
Issue and Purchase of Shares by NRIs & Foreigners
India is one of the largest and fastest growing economies in the world. There is a large number of Non-Resident Indian and Foreign National or Foreign entities interested in investing in companies in India. In this article, we look at the procedure for issuing shares to NRIs, foreign nationals and foreign entities and the related compliances.Person Resident Outside India
A person resident outside India is a person resident outside India other than a citizen of Bangladesh or Pakistan or an entity incorporated outside India other than an entity in Bangladesh or Pakistan. The Companies Act does not specify separate rules and regulations for NRIs. However, the Companies Act has a separate class called Persons Resident Outside India, which includes NRIs and Foreign Nationals. Hence, rules and regulations applying to Persons Resident Outside India would be responsible for NRIs in issuing shares.Automatic Route for Issue of Shares by an Indian Company
Under FEMA regulations, an Indian Company can issue shares under the automatic route to a person resident outside India. The following are some of the types of companies that can avail the automatic route of FDI:- Manufacturing company.
- Trading company.
- Small scale industrial company.
- Export Oriented Unit or a Unit in Free Trade Zone.
- Any other company.
Payment for Share Issued to NRIs or Foreign National
An India company issuing shares to a person resident outside India should receive the payment for the shares through one of the following routes:- Inward remittance through normal banking channel.
- Debit to NRE/FCNR account of the person concerned maintained with an authorised dealer or bank in India.
Filing for NRI or Foreign National Investment in India
For foreign investment made by NRIs and foreign nationals on a repatriable or non-repatriable basis, a report is to be filed with the Regional Office of the RBI within 30 days from the date of receipt of the amount and also another report in FC-GPR for the acquisition of right shares and bonus shares. Details of FDI are to be furnished in Part A and B. Part A has to be filed by the company, through AD Category-1 bank, to the concerned Regional Office of RBI. Part B, which is an annual report of all investments made by the company during a financial year is required to be submitted directly by the company to the following address before 30th June every year. The Director Balance of Payment Statistical Division Department of Statistical Analysis & Computer Services Reserve bank of India C 9, 8th Flor, Bandra-Kurla Complex, Bandra (E), Mumbai - 400 051Board Resolution for Issue of Shares to NRIs & Foreign Nationals
The following sample board resolution can be used to authorise the issue of shares to NRIs and Foreign Nationals. RESOLVED that subject to the terms and conditions specified from time to time by the Reserve Bank of India and/or Central Government under the Foreign Exchange Management Act, 1999 and subject to such other approvals, permission and sanctions as may be considered necessary and subject to the applicable provisions, if any, of the Companies Act, 2013, and subject to such conditions as may be prescribed by any of the authorities while granting such approvals/permissions/sanctions, and further subject to the approval of the COmpany at a General Meeting the Board of DIrectors of the Company be and is hereby authorised to allow Foreign Institutional Investors (FIIs), Non-Resident Indians (NRIs), and Perosns of Indian Origin (PIOs) to acquire shares/debentures of the Company through direct subscription or thorugh stock exchanges in India under Portfolio Investment Scheme, and/or in accordance with other permissible modes. RESOLVED FURTHER that the Board of Directors of the COmpany be and is hereby authorised to do all usch acts, deeds, matters and things and to execute such documents or writings as may be necessary, proper or expedient for the purpose of giving effect to this resolution and for matters connected therewith or incidental or ancillary thereto. RESOLVED FURTHER that the Company Secretary be directed to convene an Extraordinary General Meeting for this purpose and issue the notices with the relevant explanatory statement as per drafts placed before the meeting and approved. Also read: NRI Taxation in IndiaRelated Guides
Popular Post

Starting a small business can be a transformative venture, offering the exciting opportunity...

Tax deduction at source, shortly and popularly known as TDS, was introduced by the Income Tax...

Goods & Services Tax Certificate is issued to people who are registered under GST...

GST registration applies to all individuals and entities supplying goods or services in India. GST...

Gift tax in India is applied when the value of the received gift exceeds ₹50,000 in the...

The Union Budget 2025 has brought significant changes to India’s personal income tax structure, raising the...

The Goods and Services Tax (GST) is an indirect tax system introduced in India in 2017. It functions...

A trademark search is simply checking if another person or organization does not already own the...

Section 194H of the Income Tax Act in India mandates the deduction of Tax at Source (TDS) on commission or brokerage...

Section 80G Deduction is a facility available in the Income Tax Act which allows taxpayers to...

The Income Tax Department (ITD) has not provided specific guidance on crypto taxes for Indian investors. However...

Internal audit applicability is a critical concept for companies in India, impacting various...

In the business world, two main types of companies exist: private company and public company...

Ministry of Finance vide a Notification No 05/2022- Central Tax (Rate) dated 13.7.2022 has issued...

The Central Board of Indirect Taxes and Customs (CBIC) has recently announced an extension...

Depreciation is a key concept in finance and accounting. It helps us manage how the value of...

Form 10IA of the Income Tax Department must be filed by taxpayers claiming income tax deduction...

The Goods and Services Tax (GST) system in India has been a significant reform in the country's...

India's Gross Domestic Product (GDP) benefits significantly from the substantial...

The Finance Act, 2023 introduced the MSME 45-day payment rule under Section 43B(h) of the Income Tax Act...

The Direct Tax Vivad Se Vishwas (DTVSV) Scheme, 2024, was announced by Union Finance Minister...