Foreign investment in India takes two legal forms. Foreign direct investment is a non-resident’s investment in the equity shares, compulsorily convertible preference shares or debentures, or share warrants of an Indian company: any stake in an unlisted company, or 10% or more of a listed one [1]. Downstream investment is investment by an Indian company that is itself foreign-owned or controlled; it follows the same routes and caps and is reported to the RBI on Form DI within 30 days [1][2].
Four bodies of law govern the investment:
Exchange control. The Foreign Exchange Management Act 1999 and the FEMA (Non-Debt Instruments) Rules 2019, administered by the Reserve Bank of India through your Indian bank [1].
Investment policy. The Consolidated FDI Policy 2020 as amended by DPIIT Press Notes, which sets sector caps and the automatic and government routes. Since 2 May 2026 investors with land-border beneficial owners above the anti-money-laundering threshold, or with control, are tested under Press Note 2 (2026), which replaced Press Note 3 (2020) [2][3].
Company law. The Companies Act 2013, under which shares are issued to an identified investor by private placement.
Investment protection. India’s bilateral investment treaties, most of which India has terminated since 2016, and the arbitration and enforcement rules that apply if a dispute arises [4].
Table of Contents

The guides
How a share subscription works
About ATB Legal
Sources
The guides
FDI in India: rules, routes and approvals for foreign investors (2026): sector caps, Press Note 2 (2026) screening, the NSWS approval process, pricing rules and RBI reporting.
Automatic route vs government route in India FDI: which route your sector and shareholders put you on.
Branch office vs liaison office in India: what each may do under the RBI’s framework, which sits outside the FDI rules.
Incorporation of a private limited company in India: forming the usual vehicle for a wholly owned subsidiary.
Joint venture in India or acquisition? Deal structure, FEMA rules and shareholder protections (2026): pricing floors, deferred consideration, options, deadlock and CCI thresholds.
India bilateral investment treaty protection: how to secure your investment before a dispute: which treaties still protect UK, US and European investors, and what to set up before investing.
Doing business in India: a legal guide for foreign companies (2026): entity forms, compliance, tax and labour obligations once you are operating.
How a share subscription works
A private company issues shares to a foreign investor by private placement under section 42 of the Companies Act 2013: a board resolution identifying the investor, a shareholders’ special resolution filed with the Registrar of Companies, a registered valuer’s report, an offer letter accepted by the investor, receipt of funds in the company’s bank account, a board allotment resolution, and the return of allotment filed with the Registrar. Shares must be allotted within 60 days of receiving the money, failing which it is refunded within 15 days (section 42(6) of the Companies Act, mirrored in the FEMA rules) [1][5]. FEMA adds its own layer: the price must be at least fair value certified by a chartered accountant, SEBI-registered merchant banker or practising cost accountant, and Form FC-GPR is due within 30 days of allotment [1][2].
Three drafting points from practice still hold:
Investors commonly subscribe for compulsorily convertible preference shares, which count as FDI and can carry a liquidation preference and reserved-matter rights.
A separate class of preference shares, held by no one else, keeps the agreed liquidation preference workable, because holders of the same class rank equally in a winding-up.
Every right in the shareholders’ agreement should be mirrored in the articles of association, which prevail if the two conflict.
Many practitioners treat a FEMA valuation as reliable for about 90 days from the date of the financial data it uses; this is market practice, not a rule in the regulations.
About ATB Legal
ATB Legal is a law firm practising in India and the UAE. Its corporate and commercial work covers foreign direct investment and exchange control (FEMA), government-route and land-border approvals, company formation, joint ventures and shareholders’ agreements, and investment-treaty and arbitration questions.
This article is general information, not legal advice, and is not a solicitation of work. Under the Bar Council of India rules, Indian advocates may not advertise or solicit work.
Sources
Reserve Bank of India, FEMA (Non-Debt Instruments) Rules 2019, consolidated to 2 September 2026 — https://rbi.org.in/Scripts/bs_viewcontent.aspx?Id=5083 ; Reserve Bank of India, FEMA (Mode of Payment and Reporting of Non-Debt Instruments) Regulations 2019, Notification No. FEMA 395/2019-RB (17 October 2019, as amended), reg. 4 (FC-GPR 30 days; Form DI 30 days) — https://rbi.org.in/Scripts/BS_FemaNotifications.aspx?Id=11723
DPIIT, Consolidated FDI Policy Circular 2020 — https://www.dpiit.gov.in/static/uploads/2025/07/6457fc2703ee6082366c4a958b6473a8.pdf
DPIIT, Press Note 2 (2026 Series), 15 March 2026 — https://www.dpiit.gov.in/static/uploads/2026/03/b9da5830b052c2f2d788593e97d07c63.pdf ; FEMA (Non-Debt Instruments) Amendment Rules 2026, notified 1 May 2026, Gazette 2 May 2026
UNCTAD Investment Policy Hub, India: international investment agreements (11 BITs in force, 77 terminated; accessed 12 October 2026) — https://investmentpolicy.unctad.org/international-investment-agreements/countries/96/india
Companies Act 2013, section 42(6) (allotment within 60 days; refund within 15 days) — https://www.indiacode.nic.in/handle/123456789/2114
Last reviewed: October 2026.

Part of ATB Legal’s Corporate & Commercial practice.

Vipul Kulshreshtha

Vipul is a seasoned legal professional with over four years of experience in general corporate practice, mergers and acquisitions, private equity and venture capital fund raise. Vipul is well versed with the regulatory aspects of various sectors such as IT, fintech, healthcare, foreign exchange and financial services. Vipul is a law graduate from Institute of Law, Nirma University, Ahmedabad and thereafter, also completed his LL.M. from National Law School of India University Bangalore with specific focus on Business Laws. Prior to ATB Legal, Vipul has worked with reputed law firms based in India where he advised Indian and overseas clients in the area of mergers and acquisitions, private equity and venture capital, legal due diligence and other general corporate advisory work. At ATB Legal, Vipul is a part of the corporate team and assists in the management of different corporate legal requirements of the clients.