Foreign Shareholder Allotment India: FEMA & FC-GPR (2026)

When an Indian company issues shares to a shareholder resident outside India, the transaction is governed by two parallel frameworks: FEMA, which controls the foreign exchange inflow and the FC-GPR filing with the Reserve Bank of India, and the Companies Act, which governs the corporate mechanics of the share issue and the PAS-3 filing with the Registrar of Companies. Getting the sequence right matters because a missed filing window or an incorrect valuation can attract compounding proceedings under current regulations.

Here is the process in outline before we go section by section.

1. The board approves the allotment and the pricing basis.
2. The company obtains a valuation report supporting the issue price under FEMA pricing guidelines.
3. The foreign investor remits funds through the banking channel, and the company confirms receipt with its authorised dealer bank.
4. The company allots shares and files Form PAS-3 with the Registrar of Companies.
5. The company reports the allotment to the Reserve Bank of India through Form FC-GPR on the FIRMS portal, generally within the prescribed window from the date of allotment.

Each of these steps is expanded below.

Foreign Shareholder Allotment Roadmap

The roadmap for foreign shareholder allotment in India runs from board approval through fund remittance to the final regulatory filing with the Reserve Bank of India. Because the steps sit across two regulators, sequencing them correctly avoids the common trap of receiving funds before the company has a compliant pricing basis in place.

From board approval to FC-GPR

The process typically begins with a board resolution approving the proposed allotment, the class of shares, and the pricing methodology. Once the valuation is finalised, the foreign investor remits the subscription amount from abroad, and the receiving bank issues a Foreign Inward Remittance Certificate that the company will need for its RBI filing. Only after the funds are confirmed and the shares are allotted does the FC-GPR reporting obligation arise. Companies that are simultaneously setting up their first Indian entity often bundle this step into their broader plan for setting up a foreign subsidiary in India, since the first allotment usually coincides with incorporation itself.

FEMA and Companies Act for Foreign Allotment

Foreign shareholder allotment in India sits at the intersection of two statutes that regulators treat as complementary rather than overlapping. FEMA regulates the inbound flow of foreign capital and the reporting of that capital to the central bank, while the Companies Act governs how an Indian company legally creates and allots the underlying shares.

What each law governs

FEMA, administered through the Reserve Bank of India, is concerned with whether the sector is open to foreign investment, whether the pricing meets the fair value floor, and whether the inflow is reported correctly. The Companies Act, administered through the Registrar of Companies under the Ministry of Corporate Affairs, is concerned with the corporate process: the board and, where required, shareholder approval, the return of allotment, and the register of members. A company can be fully compliant on one front and still exposed on the other, so both filings need equal attention.

FC-GPR versus PAS-3

FC-GPR is the RBI facing filing, submitted on the FIRMS portal, that reports the foreign investment received and the shares allotted against it. PAS-3 is the MCA facing filing, submitted through the company's Registrar of Companies portal, that records the allotment as a corporate event regardless of who the shareholder is. The two filings run on different timelines and different portals, and one is not a substitute for the other.

Automatic vs Approval Route in FDI

Whether a foreign shareholder allotment needs prior government approval or can proceed without it depends on the sector the company operates in. Most sectors currently sit under the Automatic Route, meaning the company can accept the investment and complete the allotment before making any regulatory filing, subject to sectoral conditions.

Sector caps at a glance

The table below is indicative of how sectors are typically categorised. The actual percentage caps and conditions attached to each sector change from time to time, so the figures should always be confirmed against the current consolidated FDI policy before a transaction is finalised.

When approval is unavoidable

Approval is generally required when the sector itself is capped below full foreign ownership beyond a threshold, when the investment originates from an investor based in a country that shares a land border with India, or when the proposed structure falls outside the conditions attached to the Automatic Route for that sector. In these cases the company must secure government approval before the shares can be allotted, and attempting to route funds in first is not a workaround under current regulations.

FEMA Valuation Rules for Foreign Allotment

FEMA does not allow an Indian company to allot shares to a foreign investor at any price the parties agree to. The issue price must be at or above a fair market value determined under an internationally accepted pricing methodology, and this floor applies regardless of whether the round is priced by negotiation between the founder and the investor.

Fair market value methods

For an unlisted Indian company, the valuation is generally certified by a Chartered Accountant, a Merchant Banker, or a Registered Valuer, depending on the nature and stage of the transaction. Commonly accepted methods include the Discounted Cash Flow method for early stage or growth companies, the Net Asset Value method for asset heavy businesses, and comparable company multiples where a reasonable peer set exists. The board should record which method was used and why, since this becomes part of the audit trail reviewed if the transaction is ever questioned.

DCF Worked Example

The illustration below is for explanatory purposes only, using assumed figures, and is not a substitute for an actual valuation report.

Suppose a startup projects free cash flows of [figure to verify] over a five year horizon, applies a discount rate of [figure to verify] reflecting its risk profile, and arrives at a terminal value using a stable growth assumption. Discounting each year's cash flow and the terminal value back to the present, and dividing the resulting enterprise value by the fully diluted share count, produces a per share fair value. If the actual issue price is set at or above this computed fair value, the pricing generally satisfies the FEMA floor. The valuer's report, not this illustration, is what the company and its bankers will rely on when the FC-GPR filing asks for the basis of the issue price.

Founders raising from investors in the United States, the United Kingdom, the European Union, Canada, or the Middle East should note that the valuation floor applies uniformly regardless of the investor's home jurisdiction, though the route and any approval requirement can differ depending on where the ultimate beneficial owner sits.

FC-GPR Filing and Post Allotment Compliance

Filing FC-GPR does not close the file. A foreign shareholder allotment triggers a short calendar of dependent filings, each with its own deadline, and missing any one of them can affect the company's standing for its next fundraise.

FC-GPR Filing Timeline

Under current regulations, FC-GPR is generally required to be filed on the FIRMS portal within a defined window from the date of allotment, commonly understood to be around 30 days, though the exact number of days and any late filing fee should be verified against the current RBI framework before relying on it. Filing late does not automatically block the transaction, but it typically requires routing the filing through a late submission fee process, and repeated delays can attract closer scrutiny on future filings.

PAS-3, Annual Return and FLA

Once FC-GPR is filed and acknowledged, the company should also complete its PAS-3 filing with the Registrar of Companies if this has not already been done, update its register of members, and reflect the new foreign shareholder in its annual return filed with the MCA. Separately, any Indian company with foreign investment or overseas assets is generally required to file an annual Foreign Liabilities and Assets return with the Reserve Bank of India, independent of the FC-GPR filing for that year. Companies that also receive foreign contributions for specific charitable or research purposes should separately check whether FCRA registration and compliance applies to them, since FCRA sits outside the FDI framework entirely.

Because these obligations recur every year for as long as the foreign shareholding exists, most companies fold them into their broader annual FEMA compliance for foreign invested companies rather than tracking each filing as a one off event. Groups that also run intercompany pricing arrangements alongside the equity investment, such as management fees or cost sharing with the foreign parent, should also loop in transfer pricing advisory for cross border transactions early, since the equity valuation and the transfer pricing documentation are often reviewed together.

Read the full roadmap above, or speak with Krystal7 before you remit funds, so the pricing, the route, and the filing calendar are all settled before the first rupee changes hands.