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100 % shares to foreign company

17 December 2012

I want to form private limited company and it will have two Foreign Directors and the head office wants to hold 100% share in that company. I have two queries related to it ;-

1.) Is it possible to give 100% shares to the Head office (Represented by the foreign partner) or it is

mandatory to give some part of the equity to any subsidiary company ?

2.) Notarization of the MOA from the foreign country is required in case Foreign Directors sign the MOA.

In case the directors are in India for 30 days and they sign the MOA , is notarization from the foreign

country still required??

Regards

Mayank

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6 Replies

CA. Anuj Gupta (Practices in NRI Int.Tax FEMA TP FDI/FIPB & FCRA) (7024 Points)
Replied 17 December 2012

1. The answer shall depend on the work proposed to be done by the Indian Company.

2. MAy not be required subject to certain conditions.

Anuj

femaquery @ gmail.com

1 Like

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valji (Accounts manager-MBA) (2150 Points)
Replied 17 December 2012

AGREE WITH ABOVE

READ SECTROIAL GUIDELINES BY RBI ON WEBSITE OF RBI

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Dipjyoti Majumdar (CA in service & CS. dipmaj@ rediffmail.com ) (3468 Points)
Replied 18 December 2012

Mayank

Further to Anuj Sir's response, I wish to add that you need to have a Indian Director on the Board of the Indian Company to sign the Income Tax Return, unless the Foreign Nationals have a PAN in India (which is unlikely).

Regards,

1 Like

Shankar BA(Hons) (CS) (278 Points)
Replied 18 December 2012

Buddy,

When a Private Limited Company is incorporated in India with two Foreign Directors, it is termed as Foreign company.

So, as per Indian Companies Act, 1956, the Foreign company should have atleast one Indian Director.

Secondly, 100% of shares cannot be held by the headquarters as it would then be termed as "branch office".

So minimum 51% has to held by the Headquarters (that is holding company). Well at the same time the company incorporated in India has to be incorporated as Subsidiary company.

Third, as per our Indian Notarization Act, only Indian citizen can be notarized by our authorized notary public.

When it comes to foreigners it has to be done by their country lawyers authorized by their court.

1 Like

Mayank Kapoor (.) (159 Points)
Replied 18 December 2012

Dear Shankar

Thank you very much for your informative reply.

1.) What will be the case of shareholders?? I am worried about the shareholding pattern. The foreign company does not want to give any share holding to its Indian Director. So is it possible

that 99 % shares are alloted to the Holding company represented through one foreign director and 1% to the same holding company represented through the other foreign director.

2.) I totally agree with you on thenotarization point. What I mean is that is it mandatory to get the MOA notarized by the foreign country because we have foreign directors signing on the MOA ??

In case the foreign Directors are in India for 3 months and the company is incorporated within this time. The Foreign directors sign the MOA in India . Then also , is the notarization required from the foreign country??

Thanks and Regards

Mayank

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Shankar BA(Hons) (CS) (278 Points)
Replied 18 December 2012

Dude,

There is no restriction in shareholding pattern in general. Whereas Bare Act says that Directors and Shareholders are entirely different.

So, the shareholders can be anyone, that is they can be Foreign individual / body corporate or Indian individual / body corporate.

But, Reserve bank of India (RBI) has laid some regulations in order to forex. That is the capital might be from overseas nation. So, there are some restrictions laid by RBI for foreign companies forming base in India.

You please refer RBI - Foreign Exchange Department website for the regulations.

Secondly, when it comes to notarization of MOA, it has to be notarized by their country not India whereas it will also be notarized by an Indian notary public after he gets the authorized one from the foreign country.

This is because the company incorporated in India is subsidiary and ultimately the holding company has to inform and get permission in order to incorporate a subsidiary company in India from their government. Even in this it is general and their country might also have some restrictions in incorporating certain companies overseas.