The Government of India has granted permission to Non-Resident Indians (NRIs) and foreign nationals to register a new limited company in India or invest in the country, aiming to attract Foreign Direct Investments (FDI). FDIs play a crucial role in fostering economic growth and development. Under the Foreign Exchange Management Act, 1999 (FEMA) Regulations, NRIs have been acknowledged as eligible entities for investment by the government.

Moreover, the government has rationalised the registration procedures, in which foreign nationals are involved. NRIs and foreign nationals are now able to invest in India through various avenues such as purchasing shares of Indian companies, injecting capital into existing enterprises, or establishing new businesses within the country.

Under FEMA guidelines, Foreign Direct Investment (FDI) is restricted for businesses such as proprietorship firms, partnership firms, or one-person companies. Consequently, Non-Resident Indians (NRIs) and foreign nationals are prohibited from initiating partnership firms, proprietorship firms, or one-person companies in India.

Given the regulations governing FDI and FEMA, the optimal choice for NRIs and foreign nationals seeking to establish a business entity in India would be a private limited or public limited company. This is because FDI is permitted under the automatic route for the majority of sectors, aligning with the prescribed guidelines.

Prior to planning the Registration of a Private Limited Company or a Public Limited Company,  NRIs and foreign nationals must ensure adherence to the following considerations.

FEMA Restrictions

FDI is prohibited in entities engaged in following sectors:

• lottery business;
• gambling and betting including casinos, etc.;
• chit funds;
• nidhi companies;
• trading in transferable development rights;
• real estate business or construction of farm houses;
• manufacturing of cigars, cheroots, cigarillos and cigarettes, of tobacco or tobacco substitutes;
• activities or sectors not open to private sector investment, for example, atomic energy, railway operations (other than as specifically permitted under the FEMA Regime); and
• foreign technology collaborations in any form including licensing for franchise, trademark, brand name and management contract are also prohibited for lottery business and gambling and betting activities.

Before registering a Private Limited Company or a Public Limited Company or in an LLP, the promoter shall ensure that the business of the proposed Company shall not fall under the prohibited sectors. Also the promoter shall identify whether the business falls in automatic route or approval route or partially automatic and partially approval route.

Directors 

The Foreign national must have a valid Director Identification Number or a valid PAN card. Also there shall be a resident Director for the company

Shareholders

A private limited company necessitates a minimum of two members, while a public limited company mandates at least seven members. Additionally, a private limited company can accommodate up to 200 members, whereas there is no maximum limit for a public limited company.

Office Address

The proposed company must have an office address in India before going for incorporation.