indian
ventures.FDI under Automatic route.
The permission is granted when Foreign
Investment Promotion Board (FIPB)
recommended it to government for
approval.

FDI under Automatic Routes

FDI in private limited company is
allowed under the automatic route
without prior approval either of the
Government or perhaps the Reserve
Bank of India in all of
activities/sectors as per the
consolidated FDI Policy, issued by
the Government of India from time
to time.

Sectors Under Routes

Approval route

Mining & mineral separation.

Defence Industry.
Print Media.
Airports.
Satellites.
Single Brand product retail
trading.
Pharmaceuticals.
Tea Plantation.

Automatic route

Atomic Energy.
Business of chit funds.
Nidhi Company.
Trading in transferable development
rights.
Lottery business including
government lottery and online lottery.
Gambling and betting including
casino
Real estate business or construction
of farm house.
Activity / sector not opened to private
sector investment.

Procedure to be followed after investment under

the Automatic Route or with Government
approval?

A two-stage reporting procedure has

to be followed:
On receipt of share application money.
Upon issue of shares to non-resident
investors.

On Receipt of Share Application

Money
Within 30 days of receipt of share application
money/amount of consideration from the nonresident investor, the private limited company is
required to report to the Foreign Exchange
Department, Regional Office concerned of the
Reserve Bank of India, under whose jurisdiction
its Registered Office is located, the Advance
Reporting Form, containing the following details :

Name and address of the foreign investor/s.

Date of receipt of funds and the Rupee
equivalent;

On Receipt of Share Application

Money
Name and address of the authorised
dealer through whom the funds have
been received.
Details of the Government approval, if
any; and,
KYC report on the non-resident investor
from the overseas bank remitting the
amount of consideration.
The private limited company has to ensure
that the shares are issued within 180 days
from the date of inward remittance which
otherwise would result in the contravention
/ violation of the FEMA regulations.

Upon Issue Of Shares To Non-resident

Investors
Within 30 days from the date of issue of shares, a report
in Form FC-GPR- PART A together with the following
documents should be filed with the Foreign Exchange
Department, Regional Office concerned of the Reserve
Bank of India.

Certificate from the Company Secretary of the

company accepting investment from persons resident
outside India certifying that:
The private limited company has complied with the
procedure for issue of shares as laid down under the
FDI scheme.
The investment is within the sectoral cap / statutory
ceiling permissible under the Automatic Route of the
Reserve Bank and it fulfills all the conditions laid
down for investments under the Automatic Route.

Upon Issue Of Shares To Non-resident

Investors
Shares have been issued in terms of SIA/FIPB
approval No. ______ dated _______ (enclose the
FIPBapproval copy).
Certificate from Statutory Auditors/ SEBI
registered Merchant Banker / Chartered
Accountant indicating the manner of arriving
at the price of the shares issued to the
persons resident outside India.

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