Foreign founders and parent companies set up Indian companies regularly, and foreign nationals frequently sit on Indian boards. The legal path is well defined, but it involves three separate systems: company law (the Ministry of Corporate Affairs), foreign investment law (FEMA, administered by RBI, and the government's FDI policy), and immigration (visas). This post explains how each one affects a foreign national who wants to be a director or shareholder.
Who counts as a foreign national here?
For MCA filings, a foreign national is anyone who is not an Indian citizen. That includes Overseas Citizens of India (OCI cardholders) and persons of Indian origin who hold another passport. Indian citizens living abroad are NRIs and follow a slightly different path, covered in our post on NRI directors.
Company law requirements
A foreign national can be a director if they have a Director Identification Number (DIN) and a Digital Signature Certificate (DSC). For a new company, DINs for up to three directors can be applied for within SPICe+. Instead of PAN, a foreign national provides passport details, and MCA's systems do not allow the same passport number to be linked to more than one DIN.
Two structural rules matter. A private limited company needs at least two directors, and section 149(3) of the Companies Act, 2013 requires at least one director who stays in India for 182 days or more during the financial year. A board made up entirely of foreign residents will not meet this rule, so foreign-owned companies usually appoint at least one India-resident director.
Apostille versus consular attestation
Identity and address documents of a foreign director, and the MoA and AoA where signed physically, must be attested in the country of residence. The MCA's SPICe+ FAQs set three tracks:
| Residence | What is needed | Practical note |
|---|---|---|
| Commonwealth country | Attestation by a notary public of that country | Usually the quickest route |
| Hague Apostille Convention country | Notarisation followed by an apostille | The apostille is issued by a designated government authority, not the notary |
| Neither of the above | Notarisation, then authentication by the Indian Embassy or consulate | Also called consularisation; typically takes the longest |
The documents covered include the passport, proof of address, the certificate of incorporation of any foreign corporate subscriber, and the MoA and AoA. Where a document is executed matters: a document signed outside India is attested according to the place of execution.
Business visa: why it matters for filing
MCA guidance links the business visa to the format of the MoA and AoA. A foreign national subscriber who holds a valid DIN and DSC can use the electronic e-MoA and e-AoA only if they submit proof of a valid business visa. Without a business visa, physically signed and apostilled MoA and AoA must be attached, and the e-forms are not accepted for that company.
For foreign subsidiaries, the MCA lists a missing business visa or OCI card with arrival stamps among the grounds for rejection. If a foreign director travels to India to set up or run the company, check with the immigration authorities that the visa category matches the intended activity; immigration rules are outside company law and change from time to time.
The FDI side: automatic or government route?
When a foreign national or foreign company subscribes to shares, it is foreign direct investment. Under India's FDI framework, most sectors allow up to 100 per cent foreign investment under the automatic route, meaning no prior government approval is needed. Some sectors have caps, conditions or require approval, and a few are prohibited. Check the sector before you commit to a structure.
Land-border countries: Press Note 3 of 2020
RBI's Master Direction on Foreign Investment in India reflects the policy change made through Press Note 3 of 2020. An entity or citizen of a country that shares a land border with India, or an investment whose beneficial owner is a citizen of such a country, can invest only under the Government route.
The beneficial ownership test looks through intermediate holding companies, so routing the investment through a company in a third country does not avoid the rule. If any investor or ultimate owner is connected to a land-border country, take advice before filing SPICe+, because shares cannot be issued to them without approval.
Reporting after shares are issued
Once shares are allotted to a foreign subscriber, the company reports the issue to RBI in Form FC-GPR through the FIRMS portal within thirty days from the date of issue. The company also files the annual return on foreign liabilities and assets. Our FEMA and RBI compliance page explains these filings.
Why foreign subsidiary applications get rejected
The MCA's SPICe+ FAQs list the most common grounds on which applications for foreign-owned companies are rejected:
- Documents that are not apostilled, notarised or attested by the consulate as required
- A missing PAN undertaking for the foreign subscriber
- No business visa, or no OCI card with arrival stamps, attached
- A board resolution of the foreign parent that does not state the number of shares subscribed and the name of the authorised representative
Each of these is avoidable with a careful review before filing. The board resolution point is especially common: a generic resolution approving an Indian subsidiary is not enough.
Choosing the resident director
Because at least one director must stay in India for 182 days or more in the financial year, foreign-owned companies need to think carefully about who fills that role. Options include an Indian employee who will run the business, an expatriate who will be based in India for most of the year, or an independent professional. Whoever it is, remember that all directors share responsibility for the company's compliance. The resident director should have genuine access to information and a clear mandate from the parent, not just a signature role.
Should the foreign entity be a subscriber, or the individuals?
A foreign company can subscribe to shares directly, making the Indian company its subsidiary, or individual foreign founders can subscribe personally. A corporate subscriber needs its certificate of incorporation and board resolution attested, and the parent's ownership chain is examined for the land-border test. Individual subscribers need personal documents attested instead. The choice also has tax, accounting and future fundraising consequences in both countries, so decide it before drafting the SPICe+ application.
A typical setup sequence for a foreign-owned company
- Confirm the sector is open under the automatic route and that no investor is linked to a land-border country
- Identify a resident director who meets the 182-day test
- Obtain DSCs for all signatories, including video verification for foreign directors
- Get passports, address proofs and corporate documents notarised and apostilled or consularised
- Prepare the board resolution of the foreign parent naming its authorised representative and the shares subscribed
- File SPICe+ with physical apostilled MoA and AoA where required
- Open the bank account, receive share capital through banking channels, and file FC-GPR
Our page on company registration in India for foreigners covers the full process, and our company registration in Chennai guide explains the domestic steps.
Once the company is running, foreign directors take part in board meetings by video conference, sign filings with their DSC, and keep their DIN active through DIR-3 KYC, which MCA now requires once every three financial years and within thirty days of any change in contact or address details.
If you are a foreign founder or parent company planning an Indian entity, you can book a consultation with C S Rushil & Co.