14 November 2013
If an NRI wants to invest 50% in the capital of a company in the country where he is working and become director, should he take RBI approval under FEMA or any other law ?
14 November 2013
DCA Circular dated 16-2-1995 clarifies that there can not be any restriction for incorporation of a company whether all the subscriber to the MOA/AOA/ proposed directors are residing abroad, being either foreign nationals, or NRI subject to the approval of RBI, where necessary.
The RBI may issue such a general permission also under FEMA, 1999 also. The FEMA(Permissible Capital Account Transactions) Regulations, 2000 allow persons resident outside India to invest in an issue of security by body corporate or an entity in India.
Now, it has been decided by RBI through Circular No. 36 dated 26.09.2012 that in cases, where non-residents (including NRIs) make investment in an Indian company in compliance with the provisions of the Companies Act, 1956, by way of subscription to Memorandum of Association, such investments may be made at face value subject to their eligibility to invest under the FDI scheme.
16 November 2013
Thanks a lot to Mr Ajay Mishra for the prompt response.But my question was on a different aspect. He has clarified on NRI investment in India. My query was reverse. If NRI wants to invest in business and wants to be a Director in the country where he now lives (not India)should he get RBI or any Indian Govt agency approval? Trust I am clear in my query
03 August 2024
If an NRI (Non-Resident Indian) wants to invest 50% in the capital of a company and become a director in the country where he is working (not in India), he generally does not need to obtain approval from the Reserve Bank of India (RBI) or any Indian government agency for this investment. Here’s a detailed breakdown:
### **1. Indian Regulations and Approvals**
#### **A. RBI Approval**
- **Not Required:** Since the investment and directorship are taking place outside India, and the NRI is not making any investment in India, RBI approval under FEMA (Foreign Exchange Management Act) is not required.
#### **B. Indian Government Approval**
- **Not Applicable:** As the investment and business activities are taking place outside India, Indian government regulations do not apply in this context.
### **2. Regulations in the Country of Residence**
#### **A. Local Regulations**
1. **Company Laws:** The NRI must comply with the company laws and regulations of the country where he is investing and becoming a director. This includes: - **Company Registration:** Ensuring the company complies with local registration requirements. - **Director’s Duties:** Adhering to the responsibilities and obligations of being a director in that country.
2. **Investment Regulations:** The NRI should check the local regulations regarding foreign investment, directorship, and any other legal requirements specific to the country of residence.
#### **B. Tax Implications**
- **Local Tax Laws:** The NRI should be aware of and comply with the local tax laws concerning income from the investment, director’s remuneration, and any other financial activities.
### **3. Documentation and Compliance**
#### **A. Documentation**
- **Investment Agreement:** Ensure that all investment agreements, director’s appointment letters, and other legal documents are in place and compliant with local laws. - **Proof of Investment:** Maintain documentation of the investment and the role of the director for future reference.
#### **B. Compliance**
- **Legal Advice:** It’s advisable to seek legal and financial advice in the country of residence to ensure compliance with all local regulations and requirements.
### **Summary**
For an NRI investing in a company and becoming a director in the country where they are working, there is no need for RBI or Indian government approval. Instead, focus on complying with the regulations and requirements of the country where the investment and directorship are taking place. Consulting with local legal and financial experts in that country will ensure that all local laws and regulations are followed correctly.
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