[Shubham Patidar]

Hi 

I need to know- documents+process+estimated time line for below 

1. If we plan to have a foreign.               shareholders at the time of incorporation process of WOS 

2. We continue with the process of registering the new entity as WOS of ABC Pvt Ltd and once the Company is incorporated and share are alloted to ABC Pvt Ltd at the first meeting-we transfer the shares of ABC Pvt Ltd to forgein shareholders after incorporation 

[Arun Kumar Maitra]

[Arun Kumar Maitra]

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[Jasveen Kaur]

Dear All,

The query has been very well addressed by our colleague. However, I wish to add a nuanced counter-point specifically on the valuation aspect, which I believe merits a closer look in practice.

It has been mentioned that shares can be issued at face value to a foreign shareholder at the time of incorporation, and therefore a valuation report is not required. While this is technically correct in letter, it is not entirely accurate in practice — and here is why.

─────────────────────────────────
The Regulatory Position
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Yes — at the time of incorporation of a brand-new company, the Fair Market Value (FMV) of shares logically equals the face value (typically ₹10 per share), since the company has zero assets, zero revenue, and no operating history. Therefore, a formal valuation report from an IBBI-registered Registered Valuer is not strictly mandated in this specific scenario.

However, Rule 21(2)(a)(ii) of the Foreign Exchange Management (Non-Debt Instruments) Rules, 2019 (NDI Rules) requires that for any issuance of equity instruments to a person resident outside India in an unlisted company, the price must not be less than the FMV determined using any internationally accepted pricing methodology on an arm's length basis — duly certified by a Chartered Accountant or a SEBI-registered Merchant Banker.

─────────────────────────────────
The Practical Reality — FC-GPR Filing
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This is where the on-ground reality diverges from the theoretical position.

When filing Form FC-GPR on the RBI's FIRMS portal (mandatory within 30 days of share allotment), one of the mandatory documents to be uploaded is a Share Valuation Certificate from a Chartered Accountant. Without this, the AD Bank will not process the filing, and the FC-GPR submission will be treated as incomplete.

So while a Registered Valuer's report (under the Companies Act) is not required, a CA Certificate confirming that the FMV of shares equals the face value is still a practical and functional necessity for smooth RBI compliance.

To put it simply:
 Registered Valuer report under Companies Act — Not required for a new company
 Formal valuation by Merchant Banker — Not required at this stage
 CA Certificate confirming FMV = Face Value — Required for FC-GPR filing on FIRMS portal

─────────────────────────────────
Conclusion
─────────────────────────────────

The cost of obtaining a CA Certificate at this stage is nominal. The risk of proceeding without one — FC-GPR rejection by the AD Bank and potential FEMA non-compliance — is disproportionately high. In my professional experience, no AD Bank will approve an FC-GPR submission for foreign share subscription without at least a CA-certified valuation confirmation, even if it simply states that FMV equals face value for a newly incorporated entity.

I would therefore recommend that the valuation certificate from a CA be treated as a standard part of the incorporation checklist when a foreign shareholder is involved — not optional, even at the face value stage.

Happy to discuss further if the group wishes to deliberate on this.

Warm regards,
PCS JASVEEN KAUR SALUJA

Founder at

Karobaar Legal Solutions

Your Legal Partner

+91 73898 87877

karobaarleg...@gmail.com

@karobaarlegalsolutions

[natarajan subbaraman]

Sir :

Excellent guidance and excellent write up.

It gives clear picture to add Foreign shareholders to the company

thanks

N SUBBARAMAN

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[Jayaraj Potty]

ifthe co is new and  the issue is to subscriber to the MOA. RBI will not ask for any valuation certificate. But the price  should be at face value

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Thanks and Regds

Jayaraj
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