# Nominee Shareholder for a Wholly Owned Subsidiary in India

> Source: https://krystal7.com/insights/nominee-shareholder-wholly-owned-subsidiary-india
> Publisher: Krystal7 Consultants (Krystal7 Innovations Private Limited), Gurugram, India
> Author: CA Nandini
> Published: 06 Oct 2026; updated 25 Oct 2026
> Summary: Why a foreign parent needs a nominee shareholder for a wholly owned subsidiary in India, with Form MGT-6 due within 30 days of the declaration.

*Written by CA Nandini, Krystal7 Consultants. Last updated 26 October 2026.*

## AI Overview Summary

- Section 3(1)(b) of the Companies Act, 2013 needs two or more persons to form a private company. A foreign parent that wants 100 percent holds one share through a nominee.
- The nominee declares in Form MGT-4 and the parent in Form MGT-5. The company files Form MGT-6 with the Registrar within 30 days of receiving the declaration.
- A person who fails to make a section 89 declaration faces a penalty of ₹50,000 plus ₹200 a day, up to ₹5 lakh.
- A non resident nominee keeps the whole issue in the FC-GPR, due within 30 days. Moving a resident nominee's share to a non resident needs pricing at or above the guideline value and an FC-TRS within 60 days.
- Under section 3A, a private company may run with fewer than two members for six months. After that, members who know of it are severally liable for new debts.

**A Private Limited Company in India needs at least two members, so a foreign parent wanting 100 percent holds one share through a nominee. The nominee is the registered holder of that share and the parent keeps the beneficial interest. Under section 89 of the Companies Act, 2013, the nominee gives the company Form MGT-4 and the parent gives Form MGT-5. The company then files Form MGT-6 with the Registrar within 30 days of receiving the declaration. A non resident nominee from the parent's group keeps every share inside the FC-GPR.**

This page explains why the second member is needed and how the section 89 and section 90 filings work. It also covers who should act as nominee and what FEMA (the Foreign Exchange Management Act, 1999) requires when the nominee changes. It ends with a worked example, common mistakes, a checklist and FAQs.

## Why does a Private Limited Company need two members?

Section 3(1)(b) of the Companies Act, 2013 lets two or more persons form a private company. Section 3(1)(c) lets one person form a One Person Company (OPC). There is no single member version of an ordinary Private Limited Company. A foreign parent that wants to own the whole Indian company still needs a second name on the register.

Section 2(68) sets the upper end. A private company's articles must limit its members to 200, except in an OPC.

| Company type | Minimum members | Upper limit | Provision |
|---|---|---|---|
| Private Limited Company | 2 | 200 (counted as section 2(68) provides) | Sections 3(1)(b) and 2(68) |
| One Person Company | 1 | 1 | Sections 2(62) and 3(1)(c) |
| Public company | 7 | Not limited by section 2(68) | Section 3A |

Source: Companies Act, 2013, sections 2(62), 2(68), 3(1) and 3A (section 3A inserted by the Companies (Amendment) Act, 2017), read 26 Oct 2026.

### What happens if membership drops below two?

Section 3A deals with this. Suppose a private company's members fall below two and it carries on business for more than six months like that. Every person who is a member during that time, and knows of it, becomes severally liable for the company's debts contracted after those six months. Creditors can sue each such member separately.

A nominee who leaves without a replacement puts the parent's limited liability for new debts at stake once six months pass.

### What this means for a parent that wants 100 percent

The parent subscribes to every share but one. A nominee subscribes to the last share and holds it for the parent, so the parent holds the beneficial interest in all of them.

On our filings, the nominee also signs the memorandum and articles as a subscriber. That puts the nominee's KYC inside the incorporation pack, so pick the nominee before drafting starts. Our guide to a [wholly owned subsidiary in India](/insights/wholly-owned-subsidiary-in-india) covers the rest of the setup.

## What is a nominee shareholder?

A nominee shareholder is a member whose name is on the register of members but who holds the shares for someone else. Section 2(55) makes a person a member when the person subscribes to the memorandum or has their name entered in the register. The person who owns the economic and voting interest is the beneficial owner.

Section 89(10), inserted by the Companies (Amendment) Act, 2017, defines beneficial interest in a share. It includes the right, directly or indirectly, through any contract or arrangement, to exercise or cause to be exercised the rights attached to the share. It also includes the right to receive or take part in any dividend or other distribution on that share.

| Point | Registered holder (nominee) | Beneficial owner (parent) |
|---|---|---|
| Name on the register for the nominee share | Yes | No |
| Member under section 2(55) | Yes | Yes, through its own shares |
| Casts the vote on the nominee share | Yes, under section 47(1) | No, but directs the vote under section 89(10) |
| Right to the dividend on the nominee share | Holds legal title only | Yes, under section 89(10) |
| Declaration under section 89 | Form MGT-4 | Form MGT-5 |
| Counts towards the two member minimum | Yes | Yes |

Source: Companies Act, 2013, sections 2(55), 3(1), 47(1) and 89(10); MCA form titles for MGT-4 and MGT-5, read 26 Oct 2026.

Section 47(1) gives every member holding equity shares a vote on every resolution placed before the company. On a poll, the vote is in proportion to the member's share of the paid up equity capital. The nominee casts the vote on its one share, and the nominee agreement decides how.

## How do the section 89 declarations work?

Section 89 needs three documents for one nominee share. Two are declarations given to the company. The third is the company's return to the Registrar of Companies (ROC).

### Form MGT-4 by the registered holder

The nominee declares to the company that it holds the share but not the beneficial interest. It names the beneficial owner. This is the declaration under section 89(1). MCA titles Form MGT-4 a declaration by the registered owner of shares.

### Form MGT-5 by the beneficial owner

The parent declares to the company that it holds the beneficial interest, and gives the nominee's details. This is the declaration under section 89(2). MCA titles Form MGT-5 a declaration by the beneficial owner. A later change in the beneficial interest needs a fresh declaration under section 89(3).

### Form MGT-6 by the company

Section 89(6) requires the company to note the declaration in the register concerned. It must then file a return with the Registrar within 30 days of receiving the declaration. That return is Form MGT-6. The MCA instruction kit lists the declarations under sections 89(1), 89(2) and 89(3) as its attachments.

A director, manager, CEO, CFO or company secretary of the company signs Form MGT-6 digitally. We collect the signed MGT-4 and MGT-5 on the day of allotment. The 30 day clock then starts on a date we know, not on the day a scan arrives from abroad.

### What does Form MGT-6 cost?

The normal fee depends on the company's nominal (authorised) share capital. Late filing adds a multiple of that fee.

| Nominal share capital | Normal fee |
|---|---|
| Less than ₹1,00,000 | ₹200 |
| ₹1,00,000 to ₹4,99,999 | ₹300 |
| ₹5,00,000 to ₹24,99,999 | ₹400 |
| ₹25,00,000 to ₹99,99,999 | ₹500 |
| ₹1,00,00,000 or more | ₹600 |

Source: MCA, Instruction Kit for eForm MGT-6, Annexure A, read 26 Oct 2026.

| Delay after the due date | Additional fee |
|---|---|
| Up to 30 days | 2 times the normal fee |
| Over 30 and up to 60 days | 4 times the normal fee |
| Over 60 and up to 90 days | 6 times the normal fee |
| Over 90 and up to 180 days | 10 times the normal fee |
| More than 180 days | 12 times the normal fee |

Source: MCA, Instruction Kit for eForm MGT-6, Annexure A, read 26 Oct 2026.

### What are the penalties under section 89?

Section 89(5) puts the penalty on the person who fails to declare. Section 89(7) puts it on the company and its officers who do not file the return. A wholly owned subsidiary cannot use the small company relief in section 446B, because section 2(85) keeps subsidiaries out of the small company definition.

The amounts sit in the comparison table in the next section.

## How does section 90 apply to a wholly owned subsidiary?

Section 90 looks for the individual at the top of the chain, not the holder of one share. Section 90(1), as substituted in 2017, covers an individual with beneficial interests of not less than 25 percent. The rules can prescribe another percentage. The interest can be held alone, together with others, or through other persons or trusts.

That individual declares the interest to the company. Section 90(4A), added in 2019, requires the company to take steps to identify its significant beneficial owners (SBOs). Under section 90(4), the company files a return of SBOs with the Registrar, which MCA's online filing service names Form BEN-2.

The company can send a notice under section 90(5) to anyone it believes is an SBO. That person must reply within 30 days under section 90(6). If the reply is missing or unsatisfactory, the company applies to the National Company Law Tribunal under section 90(7). It has 15 days from the end of the notice period.

For a wholly owned subsidiary, the nominee is not normally an SBO, because it holds no beneficial interest in its share. The parent is a body corporate, so the trail runs through the parent's shareholders to the individuals behind it. Our guide on [significant beneficial owner filings in Form BEN-2 for a foreign parent](/insights/significant-beneficial-owner-ben-2-foreign-parent) sets out the current threshold and the tests. Our [note on the LinkedIn SBO case](/insights/linkedin-sbo-case-parent-ceo-significant-beneficial-owner) looks at when a parent's CEO can be an SBO.

| Point | Section 89 | Section 90 |
|---|---|---|
| Question asked | Who holds the share for whom | Which individual has significant beneficial ownership |
| Who declares | The registered holder and the beneficial owner | The individual SBO |
| Company's return to the ROC | Form MGT-6, within 30 days of receiving the declaration | Form BEN-2 |
| Threshold | Every share held for another person | 25%, or the other percentage prescribed |
| Penalty on the person | ₹50,000 plus ₹200 a day, up to ₹5 lakh | ₹50,000 plus ₹1,000 a day, up to ₹2 lakh |
| Penalty on the company | ₹1,000 a day, up to ₹5 lakh | ₹1 lakh plus ₹500 a day, up to ₹5 lakh |
| Penalty on an officer in default | ₹1,000 a day, up to ₹2 lakh | ₹25,000 plus ₹200 a day, up to ₹1 lakh |

Sources: Companies Act, 2013, sections 89 and 90 (as amended in 2017 and 2019); MCA, Penalties and Offences under Companies Act, 2013 (6 May 2024); MCA BEN-2 service title, read 26 Oct 2026.

## Who should be the nominee?

Three kinds of nominee are common. Each works under company law, but they differ under FEMA. The Indian company reports shares issued to non residents in Form FC-GPR, and transfers between residents and non residents in Form FC-TRS.

| Nominee | Position at allotment under FEMA | If the nominee changes later | Practical points |
|---|---|---|---|
| A group company outside India | Non resident allottee, inside the FC-GPR | A move to another non resident holding on a repatriation basis is not an FC-TRS case | Survives staff changes; signs through an authorised signatory; needs corporate KYC |
| A foreign director or officer of the parent | Non resident allottee, inside the FC-GPR | Same as a group company; a death needs a transmission first | Personal KYC through the country document route; the role ends when the job ends |
| An Indian resident, such as the resident director | Resident allottee, so that share sits outside the FC-GPR | A move to a non resident is a sale at or above the price the pricing guidelines set, reported in FC-TRS within 60 days | Easy KYC in India; FEMA work at exit; a gift needs RBI approval and a relative |

Sources: RBI, FEMA 395/2019-RB, regulation 4 (amended up to 13 Jun 2026); FEMA (Non Debt Instruments) Rules, 2019, rules 9, 13 and 21; RBI, Master Direction on Foreign Investment in India, paras 7.7.1 and 8.2 (updated up to 15 Jun 2026), read 26 Oct 2026.

### A group company as nominee

A sister company or the parent's own holding company abroad can hold the share. It is a person resident outside India, so the Indian company reports its share in the same FC-GPR as the parent's.

A group company does not resign or die. That makes it the most stable choice for a group with more than one entity. The cost is a second set of corporate KYC and a board resolution of that company.

### A foreign director or officer of the parent

This suits a group with one entity abroad. The officer is a non resident, so the whole issue again sits in the FC-GPR.

On our filings, the UAE does not use the apostille route; documents go through attestation by the UAE Ministry of Foreign Affairs (MOFA) and consularisation. For Commonwealth countries, apostille has not been mandatory, and simple notarisation has worked. Germany is a Hague Convention country, but its apostille has not worked for incorporation on our filings.

Officers leave, so plan the replacement on the day you appoint the nominee.

### An Indian resident as nominee

Company law accepts the resident director as nominee. FEMA reads it differently.

Regulation 4(1) asks for an FC-GPR when an Indian company issues equity instruments to a person resident outside India. A share issued to a resident is not such an issue, so the nominee's share sits outside the FC-GPR. The company still counts as owned by persons resident outside India. Rule 23 of the Non Debt Instruments Rules measures ownership by beneficial holding of more than 50 percent of the equity instruments.

The friction comes at exit. Moving the share from the resident nominee to a non resident is a sale under rule 9(3). Rule 21(2)(b) sets a floor, so the price cannot be less than the value the pricing rules give. For an unlisted company, para 8.2 of the RBI Master Direction asks for a valuation on an internationally accepted pricing method. A chartered accountant, a SEBI registered merchant banker or a practising cost accountant can certify it. Para 8.11 adds that the certificate must not be more than 90 days old.

The resident side then reports the transfer in Form FC-TRS within 60 days. The gift route does not help. Rule 9(4) allows a gift from a resident to a non resident only with prior RBI approval. Donor and donee must also be relatives under section 2(77). A parent company cannot be anyone's relative.

Our guide to [FC-TRS on a share transfer from a resident to a non resident](/insights/share-transfer-resident-to-non-resident-fc-trs) walks through that filing. The [FEMA pricing guidelines guide](/insights/fema-pricing-guidelines-share-valuation) covers the valuation.

### Parents from land border countries

If the parent or its owners sit in a country that shares a land border with India, Press Note 3 approval comes first. On our filings it adds about 6 months, and the Ministry of Home Affairs (MHA) clears directorship and shareholding separately. Our [Press Note 3 guide](/insights/press-note-3-fdi-land-border-countries) covers the route.

## What FEMA filings does a nominee structure trigger?

Each event in the life of the nominee share maps to one FEMA report under regulation 4 of FEMA 395, or to none.

| Event | FEMA report | Time limit | Who files |
|---|---|---|---|
| Shares issued to the parent and a non resident nominee | FC-GPR | 30 days from the issue | The Indian company |
| Nominee share moves between a resident and a non resident holding on a repatriation basis | FC-TRS | 60 days from the transfer or the receipt or remittance of funds, whichever is earlier | The resident transferor or transferee |
| Nominee share moves between two non residents holding on a repatriation basis | None under regulation 4(3) | Not applicable | Not applicable |
| Annual return on foreign liabilities and assets | FLA | By 15 July each year | The Indian company that received FDI |
| The subsidiary invests in another Indian company | Form DI | 30 days from the allotment | The investing Indian company |

Source: RBI, FEMA 395/2019-RB, regulations 4 and 5 (amended up to 13 Jun 2026), read 26 Oct 2026.

Regulation 5 adds a late submission fee for delays, set by the RBI in consultation with the Central Government. Our page on the [late submission fee for FEMA reporting](/insights/late-submission-fee-fema-reporting) covers how it is computed.

## How do voting and dividends work with a nominee?

### Voting

The nominee casts the vote on its share because it is the member on the register. The parent holds the right to cause that vote to be cast, which section 89(10) treats as part of its beneficial interest. The nominee agreement turns that right into an obligation.

We draft the agreement so the nominee votes only as the parent directs in writing. For routine meetings, a standing direction to vote with the parent works. For a special resolution, we ask for a direction for that meeting, recorded in the minutes.

### Dividends

Section 89(10) treats the right to receive or take part in a dividend as part of the beneficial interest. That right sits with the parent. The nominee holds only the legal title to the share.

On our files, the nominee signs a standing instruction at the start. The company then pays the dividend on the nominee's share into the parent's account along with the rest. Withholding tax on the dividend follows the Income Tax Act, 2025. Our guide to a [dividend from an Indian subsidiary to a foreign parent](/insights/dividend-from-indian-subsidiary-to-foreign-parent) covers rates and treaty relief.

## How does quorum work at general meetings?

A company with two members has very little room on attendance. Check the quorum that the articles and the Act require before the notice goes out. With only two members on the register, a quorum of two means both must attend.

The parent attends through a person its board authorises to act for it. We have the parent's board pass that resolution at incorporation, naming the person by role, so a staff change does not need a new resolution.

The nominee agreement should oblige the nominee to attend and to sign any consent the meeting needs. Without that clause, a nominee who goes quiet can stall the annual general meeting.

## What happens when the nominee leaves?

A nominee can resign, fall out with the group or die. The share must move to a new nominee before membership has been below two for six months. These are the steps on our files.

1. Pick the replacement and confirm its residential status for FEMA.
2. Have the old nominee sign a stamped instrument of transfer in the prescribed form. Section 56(1) requires it to be dated, executed and delivered to the company within 60 days of execution.
3. Hold a board meeting to approve the transfer and update the register of members.
4. Collect a fresh Form MGT-4 from the new nominee and a fresh Form MGT-5 from the parent.
5. File Form MGT-6 within 30 days of receiving those declarations.
6. File Form FC-TRS within 60 days if the share moved between a resident and a non resident.
7. Recheck the SBO position and file Form BEN-2 if anything changed.

When the parent adds capital later, the new shares usually go to the parent alone. The nominee's percentage falls, but the member count stays at two. Our guide to [Form PAS-3 for allotments to foreign investors](/insights/pas-3-return-of-allotment-foreign-investors) covers that filing.

## Is an OPC an alternative for a foreign founder?

An OPC solves the two member problem for an individual, not for a company. Section 2(62) defines an OPC as a company with only one person as a member. Section 3(1) requires its memorandum to name another person who becomes the member on the subscriber's death or incapacity to contract. That other person must give prior written consent.

The Union Budget speech of 1 Feb 2021 (para 81) proposed four changes for OPCs. Two removed the limits on paid up capital and turnover and allowed conversion at any time. The other two cut the residency limit for an Indian citizen from 182 days to 120 days and let non resident Indians (NRIs) incorporate OPCs.

The two eligibility changes speak to Indian citizens, at home or abroad. On our reading, none of them helps a foreign parent company set up a subsidiary. A foreign parent needs a Private Limited Company with a second member.

| Point | One Person Company | Private Limited Company with a nominee |
|---|---|---|
| Members | One (sections 2(62) and 3(1)(c)) | Two or more (section 3(1)(b)) |
| Built for | An individual founder; the 2021 changes covered Indian citizens, including NRIs | Any investor allowed under FEMA, including a foreign company |
| Meaning of "nominee" | The person named in the memorandum who becomes member on death or incapacity; holds no shares | A member who holds one share for the parent |
| Section 89 declarations | Not triggered, as the OPC nominee holds no shares | MGT-4, MGT-5 and MGT-6 |
| Fit for a foreign parent company | No, on our reading | Yes |

Sources: Companies Act, 2013, sections 2(62) and 3(1); Union Budget 2021-22 speech, para 81, read 26 Oct 2026.

On our filings, an OPC nominee needs a digital signature certificate (DSC). Our [OPC registration service](/services/opc-registration.html) covers that route for NRI founders.

## What are the risks, and how do we document them?

The risks come from people and paperwork, not from the law.

- The nominee refuses to cooperate, or holds out for payment, when the parent needs a signature.
- The nominee dies or loses capacity, and the share goes through transmission to people who signed nothing.
- Section 46(1) makes a share certificate prima facie evidence of title, so outsiders see the nominee as the owner.
- A missed declaration or a late MGT-6 brings the penalties in the table above.
- The register drops to one member and stays there past six months, which brings section 3A into play.
- A resident nominee turns a family style handover into a priced FEMA transfer.

We answer each risk with a document, kept on one file per nominee share.

| Document | What it records | Who signs |
|---|---|---|
| Nominee agreement | Holds for the parent; votes as directed; passes on dividends; attends meetings; transfers on request | The parent and the nominee |
| Form MGT-4 | The nominee holds no beneficial interest | The nominee |
| Form MGT-5 | The parent holds the beneficial interest | The parent |
| Form MGT-6 and its filing receipt | The company's return to the ROC under section 89(6) | A director or other authorised officer |
| Board minutes of the Indian company | Allotment, the declarations received and approval to file MGT-6 | The board |
| Parent board resolution | Approval of the structure, the nominee's name and the authorised representative | The parent's board |
| Standing dividend instruction | Payment of the nominee share's dividend to the parent | The nominee |

Source: Companies Act, 2013, sections 89(1), 89(2) and 89(6); Krystal7 file practice, read 26 Oct 2026.

## Worked example

Assumptions: a US parent sets up an Indian wholly owned subsidiary in Haryana. Authorised capital is ₹15 lakh. The company issues 1,00,000 equity shares of ₹10 each on incorporation, so paid up capital is ₹10,00,000. The nominee is the parent's CFO, who lives in the US. The fair value used later is an assumption for illustration.

| Holder | Residential status | Shares | Amount paid | Legal holding | Beneficial holding |
|---|---|---|---|---|---|
| US parent | Non resident | 99,999 | ₹9,99,990 | 99.999% | 100% |
| CFO as nominee | Non resident | 1 | ₹10 | 0.001% | 0% |
| Total | | 1,00,000 | ₹10,00,000 | 100% | 100% |

Source: Krystal7 worked example; Companies Act, 2013, sections 2(55) and 89(10), read 26 Oct 2026.

### Incorporation and the first 30 days

On a Haryana filing with ₹15 lakh authorised capital, paid on 14 Aug 2026, our SPICe+ challan showed ₹143 for PAN and TAN. The MCA registration fee is nil up to ₹15 lakh. Stamp duty was ₹195 (₹60 on the MoA, ₹120 on the AoA and ₹15 on linked forms).

The CFO signs Form MGT-4 and the parent signs Form MGT-5 on the allotment date. The company files Form MGT-6 within 30 days of receiving them. With nominal capital of ₹15 lakh, the normal fee is ₹400. If the company filed 20 days late, the additional fee would be 2 times ₹400, which is ₹800.

Within the same 30 days, the company reports all 1,00,000 shares in Form FC-GPR, because both allottees are non residents. Section 10A also bars the company from starting business or borrowing until it meets that section's conditions. Our [INC-20A guide](/insights/inc-20a-commencement-of-business-foreign-subsidiary) covers that declaration.

### A dividend in year three

The company declares a dividend of ₹3 per share, ₹3,00,000 in all. The parent's own shares earn ₹2,99,997. The nominee share earns ₹3, which goes to the parent under the standing instruction. The parent is beneficially entitled to the full ₹3,00,000.

### The same company with a resident nominee

Now assume the nominee had been the Indian resident director. The FC-GPR would cover 99,999 shares worth ₹9,99,990, and the director's ₹10 share would sit outside it. The company is still owned by persons resident outside India, because the parent holds the whole beneficial interest.

In year four the parent moves that share to a US officer. Assume a chartered accountant values the share at ₹62. The price must be at least ₹62, on a certificate not more than 90 days old. The resident director then files FC-TRS within 60 days. The rupee amount is small. The valuation, the bank paperwork and the FEMA report are the same as for a large deal.

## Common mistakes

1. **Treating the nominee share as an incorporation formality.** Fix: file Form MGT-6 within 30 days of receiving the declarations. Keep MGT-4 and MGT-5 with the register of members.
2. **Naming the resident director as nominee by default.** Fix: use a non resident group company or officer. The share then stays in the FC-GPR, and a later change needs no FC-TRS.
3. **No replacement plan when the nominee leaves.** Fix: name a successor nominee in the parent's board resolution and move the share well inside six months.
4. **Confusing the OPC nominee with a nominee shareholder.** Fix: an OPC nominee holds no shares; a foreign parent needs a Private Limited Company with a second member.
5. **Skipping the declarations on a change of nominee.** Fix: collect a fresh MGT-4 and MGT-5 and file a new MGT-6 every time the registered holder changes.
6. **Treating Form MGT-6 as the SBO filing.** Fix: run the section 90 analysis separately and file Form BEN-2 for the individuals behind the parent.
7. **Gifting the nominee share back to the parent.** Fix: a gift from a resident needs RBI approval and a relative as donee. Price it as a sale, or avoid the resident nominee.
8. **Asking the nominee to sign an undated transfer at incorporation.** Fix: section 56(1) runs 60 days from execution. Use a clause obliging the nominee to sign a fresh instrument on request.

## Checklist for a nominee shareholder in a wholly owned subsidiary

1. Decide who the nominee is before the memorandum and articles are drafted.
2. Confirm the nominee's residential status and the document route for its KYC.
3. Have the parent's board approve the structure and authorise a representative for meetings.
4. Sign the nominee agreement before incorporation.
5. Allot one share, or the agreed small number, to the nominee on incorporation.
6. Collect Form MGT-4 from the nominee and Form MGT-5 from the parent on the allotment date.
7. Note the declarations in the register of members.
8. File Form MGT-6 within 30 days of receiving the declarations.
9. File Form FC-GPR within 30 days of the issue.
10. Complete the section 90 analysis and file Form BEN-2.
11. Collect the standing dividend instruction from the nominee.
12. Diary the FLA return for 15 July each year.
13. Review the nominee's status each year and move the share before any departure.

Our [foreign subsidiary service](/services/foreign-subsidiary.html) handles the nominee structure, the declarations and the FEMA reports with the incorporation. We quote a fixed fee in writing within 48 hours of a scoping call.

## Key terms

- **Nominee shareholder**: A nominee shareholder holds shares in an Indian company on behalf of a foreign parent, so that a private company meets the two member minimum in section 3 of the Companies Act, 2013. The nominee files Form MGT-4, the parent files MGT-5, and the company reports the beneficial interest to the Registrar in Form MGT-6 under section 89. (https://krystal7.com/glossary#nominee-shareholder)
- **Beneficial interest**: The right to exercise, or cause to be exercised, the rights attached to a share, and to receive its dividends or other distributions. Section 89(10) of the Companies Act, 2013 defines it, including rights held through a contract or arrangement. (https://krystal7.com/glossary#beneficial-interest)
- **Form MGT-6**: Form MGT-6 is the return an Indian company files with the Registrar within 30 days of receiving a section 89 declaration of beneficial interest, such as MGT-4 from a nominee holding a share for a foreign parent and MGT-5 from the parent. Section 89(6) of the Companies Act, 2013 and rule 9(3) of the Management Rules require it. (https://krystal7.com/glossary#form-mgt-6)

## Frequently Asked Questions

### Can a foreign company own 100 percent of an Indian Private Limited Company?
Yes, beneficially, where FEMA allows 100 percent foreign investment in the sector. A Private Limited Company needs two members under section 3(1)(b), so one share sits with a nominee. The parent holds the beneficial interest in that share and in all the others.

### Is a nominee shareholder legal in India?
Yes. Section 89 of the Companies Act, 2013 regulates it through declarations. The nominee files Form MGT-4, the beneficial owner files Form MGT-5 and the company files Form MGT-6 with the ROC.

### What is the due date for Form MGT-6?
Thirty days from the date the company receives the declaration. Section 89(6) sets this limit. Late filing adds an additional fee of 2 to 12 times the normal fee, depending on the delay.

### Who signs Form MGT-4 and Form MGT-5?
The registered holder signs MGT-4 and the beneficial owner signs MGT-5. In a wholly owned subsidiary, that is the nominee and the parent, and both forms go to the Indian company.

### Is the nominee a significant beneficial owner?
Not normally. Section 90 looks at individuals with beneficial interests above the threshold, and the nominee holds no beneficial interest in its share. The SBOs are the individuals behind the parent, reported in Form BEN-2.

### Can the Indian resident director be the nominee shareholder?
Yes, company law allows it. Under FEMA, the director's share sits outside the FC-GPR. Moving it later to a non resident is a priced sale with an FC-TRS. We prefer a non resident nominee for that reason.

### Does the nominee's share need an FC-GPR?
Yes, if the nominee is a person resident outside India. Regulation 4(1) of FEMA 395 covers any issue of equity instruments to a non resident. The report is due within 30 days of the issue.

### Is an FC-TRS needed when the nominee changes?
Only if the share moves between a resident and a non resident holding on a repatriation basis, or between repatriable and non repatriable non resident holdings. A move between two non residents on a repatriation basis is not an FC-TRS case. Where it applies, the resident files within 60 days.

### Who gets the dividend on the nominee share?
The parent, as beneficial owner. Section 89(10) treats the dividend right as part of the beneficial interest. On our files, the nominee signs a standing instruction so the company pays that dividend to the parent's account.

### Can a foreign founder use a One Person Company instead?
Not a foreign parent company. An OPC has one member, and its nominee steps in only on the member's death or incapacity. The 2021 Budget changes opened OPCs to NRIs, who are Indian citizens.

### What happens if the nominee dies?
The share goes through transmission before it can move to a new nominee. The heirs are not bound by the nominee agreement, which slows the handover. A group company as nominee avoids this.

## Sources

- Gazette of India, The Companies Act, 2013 (Act 18 of 2013), Gazette copy hosted by PRS Legislative Research, read 26 Oct 2026, https://prsindia.org/files/bills_acts/bills_parliament/2016/Companies%20Act%202013.pdf
- Gazette of India, The Companies (Amendment) Act, 2017 (Act 1 of 2018, published 3 Jan 2018), Gazette copy hosted by IBBI, read 26 Oct 2026, https://ibbi.gov.in/webadmin/pdf/legalframwork/2018/Jan/181439_2018-01-04%2021:34:07.pdf
- Gazette of India, The Companies (Amendment) Act, 2019 (Act 22 of 2019, 31 Jul 2019), copy hosted by NFRA, read 26 Oct 2026, https://cdnbbsr.s3waas.gov.in/s3e2ad76f2326fbc6b56a45a56c59fafdb/uploads/2018/05/2023010354.pdf
- Gazette of India, The Companies (Amendment) Act, 2020 (Act 29 of 2020), Gazette copy hosted by PRS Legislative Research, read 26 Oct 2026, https://prsindia.org/files/bills_acts/bills_parliament/2020/Companies%20(Amendment)%20Act,%202020.pdf
- Ministry of Corporate Affairs, Penalties and Offences under Companies Act, 2013 (6 May 2024), read 26 Oct 2026, https://www.mca.gov.in/Ministry/pdf/Penalties-and-Offences-under-Companies-Act-2013.pdf
- Ministry of Corporate Affairs, Instruction Kit for eForm MGT-6, read 26 Oct 2026, https://www.mca.gov.in/MCA21/dca/help/instructionkit/Form_MGT-6_help.pdf
- Ministry of Corporate Affairs, Form No. MGT-4, declaration by the registered owner of shares (form title), checked 26 Oct 2026, https://www.mca.gov.in/bin/ebook/dms/getdocument?doc=MTA3NzM%3D&docCategory=Forms&type=open
- Ministry of Corporate Affairs, Form No. MGT-5, declaration by the beneficial owner (form title), checked 26 Oct 2026, https://www.mca.gov.in/bin/ebook/dms/getdocument?doc=MTA3NzQ%3D&docCategory=Forms&type=open
- Ministry of Corporate Affairs, BEN-2 Return to the Registrar in respect of declaration under section 90 (service title), checked 26 Oct 2026, https://www.mca.gov.in/content/mca/global/en/mca/e-filing/complianceServices/ben2.html
- Reserve Bank of India, Foreign Exchange Management (Mode of Payment and Reporting of Non Debt Instruments) Regulations, 2019, FEMA 395/2019-RB (amended up to 13 Jun 2026), read 26 Oct 2026, https://www.rbi.org.in/Scripts/NotificationUser.aspx?Id=11723&Mode=0
- Reserve Bank of India, Foreign Exchange Management (Non Debt Instruments) Rules, 2019 (updated up to 2 Sep 2026), read 26 Oct 2026, https://rbi.org.in/scripts/bs_viewcontent.aspx?Id=5083
- Reserve Bank of India, Master Direction on Foreign Investment in India (updated up to 15 Jun 2026), read 26 Oct 2026, https://www.rbi.org.in/Scripts/BS_ViewMasDirections.aspx?id=11200
- Ministry of Finance, Union Budget 2021-22 Budget Speech, para 81, read 26 Oct 2026, https://www.indiabudget.gov.in/budget2021-22/doc/Budget_Speech.pdf

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