Foreign Direct Investment (FDI) in Private Limited Company

February 04, 2023
Registrationwala

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Foreign Direct Investment (FDI) in Private Limited Company

Foreign Direct Investment (FDI) in Private Limited Company

February 04, 2023

Registrationwala

Foreign direct investment is an investment form of controlling business. This is basically to control business from one country to another country. Mainly, FDI includes mergers and acquisition. This includes building new facilities, reinvesting profits earned from overseas operations and intra-company loans. In a narrow sense, FDI refers to building a new facility, a lasting management interest in an enterprise operating in an economy other than that of the investor.

FDI is a controlling ownership in a business enterprise in one country by an entity based in another country. This is the sum of equity capital, other long-term capital, and short-term capital as shown the balance of payments.

FDI in Private Limited Company

Indian Government has shown a keen interest in increasing Foreign Investment. The private limited company is mostly preferred for the business. The private limited company is easy to raise funds. These types of companies have greater flexibility and limited liability.

FDI is allowed in private limited companies for non-residents. There are two categories automatic route and approval route under FDI in private limited company. Mostly there is permission of 100% in most of the sectors in restricted and capped. In some cases, automatic approval is not allowed from Foreign Investment Permission Board, Government of India. Investors of Pakistan and Bangladesh only can invest under approved route.

Indian companies can be issued under fair value. According to Legal norms and guidelines, FDI can issue debentures equity shares and convertible debentures.FDI under automatic route is permissible .Approval category or FDI prohibited do not contain proposal under foreign or Non-residential entity. Application is not required under FDI in Private Limited Company.

There is no requirement of permission of the FIPB or RBI in private limited company under the automatic route. Certain filing can be done only with receipt of the shared subscription money from the foreign or non-resident investor and issuance of shares. The investment cannot be made in a company which requires an Industrial License. Majority of sectors in India are eligible for 100% FDI under the automatic route.