India is a preferred destination for investment from 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 a NRI or Foreign National or Foreign Company to invest or start, manage and grow a business in India.
Foreign companies can set up wholly-owned subsidiary in sectors where 100% foreign direct investment is permitted under the FDI policy. The wholly-owned subsidiary may be either of the following business entities:
- Private Limited Company
- Public Limited Company
- Unlimited Company
- Sole Proprietorship
A Private Limited Company is the most popular form of business entity used for Foreign Investors in India, including USA investors in India. It takes some time to incorporate in India as there are various steps required in forming a private limited company in India. There are various steps required to establish a business in India, before and after incorporation, as mentioned hereinafter.
A private company is a company which has the following characteristics:
- shareholders’ right to transfer shares is restricted.
- the number of shareholders is limited to two hundred.
- an invitation to the public to subscribe to any shares or debentures is prohibited.