Saving Mantra Blog: Step-by-Step Process for Set Up of an Indian Company by a Foreign Entity (FDI)
Foreign companies and investors across the world are increasingly choosing India as a business destination. Thanks to simplified FDI norms, digital compliance, and a vibrant startup ecosystem, forming a company in India has never been more accessible. This guide explains the complete step-by-step process for a foreign entity to set up a company in India through FDI.
✔ Step 1: Determine FDI Route (Automatic or Government Approval)
Before initiating incorporation, a foreign entity must check if its investment falls under:
1. Automatic Route
No prior government approval is required. Most sectors such as IT, manufacturing, trading, and services fall under this route.
2. Government Route
Sectors like defense, print media, and multi-brand retail require approval from relevant ministries via the Foreign Investment Facilitation Portal (FIFP).
✔ Step 2: Decide Business Structure
A foreign company can invest in:
- Private Limited Company (most preferred)
- Public Limited Company
- Wholly-Owned Subsidiary (WOS)
- Joint Venture with Indian Partner
- Limited Liability Partnership (LLP) (in permitted sectors)
Choice depends on compliance level, sector permissions, and control preferences.
✔ Step 3: Obtain Digital Signature Certificates (DSC) for Directors
Foreign directors must obtain a Class 3 DSC to sign incorporation documents online.
Required Documents (Apostilled/Notarized):
- Passport
- Address proof
- Passport-size photo
- Email & mobile number
✔ Step 4: Apply for Director Identification Number (DIN)
Foreign nationals intending to act as directors in the Indian company require a DIN.
This is applied through the SPICe+ Part B form on the MCA portal.
✔ Step 5: Name Reservation through SPICe+ Part A
The company name must be:
- Unique
- Not similar to any existing name
- Not containing restricted words (e.g., Government, National, etc.)
Name reservation is done via SPICe+ Part A on MCA.
✔ Step 6: Prepare Incorporation Documents
Foreign entities must prepare and submit:
Mandatory Documents
- Charter documents of parent company (apostilled)
- Board Resolution authorizing investment
- Identity & address proof of directors
- Consent from directors (DIR-2)
- Registered office address proof in India
All foreign documents must be apostilled or notarized in the home country.
✔ Step 7: File SPICe+ Part B for Company Incorporation
The following are filed in this step:
- e-MOA
- e-AOA
- AGILE-PRO (for GST, EPFO, ESIC, bank account)
- INC-9 declaration
- Directors’ and shareholders’ details
After verification, the MCA issues the Certificate of Incorporation (COI) with:
✔ Corporate Identification Number (CIN)
✔ PAN
✔ TAN
✔ Step 8: Open a Bank Account in India
Foreign companies must open an FDI-compliant bank account for capital infusion.
Banks may ask for:
- COI
- Board resolution
- Address proof
- KYC of foreign shareholders
✔ Step 9: Remit FDI into the Indian Company
Foreign investment must be brought into India via banking channels compliant with FEMA regulations.
Bank provides a Foreign Inward Remittance Certificate (FIRC).
✔ Step 10: File FDI Reporting with RBI
Within 30 days of allotment, the company must file:
- FC-GPR on FIRMS Portal
- Share valuation certificate
- KYC of foreign investor
Non-compliance leads to penalties under FEMA.
✔ Step 11: Post-Incorporation Compliances
- Appointment of Auditor
- Issue of Share Certificates
- Maintenance of statutory registers
- Filing of annual returns with MCA
- TDS, GST, and income tax compliance
- FEMA/FDI compliance annually
Conclusion
Setting up an Indian company through FDI is a multi-step but streamlined process. With accurate documentation, proper FDI route selection, and timely regulatory filings, foreign entities can easily establish their presence in the Indian market.
Disclaimer
This article is for educational purposes only. Regulatory requirements may change. Consult a qualified professional before making legal, tax, or investment decisions.