Issue and Purchase of Shares by NRIs & Foreigners

Issue and purchase of shares by NRIs and foreign nationals is a common activity nowadays. With a lot of investment and growth in Indian companies, it has attracted a tremendous amount of people and businesses all over the world to invest through the purchase of shares of Indian Companies. Due to good response, the companies now choose a very easy and less complicated method to issue shares to NRIs and foreign nationals.

Why do people want to buy shares from India? 

As India has become one of the fastest-growing and largest economies in the world, there has been an increase in the number of Non-Resident Indian and Foreign National or Foreign entities interested in investing in the companies of India. The following article mainly focuses on issuing shares to NRIs, foreign nationals, and foreign entities and its related compliances and the legal framework. 

What do you mean by a Person Resident outside India?

A person resident outside India is a person resident outside India other than a citizen of Pakistan or Bangladesh or an entity incorporated outside India other than an entity incorporated in Bangladesh or Pakistan.

However, the Companies Act 2013 does not specify any separate rules or regulations for NRIs. However, the Companies Act has a separate class of persons called Persons Resident Outside India, which is inclusive of NRIs and Foreign Nationals. Therefore, any rules and regulations that apply to Persons Resident Outside India will be responsible for NRIs in issuing shares.

Automatic Route for Issue of Shares by an Indian Company

Under the Foreign Exchange Management Act regulations, an Indian Company is allowed to issue shares through the automatic route to a person who is a resident outside India. 

The majority of companies and their activities are up for or eligible for 100% FDI through the automatic route. There are a few companies that are involved in some activities known as defence equipment manufacturing, broadcasting, etc., that require FDI under the approval route.

Below mentioned are some of the types of companies that are available for investment through the automatic route. They are:

  • Trading company.
  • Export Oriented Unit or a Unit in a Free Trade Zone.
  • Small scale industrial company.
  • Manufacturing company. 
  • Any other company.

Mode of Payment for Share Issued to NRIs or Foreign National

An Indian registered company that issues shares to a person who is a resident outside India is eligible to receive payment for the shares through the following modes:

  • Through normal banking, channel inform of inward remittance 
  • Debit the mentioned amount to the NRE/FCNR account of the person concerned maintained with an authorised dealer in India or the bank of India. 

How do I file for Foreign or NRI Investments? 

For any kind of foreign investment made by NRIs and foreign nationals on a repatriable or non-repatriable basis, a report of the same is to be filed to the Reserve Bank of India at its regional office within 30 days from the date of receipt of the amount and also another report in Foreign Currency-Gross Provisional Return for the acquisition of shares and bonuses.

All the details of such Foreign Direct Investment are to be filed in Part A and B respectively. Furthermore, Part A has to be filed by the company, by Authorized Dealer Category-1 bank to the Reserve Bank of India’s regional office. On the other hand, Part B, which is known to be an annual report of all the investments done by the company throughout the financial year, is further required to be furnished directly or indirectly by the company to the below-mentioned address on or before 30th June of every calendar year. 

The Director

Balance in Payment Statistical Division

Department of Statistical Analysis & Computer Services

Reserve bank of India

C 9, 8th Floor, Bandra-Kurla Complex,

Bandra (E), Mumbai – 400 051

Sample draft of the Board Resolution to issue shares to foreign nationals and NRIs. 

The following sample board resolution can be used to authorise the issue of shares to NRIs and Foreign Nationals.

RESOLVED FURTHER that subject to the aforementioned agreements indicated occasionally by the Reserve Bank of India and additionally Central Government under the Foreign Exchange Management Act, 1999 and dependent upon such different sanctions, approvals and permissions as might be viewed as fundamental and dependent upon the relevant provisions, assuming any, of the Companies Act, 2013, and liable to such conditions as might be recommended by any of the specialists while giving such approvals/permissions/sanctions, and further dependent upon the approval of the concerned Company at the General Meeting or the Board of Directors of the Company be and is thus approved to permit Foreign Institutional Investors (FIIs), Non-Resident Indians (NRIs), and Persons of Indian Origin (PIOs) to gain shares/debentures of the Company through direct membership or through stock trades in India under Portfolio Investment Scheme, as well as per other reasonable modes.

RESOLVED FURTHER that the Board of Directors of the Company be and is thusly approved to do all such acts, deeds, matters and things and to execute such archives or works as might be fundamental, appropriate or convenient to offer impact to this goal and for issues associated therewith or accidental or subordinate thereto. 

RESOLVED FURTHER that the Company Secretary be coordinated to convene an Extraordinary General Meeting for this reason and issue the notification with the needed explanatory statement according to drafts put before the meeting and approved. 


As India is becoming a hub for investments, it’s important that Indian companies now issue their shares to foreign nationals and NRIs. This helps in investment as well as curates a good future for the Indian companies as well. All such investments also increase the credibility of Indian companies. Therefore, the issue of shares to foreign nationals and NRIs has become a much easier process now. 


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