Opening the bank account and moving the capital

Your company exists and owns nothing. The next job is opening an Indian bank account and moving the share capital into it, because every filing that follows depends on money having arrived and on the paperwork the transfer generates.

This is the step foreign companies most often get wrong, and it is the one that is hardest to unwind. An incorrect purpose code or a rupee of excess funding means refunds, reissued certificates and a delayed report to the Reserve Bank of India.

Account opening

2 to 3 weeks from application, bank-dependent

Capital infusion

After the account is open, never before

Who transfers

The parent entity and the nominee shareholder, separately

Amount

Exactly the subscribed capital named in the MoA

Report to the RBI

FC-GPR within 30 days of issuing the shares

Documents the transfer produces

FIRC and a KYC of the remitter, both from the bank

Which bank should a foreign-owned subsidiary use?

HSBC, in most cases. Commenda works with two international banks that handle foreign-owned Indian subsidiaries well, HSBC and Standard Chartered. Both have experience with cross-border transactions, FDI inflows and RBI reporting.

HSBC is usually the more practical of the two because it accepts documents signed digitally and does not require wet signatures. When nobody on your side is in the country, that single difference decides how long the account takes.

Where the account should be

Open the account in the city of your registered office, including when that office is a virtual address. Banks run their own verification against the address on your certificate of incorporation, and a mismatch between the two starts a correspondence you do not want.

What the bank asks for

Every bank publishes its own list and they differ more than you would expect. Three things are common to all of them.

• KYC of the directors and of the foreign parent, in the same notarised and apostilled form the MCA accepted.
• The incorporation set: certificate of incorporation, MoA and AoA, PAN, TAN, and the board resolution authorising the account.
• A description of the business, which the bank underwrites in its own right. Banks reject account applications on the business description alone, so keep it specific and keep it identical to what you told the MCA.

How does the share capital reach the company?

The parent entity and the nominee shareholder each wire their own subscription amount into the new account. Under the standard 10,000-share structure that is INR 99,990 from the parent and INR 10 from the nominee.

Send exactly the amount named in the capital structure and the memorandum of association. Excess funds have to be refunded, and the refund has its own paperwork.

1. The parent wires the subscription amount from the foreign entity's own bank account. It has to come from the shareholder of record, not from an affiliate or a director personally.
2. The nominee shareholder sends their share of the capital from their own account, however small the amount.
3. The bank issues a Foreign Inward Remittance Certificate and a KYC of the remitter. Both documents are required for the FC-GPR filing with the RBI.
4. The shares are allotted, which has to happen within 60 days of the money arriving. Share certificates are prepared and stamp duty paid.
5. The company files FC-GPR with the RBI within 30 days of that allotment.

Do this transfer on a call with someone who has done it before. In our experience it is the last major step companies get wrong, usually because it is treated as a routine wire and sent in a hurry.

Why does India watch money leaving more closely than money arriving?

Because it is a foreign currency deficit country. Capital coming in is reported after the fact: you transfer the funds, you allot the shares, then you tell the RBI through FC-GPR within 30 days of that allotment.

The reverse is not symmetrical. When an Indian entity makes an overseas direct investment, the RBI has to approve it before the transfer is made. Founders assume the two directions work the same way and plan cash movements that do not survive contact with the rule.

What happens after the capital is in?

Share certificates within 60 days of incorporation, the beneficial ownership declarations, INC-20A to commence business, and the FDI report to the RBI. All of it is covered in post-incorporation.

Later rounds and day-to-day funding

Subscription capital is rarely the last money you send. Two routes carry the rest.

Both routes are ordinary. Which one suits you is a tax and transfer pricing question before it is a banking one, so settle it with your advisors before the money moves.