A private limited company in India can have foreign shareholders, subject to certain rules and regulations. In such cases, the company is known as a Foreign-Owned Indian Company (FOIC) or an Indian Subsidiary of a Foreign Company.

The foreign shareholder can hold equity shares in the Indian private limited company, subject to the Foreign Direct Investment (FDI) policy of India, which specifies the sectoral caps, entry routes, and other conditions for foreign investment in various sectors. For instance, certain sectors such as defense, telecommunications, and broadcasting require prior government approval for foreign investment.

The foreign shareholder must also comply with the Reserve Bank of India’s (RBI) regulations on FDI, such as reporting requirements, pricing guidelines, and restrictions on repatriation of funds. Additionally, the Indian private limited company must comply with various legal and regulatory requirements, such as maintaining proper records, filing of annual returns and financial statements, and obtaining necessary licenses and approvals.

It is recommended that the Indian private limited company and the foreign shareholder enter into a comprehensive shareholders’ agreement, which specifies the rights, obligations, and responsibilities of the parties, and provides for dispute resolution mechanisms. This can help to avoid potential disputes and ensure smooth functioning of the company.