Memorandum of Association and Articles for a Foreign Owned Subsidiary

Written by CA Nandini Hasija, Krystal7 Consultants. Last updated 23 October 2026.

A memorandum of association is the charter of an Indian company under section 4 of the Companies Act, 2013. It states five things: the name ending in "Private Limited", the State of the registered office, the objects, members' liability and the share capital. The articles under section 5 set the internal rules, with Table F applying wherever they are silent. A foreign parent controls its subsidiary through what it writes into the articles.

This page is for foreign parents and their advisers drafting the constitution of an Indian Private Limited subsidiary. It covers the memorandum clauses, Table F, the clauses a parent should add, signing in SPICe+, and how to change both documents later.

What is a memorandum of association under section 4?

A memorandum of association creates the company and fixes its basic terms. Section 4(1) of the Companies Act, 2013 lists the clauses: name, State of the registered office, objects, liability, share capital and, for a one person company, the nominee. Section 4(6) requires the format in Tables A to E of Schedule I.

A Private Limited subsidiary uses Table A, the memorandum of a company limited by shares. The memorandum is short, and most of its length sits in the objects clause.

Section 6 says the Act overrides anything in the memorandum or articles that conflicts with it. Section 10 makes both documents binding on the company and its members as if each member had signed them. The Act itself is on India Code.

What must the memorandum of a private subsidiary contain?

The memorandum must state the name ending with "Private Limited" and the State of its registered office. It sets out the objects, the matters needed to pursue them, and limited liability of members. It must also state the authorised share capital, its division into shares and each subscriber's shares, at least one each.

Clause	Section	What we write for a foreign owned subsidiary
Name	4(1)(a)	The approved name ending with "Private Limited"
Registered office	4(1)(b)	The State only, such as Karnataka or Haryana; the address goes in SPICe+
Objects	4(1)(c)	The objects to be pursued and the matters necessary in furtherance of them
Liability	4(1)(d)	Liability limited to the amount unpaid on shares held
Share capital	4(1)(e)	Authorised capital, divided into shares of a fixed amount, such as INR 10 each
Subscription	4(1)(e)	Each subscriber's name and number of shares, at least one share each
Nominee	4(1)(f)	Only for a one person company; not used by a subsidiary

The name comes first in practice. Section 4(4) lets a person apply to reserve a name for a proposed company. Under section 4(5), the Registrar reserves it for 20 days from approval for a new company. FAQ 24 of the MCA SPICe+ FAQs of 20 Nov 2020 says the same. An existing company changing its name gets 60 days from approval.

A private company needs at least two members under section 3(1)(b). A wholly owned subsidiary therefore has the parent and one nominee holder as subscribers. The nominee holds its share for the parent, which triggers the beneficial interest declarations under section 89 and the SBO rules. See our guide to BEN-2 and significant beneficial owners.

Authorised capital is a ceiling, not money paid in. We size it to cover the first year's planned share issues. An increase later needs a members' resolution and Form SH-7, plus fees and stamp duty.

Before you size it, our authorised capital fee calculator shows the ROC fee and stamp duty a later increase would cost.

How should a foreign subsidiary draft its objects clause?

Write the objects to match the business the subsidiary will run and the FDI route it relies on. Section 4(1)(c) asks for the objects and any matter considered necessary in furtherance of them. A wide clause that names a restricted activity draws questions from the AD bank and in Form FC-GPR.

The 2013 Act dropped the old split between main objects and other objects. Table A now has two parts: the objects to be pursued on incorporation, and the matters necessary for furthering them. We keep the first part specific and the second part functional.

Three drafting points come up for foreign parents:

1. The objects must fit an automatic route sector, or the parent must hold government approval. An objects clause that includes multi brand retail or defence manufacturing invites a query.
2. The bank opens the account against the objects. A SaaS subsidiary with "trading in all kinds of goods" in its objects gets asked why.
3. The objects should cover the intercompany role, such as rendering software development, support or back office services to group companies.

A change of objects later needs a special resolution and registration with the Registrar, as shown further below. Getting it right at incorporation saves one filing.

What are the articles of association and Table F?

The articles of association are the company's internal rules under section 5. They cover shares, transfers, meetings, the board, dividends and accounts. Table F in Schedule I is the model set for a company limited by shares. Section 5(8) applies Table F wherever the registered articles do not exclude or modify it.

Section 5(8) is easy to miss. A subsidiary that files a short set of articles still carries every Table F regulation it did not exclude. We draft the articles to exclude Table F expressly, and then set out a complete text.

Table F is split under headings for share capital, transfer, alteration of capital, general meetings, the board, dividends and accounts. The defaults that matter most to a foreign parent are below.

Table F heading	Default rule	What a foreign parent usually changes
Transfer of shares	The board may decline to register a transfer of shares that are not fully paid to a person it does not approve, and a transfer of shares on which the company has a lien	Add the private company restriction, a right of first refusal and permitted transfers to affiliates
Alteration of capital	Members may increase share capital by ordinary resolution	Keep it, so an increase needs no special resolution
Proceedings at general meetings	Quorum as provided in section 103	Require the parent's representative to be present
Board of Directors	The board may appoint additional directors up to the maximum strength fixed by the articles	Tie appointments to the parent's nomination right
Proceedings of the Board	The chairperson of the board has a second or casting vote	Remove it, or give it only to a parent nominee in the chair
Proceedings of the Board	Continuing directors may act despite a vacancy, but below the quorum fixed by the Act they may act only to restore the quorum or call a general meeting	Keep it, with the parent nominee quorum rule

The casting vote catches boards out. A resident director who chairs a meeting gets the casting vote under Table F. On a board split evenly between parent nominees and local directors, that decides the outcome.

What must the articles of a private company include?

The articles must contain the three restrictions in section 2(68). They restrict the right to transfer shares, limit members to 200, and prohibit any invitation to the public to subscribe for the company's securities. Table F does not contain them, so the articles must add them.

The member limit excludes current and former employees who became members while employed. Joint holders count as one member. A wholly owned subsidiary is far from 200, but the clause must still appear.

The definition in section 2(68) is what makes a company private. Articles without the restrictions describe a public company.

A private company also gets more room than a public one. G.S.R. 464(E) of 5 Jun 2015 exempts private companies from several sections, and some of the exemptions work only through the articles.

Provision	Effect of G.S.R. 464(E) for a private company	What the articles can do
Sections 43 and 47	Do not apply where the memorandum or articles so provide	Create shares with differential voting or dividend rights
Sections 101 to 107 and 109	Apply unless the articles provide otherwise	Set notice, quorum, chairperson, proxy and voting rules for general meetings
Section 160	Does not apply	Appoint directors without the deposit and notice procedure
Section 162	Does not apply	Appoint two or more directors by one resolution
Section 180	Does not apply	Leave borrowing and asset sale powers with the board
Section 184(2)	Interested director may take part after disclosure	Confirm the board can act with interested nominees

These relaxations help a parent run the subsidiary from abroad. A differential rights class can let a local partner hold economic shares without votes. General meeting rules can be set to fit a two member company.

Which clauses should a foreign parent add to the articles?

A foreign parent should add reserved matters, nomination and removal rights, and a quorum that needs a parent nominee. It should also settle the casting vote, alternate directors, video attendance and transfer restrictions. Each clause works only if it sits in the articles and complies with the Act.

Clause	Legal hook	Drafting note
Reserved matters	Section 5(1); articles bind the company under section 10	List the decisions that need the parent's prior written consent or a parent nominee's vote
Board nomination and removal	Section 161(3); section 152	The parent nominates, removes and replaces directors by written notice; the board acts on it
Resident director	Section 149(3)	Leave one seat for a director who stayed in India 182 days or more in the previous calendar year
Quorum with a parent nominee	Section 174(1) sets the minimum; articles may add conditions	At least one parent nominee present, in person or by video conference
Adjourned meeting	Section 174(4)	If the parent nominee is absent twice, the adjourned meeting proceeds without that condition
Casting vote	Table F, proceedings of the Board	Delete it, or confine it to a parent nominee in the chair
Alternate directors	Section 161(2)	Let the board appoint an alternate for a director absent from India for three months or more
Video conference attendance	Section 173(2); rule 3 of the Meetings of Board Rules	Confirm attendance by video for board and general meetings
Transfer restrictions	Section 2(68); section 58	Right of first refusal, lock in for any minority, permitted transfers within the group
Authorised representative	Section 113	The parent's board appoints a person to attend and vote at general meetings

Reserved matters need care in the wording. A list that is too long stalls the subsidiary, because every decision waits for the parent. We usually cover the annual budget, borrowings and guarantees above a limit, share issues and transfers, related party transactions, auditors, and any change to the articles.

The board nomination clause must respect the Act. Section 152 still says directors are appointed by the company in general meeting, save where the Act provides otherwise. Section 161(3) lets the board, if the articles allow it, appoint a person nominated by an institution under a law or an agreement. A parent company may not fit the word institution. We therefore combine both routes: the board appoints the nominee at once, and members confirm the appointment.

The resident director requirement sits outside the parent's control. Our note on the resident director rule covers who qualifies.

Are shareholders' agreement terms binding if not in the articles?

Not reliably. A share transfer restriction that is not in the articles does not bind the company or its shareholders. The Supreme Court held this in V.B. Rangaraj v. V.B. Gopalakrishnan, (1992) 1 SCC 160, decided on 28 Nov 1991.

The safe course is to copy every key shareholders' agreement term into the articles.

The proviso to section 58(2) says a contract between two or more persons on the transfer of securities is enforceable as a contract. We do not rely on it to restrict a private company's transfers. Section 2(68) puts that restriction in the articles.

For a wholly owned subsidiary, the risk is small while the parent holds every share. It grows when a local partner, an employee pool or an investor comes in. We insert the transfer, exit and governance terms into the articles at that point, by special resolution.

Entrenchment adds protection. Section 5(3) lets the articles say that specified clauses can be changed only by a stricter procedure, such as the parent's written consent. Under section 5(4), a private company adopts an entrenchment provision on formation or by an amendment agreed by all members. Section 5(5) and rule 10 then require notice to the Registrar, in Form MGT-14 within 30 days for an existing company.

How do foreign directors count for quorum and attend by video conference?

Directors abroad count for quorum when they attend by video conference under section 174(1) and rule 3 of the Meetings of Board Rules. The board quorum is one third of the total strength or two directors, whichever is higher. Members may attend general meetings by video conference under MCA General Circular 03/2025 until further orders.

Section 173(2) lets a director attend a board meeting by video conference. The procedure in rule 3 of the Companies (Meetings of Board and its Powers) Rules, 2014 needs an Indian venue and a recorded meeting. Our note on board meetings with non resident directors walks through it.

The articles can tighten quorum but not loosen it below the Act. A clause that needs one parent nominee present is valid, because it adds to the statutory minimum. A clause that lets one director form a quorum on a board of three is not.

General meetings follow a different rule. Section 103(1)(b) sets the quorum for a private company at two members personally present, unless the articles fix a larger number. The parent attends through its section 113 representative, and the articles should say that the representative counts toward the quorum. A two member subsidiary needs both the parent and the nominee holder.

MCA General Circular 03/2025 of 22 Sep 2025 lets companies hold AGMs and EGMs by video conference until further orders. The framework of the earlier circulars still applies. It does not extend the time to hold the AGM. We add a clause in the articles that confirms attendance and voting by video, so the company does not depend on the circular alone.

What FEMA limits apply to investor rights in the articles?

The articles cannot give a foreign shareholder an assured exit price. Rule 9(5) of the Foreign Exchange Management (Non Debt Instruments) Rules, 2019 allows optionality clauses only with a lock in of at least one year, or longer where the sector rules say so. The exit must follow the pricing guidelines, with no assured return. A put option at a fixed price breaches the rules.

The NDI Rules on rbi.org.in, updated up to 2 Sep 2026, repeat the point in the Explanation to rule 2(k). Equity instruments may carry an optionality clause, but no option to exit at an assured price. Rule 21 sets the pricing guidelines for issues and transfers between residents and non residents.

This matters most in joint ventures. Take an Indian partner's put option against the foreign parent, or the parent's call option over a local stake. Each must leave the price to a valuation at exercise. Our guide to the FEMA pricing guidelines covers the valuation methods.

Two other FEMA points touch the articles:

1. Shares issued to the parent must be equity instruments under rule 2(k). Preference shares and debentures count only if fully and mandatorily convertible. Optionally or partially convertible instruments fall outside the definition in rule 2(k).
2. A parent with a beneficial owner in a country sharing a land border with India needs government approval under Press Note 3. The articles cannot route around that. The Cabinet decision of 10 Mar 2026 is in the table under "What changed in 2026". See our note on Press Note 3.

How are the memorandum and articles signed in SPICe+?

SPICe+ (Form INC-32) carries the memorandum and articles as the electronic Forms INC-33 and INC-34. Subscribers sign them with a digital signature certificate. When subscribers sign at different places, the witness signs after all of them (FAQ 58). Rule 13 of the Companies (Incorporation) Rules, 2014 sets how subscribers sign and how foreign signatures are attested.

The MCA SPICe+ FAQs of 20 Nov 2020 (FAQs 42 to 45, 50 and 52) list four cases. In each, the company attaches signed copies instead of INC-33 and INC-34:

1. A first subscriber is a body corporate based outside India. The attachment is the apostilled memorandum and articles.
2. There are more than seven subscribers.
3. A foreign individual subscriber has no valid business visa.
4. A foreign national who is both subscriber and director has no DIN.

The company cannot mix the two methods. If signed copies are attached for any subscriber, the company files no INC-33 or INC-34 at all (FAQ 45). A foreign parent is a body corporate based outside India, so its subsidiary attaches signed and apostilled or attested copies. Our SPICe+ guide covers the rest of the form.

Rule 13(4) lets a body corporate subscribe through a director, officer or employee authorised by its board resolution. That person cannot also be a subscriber. Rule 13(5) then sets the attestation for a foreign national residing outside India:

Where the signatory is	What rule 13(5) requires
A Commonwealth country	Signature, address and proof of identity notarised by a Notary Public there
A country party to the Hague Apostille Convention, 1961	Notarised in the country of origin and apostilled
Any other country	Notarised, and the notary's certificate authenticated by an Indian diplomatic or consular officer
Visiting India	Allowed if the person holds a valid business visa; Persons of Indian Origin and OCI holders are exempt from the visa condition

Practice varies by country. In our filings, simple notarisation works for Commonwealth signatories. The UAE is not a party to the Apostille Convention (HCCH status table, last updated 30 Jun 2026). UAE documents therefore go through a notary, the UAE foreign ministry and then the Indian mission. Check that the Convention applies between India and the signatory's country before the signatory visits a notary.

Each subscriber signs in the presence of at least one witness under rule 13(1). The witness adds a statement that the subscriber signed in their presence and that they verified the subscriber's identity.

How do you alter the memorandum or articles after incorporation?

Pass a special resolution of members and file it with the Registrar in Form MGT-14 within 30 days under section 117. Section 13 governs the memorandum and section 14 the articles. A name change also needs approval in Form INC-24, and an increase in authorised capital needs Form SH-7.

Change	Members' approval	Further approval	Form and time
Objects	Special resolution	None; the Registrar registers and certifies within 30 days of filing	MGT-14 within 30 days
Articles	Special resolution	None, unless the change converts a public company to private	MGT-14 within 30 days
Entrenchment	All members agree	None	MGT-14 within 30 days under rule 10
Authorised capital increase	Ordinary resolution, if the articles allow	None	SH-7 within 30 days under section 64
Name	Special resolution	Approval of the new name under section 13(2)	RUN reservation; MGT-14; INC-24
Registered office to another State	Special resolution	Central Government approval on Form INC-23	MGT-14; INC-23; INC-26 notice; INC-28 within 30 days of the order; then INC-22

Section 13(10) says no alteration of the memorandum has effect until it is registered. The new objects do not apply until the Registrar records them. We hold back any new line of business until then.

A name change runs in four steps:

1. Reserve the new name through RUN under rule 9; an existing company gets 60 days.
2. Pass the special resolution and file Form MGT-14 within 30 days.
3. File Form INC-24 for approval of the new name under section 13(2) and rule 29.
4. Collect the fresh certificate of incorporation in Form INC-25, which completes the change under section 13(3).

Rule 29 bars a name change for a company that has defaulted in filing its annual returns or financial statements. It also bars one that has not repaid matured deposits or debentures, or interest on them. We clear any late AOC-4 or MGT-7 before we apply. Our page on changing the name of an Indian company covers the follow on updates.

Every copy of the memorandum and articles issued after an alteration must include it, under section 15. We reissue a clean consolidated copy after each change and send it to the bank and the parent's legal team.

What changed in 2026

We found no 2026 amendment to sections 4 and 13 of the Companies Act in the text we read. The later developments that touch a foreign parent's constitution came from FDI policy and from a pending Bill.

Area	Position before	Position on 23 Oct 2026	Date	Instrument
Video conference general meetings	Allowed under circulars to 30 Sep 2025	Allowed until further orders; no extension of AGM time	22 Sep 2025	MCA General Circular 03/2025
Land border beneficial ownership	A beneficial owner in a land border country put the investment on the government route	Cabinet approved keeping non controlling beneficial ownership up to 10 percent on the automatic route	10 Mar 2026	Cabinet decision, PIB release
Companies Act amendments	Not applicable	Corporate Laws (Amendment) Bill, 2026 introduced on 23 Mar 2026 and sent to a Joint Committee; we found no record that it has passed	23 Mar 2026	Bill No. 85 of 2026

The land border change and the Bill both came after this page's publish date of 27 Feb 2026. We have added them as later developments.

Worked example

A Delaware corporation sets up an Indian SaaS subsidiary in Bengaluru. The parent will hold 99,999 shares and its group CFO, as nominee, one share. The board has two parent nominees in the US and one resident director in India.

The memorandum reads:

1. Name: the approved name ending with "Private Limited".
2. Registered office: the State of Karnataka.
3. Objects: software development, SaaS services and support services, including services to group companies outside India.
4. Liability: limited to the amount unpaid on shares.
5. Authorised capital: INR 50,00,000 in 5,00,000 equity shares of INR 10 each.
6. Subscription: 1,00,000 shares of INR 10 each, paid up capital INR 10,00,000.

The articles exclude Table F and set out a full text. They contain the section 2(68) restrictions, a reserved matters list, nomination rights, and a quorum that needs one parent nominee. They delete the chairperson's casting vote.

Quorum works out as follows. One third of three directors is one. The Act's floor is two, so the quorum is two directors. The articles add that one must be a parent nominee. The resident director and one nominee on video conference form a valid quorum.

Both signatories sign in the US. The US is a party to the Apostille Convention and is not a Commonwealth country. Their signatures are notarised and apostilled, under rule 13(5)(b) for the CFO. The parent is a body corporate based outside India. The company therefore attaches the signed and apostilled memorandum and articles to SPICe+ instead of filing INC-33 and INC-34. That covers both subscribers (FAQ 45).

Eighteen months later the parent funds a INR 1.5 crore expansion. The subsidiary needs 15,00,000 new shares at INR 10 each, which would take issued capital to INR 1.6 crore. That exceeds the INR 50,00,000 authorised capital.

1. Members pass an ordinary resolution under section 61, as the articles allow, raising authorised capital to INR 2 crore.
2. The company files Form SH-7 within 30 days under section 64.
3. The board allots 15,00,000 shares to the parent.
4. Stamp duty on the issue at 0.005 percent of INR 1,50,00,000 is INR 750 (Indian Stamp Act, 1899, as amended from 1 Jul 2020).
5. The company files Form FC-GPR within 30 days of allotment.

Common mistakes

1. Filing short articles and assuming Table F is excluded. Fix: state in the articles that Table F does not apply, and write a complete text.
2. Leaving out the section 2(68) restrictions. Fix: include the transfer restriction, the 200 member limit and the bar on public invitations.
3. Keeping control rights only in a shareholders' agreement. Fix: copy reserved matters, transfer and exit terms into the articles.
4. Keeping the Table F casting vote on an evenly split board. Fix: delete it or give it only to a parent nominee in the chair.
5. Writing a quorum clause the parent cannot meet from abroad. Fix: allow video conference attendance and an adjourned meeting fallback.
6. Giving an investor a put option at a fixed price. Fix: tie the exit price to a valuation under rule 21 of the NDI Rules at the time of exercise.
7. Drafting an objects clause wider than the business. Fix: describe the actual activities and the group services role.
8. Starting a new business before the altered objects are registered. Fix: wait for the Registrar's record under section 13(10).
9. Sending unapostilled signatures from abroad. Fix: follow the rule 13(5) route for the signatory's country.

Checklist

1. Reserve the name through SPICe+ Part A or RUN.
2. Confirm the FDI route for the planned activities.
3. Draft the objects to match the business and the group services role.
4. Set the authorised capital to cover the first year's share issues.
5. Draft complete articles that exclude Table F and include the section 2(68) restrictions.
6. Add reserved matters, nomination rights, quorum, casting vote, alternate director and video conference clauses.
7. Check every option or exit clause against rules 9(5) and 21 of the NDI Rules.
8. Appoint the parent's authorised signatory by board resolution under rule 13(4).
9. Have each foreign signatory sign before a witness and notarise or apostille under rule 13(5).
10. File the memorandum and articles with SPICe+, as INC-33 and INC-34 or as signed attachments.

To have us draft the memorandum and articles for a new subsidiary, email [email protected] with the parent's group structure and the shareholders' agreement terms.

Frequently Asked Questions

What is a memorandum of association?+

A memorandum of association is the charter document of an Indian company under section 4 of the Companies Act, 2013. It states the company's name, the State of its registered office, its objects, the liability of members and its share capital. A company limited by shares uses the format in Table A of Schedule I.

What are the clauses of a memorandum of association?+

Section 4(1) of the Companies Act, 2013 lists six clauses. They are name, registered office State, objects, liability, share capital with each subscriber's shares, and a one person company's nominee. A Private Limited subsidiary uses the first five. Each subscriber must take at least one share.

What is the difference between the memorandum and the articles of association?+

The memorandum under section 4 sets the company's identity, objects and capital. The articles under section 5 set the internal rules for shares, meetings, directors and dividends. Both bind the company and its members under section 10, and the Act overrides either under section 6.

Is Table F compulsory for a private company?+

No. Table F in Schedule I is the model set of articles for a company limited by shares. Under section 5(8), its regulations apply wherever the company's registered articles do not exclude or modify them. A company can exclude Table F and adopt its own complete articles.

Can a foreign company subscribe to the memorandum of an Indian company?+

Yes. Rule 13(4) of the Companies (Incorporation) Rules, 2014 lets a body corporate subscribe through a director, officer or employee authorised by board resolution. A foreign parent signs this way. The investment must also comply with the NDI Rules and the FDI route for the business.

How does a foreign subscriber sign the memorandum and articles?+

Under rule 13(5), a signatory in a Commonwealth country has the signature notarised there. In a Hague Apostille country, the signature is notarised and apostilled. Elsewhere, the notary's certificate is authenticated by an Indian diplomatic or consular officer. A witness attests each signature under rule 13(1).

What are Forms INC-33 and INC-34?+

INC-33 and INC-34 are the electronic memorandum and articles filed with SPICe+ (Form INC-32). Subscribers sign them with a digital signature certificate. The company attaches signed copies instead in two main cases. One is more than seven subscribers. The other is a first subscriber that is a body corporate based outside India (MCA SPICe+ FAQs, 20 Nov 2020).

Should the shareholders' agreement be written into the articles?+

Yes, for every term the parties want to enforce against the company. In V.B. Rangaraj v. V.B. Gopalakrishnan, (1992) 1 SCC 160, the Supreme Court held that share transfer restrictions not contained in the articles do not bind the company or its shareholders. We copy reserved matters, transfer restrictions and exit terms into the articles by special resolution.

What are reserved matters in articles of association?+

Reserved matters are decisions that need the prior consent of a named shareholder or its nominee directors. For a foreign parent they usually cover budgets, borrowings above a limit, share issues, related party transactions, auditors and changes to the articles. They bind the company when written into the articles under section 5.

Can foreign directors attend board meetings by video conference?+

Yes. Section 173(2) of the Companies Act, 2013 and rule 3 of the Meetings of Board Rules let directors attend by video conference. They count for quorum, which is one third of the board or two directors, whichever is higher. The articles can require a parent nominee to be present.

How is the memorandum of association altered?+

Under section 13 of the Companies Act, 2013, members pass a special resolution and the company files Form MGT-14 within 30 days. A name change also needs approval in Form INC-24. A move of the registered office to another State needs Central Government approval. No alteration takes effect until registered.

How do you change the name of a private company?+

Reserve the new name through RUN, pass a special resolution, and file Form MGT-14 within 30 days. Then apply in Form INC-24 under rule 29 of the Companies (Incorporation) Rules, 2014. The change is complete when the Registrar issues a fresh certificate of incorporation under section 13(3).

Can the articles give a foreign investor a put option at a fixed price?+

No. Rule 9(5) of the Foreign Exchange Management (Non Debt Instruments) Rules, 2019 allows optionality clauses only with a lock in of at least one year. It allows no assured return. The exit price must follow the pricing guidelines under rule 21 at the time of exercise.

Can a private company issue shares with differential voting rights?+

Yes, if its memorandum or articles provide for it. G.S.R. 464(E) of 5 Jun 2015 switches off sections 43 and 47 of the Companies Act, 2013 for a private company whose constitution so provides. A foreign owned subsidiary must also make sure any instrument issued to a non resident qualifies under the NDI Rules.

Sources

• Legislative Department, India Code, Companies Act, 2013 (index page; sections 3, 4, 5, 6, 10, 13, 14, 15, 58, 61, 64, 89, 101 to 117, 149, 152, 161, 173, 174 and Schedule I), https://www.indiacode.nic.in/handle/123456789/2114
• Income Tax Department (Companies Act, 2013 text), Section 2 Definitions, clauses (68) and (76), accessed 24 Oct 2026, https://www.incometaxindia.gov.in/w/section-2-148
• Ministry of Corporate Affairs, Rules: Companies (Incorporation) Rules, 2014 (rules 9, 10, 13, 29, 30 and 31); Companies (Meetings of Board and its Powers) Rules, 2014 (rule 3), https://www.mca.gov.in/content/mca/global/en/acts-rules/ebooks/rules.html
• Tripura High Court, copy of the Companies (Incorporation) Rules, 2014 (rules 10, 13, 29, 30 and 31), https://www.thc.nic.in/Central%20Governmental%20Rules/Companies%20(Incorporation)%20Rules,2014.pdf
• Tripura High Court, copy of the Companies (Meetings of Board and its Powers) Rules, 2014 (rule 3), https://www.thc.nic.in/Central%20Governmental%20Rules/Companies%20(Meetings%20of%20Board%20and%20its%20Powers)%20Rules,%202014.pdf
• Ministry of Corporate Affairs, FAQs on Incorporation and Allied Matters (SPICe+), 20 Nov 2020 (FAQs 24, 27, 28, 42 to 45, 50, 52 and 58), https://www.mca.gov.in/Ministry/pdf/SpicePlusFAQS_20112020.pdf
• Ministry of Corporate Affairs, Notifications: G.S.R. 464(E) of 5 Jun 2015 (exemptions to private companies), https://www.mca.gov.in/content/mca/global/en/acts-rules/ebooks/notifications.html
• Ministry of Corporate Affairs, General Circular No. 03/2025, 22 Sep 2025, https://www.mca.gov.in/content/mca/global/en/acts-rules/ebooks/circulars.html
• Supreme Court of India, V.B. Rangaraj v. V.B. Gopalakrishnan, (1992) 1 SCC 160, decided on 28 Nov 1991; the citation also appears in an NCLAT order, https://nclat.gov.in/sites/default/files/migration/upload/1558735485b6d4c8fab8de.pdf
• Reserve Bank of India, Foreign Exchange Management (Non Debt Instruments) Rules, 2019 (rules 2(k), 9(5) and 21), updated up to 2 Sep 2026, https://rbi.org.in/scripts/bs_viewcontent.aspx?Id=5083
• Reserve Bank of India, Notification FEMA 395/2019-RB (reporting of non debt instruments, regulation 4(1): FC-GPR within 30 days of issue), RBI notifications page, https://www.rbi.org.in/Scripts/NotificationUser.aspx
• Hague Conference on Private International Law, Status table of the Apostille Convention of 5 Oct 1961, last updated 30 Jun 2026, https://www.hcch.net/en/instruments/conventions/status-table/?cid=41