Option to foreign company/ subsidiary to set up their business in India


(1) As an Indian Company

 

A foreign company/individual/entity can start operations in India by incorporating a company under the Companies Act, 1956 asunder

Joint Ventures;

or

Wholly Owned Subsidiaries

The foreigners can hold equity up to 100% in Indian Company basing on the necessities of the investor, subject to equity caps and sector / activity described under the Foreign Direct Investment (FDI) policy. Details of the FDI policy, sectoral equity caps, procedures and other conditions can be taken from Department of Industrial Policy & Promotion, Government of India.

 

 

Joint Venture with an Indian Partner having equity as per agreement and sectoral cap.

 

 

Foreign Companies can set up their business in India with Indian partners.

 

Foreign investors may have the following advantages:

 

Well founded marketing and distribution established by the Indian partner

Provide finance as Indian partners.

Established contacts of the Indian partners which help the business to gain more profit.

As a local people know political, geographical and other influential characters   related to business activities and decisions.

 

Wholly Owned Subsidiary Company

 

 

Foreign companies can also to set up wholly owned subsidiary in sectors where 100% foreign direct investment is allowed under the FDI policy.

 

First step is to Incorporate the Company

 

Find out the name availability and then file an application  for registration and incorporation with Registrar of Companies (ROC). Once a company has been duly registered and incorporated as an Indian company, it is subject to Indian laws and regulations as applicable to other domestic Indian companies.

 


(2) As a Foreign Company

 

Foreign Companies can set up their operations in India through

* Liaison Office/Representative Office
 

* Project Office
 

* Branch Office

 

Such offices can undertake any permitted activities. Companies have to register themselves with Registrar of Companies (ROC) within 30 days of setting up a place of business in India.

 

Liaison office/ Representative office

 

 

Liaison office acts as a channel of communication between the principal place of business or head office and entities in India. Liaison office cannot undertake any commercial activity directly or indirectly and cannot, therefore, earn any income in India. Its role is limited to collecting information about possible market opportunities and providing information about the company and its products to prospective Indian customers. It can promote export/import from/to India and also facilitate technical/financial collaboration between parent company and companies in India.

The approval for establishing a liaison office in India is granted by the Reserve Bank of India (RBI).

 

Project Office

 

 

Foreign Companies planning to execute specific projects in India can set up temporary project/site offices in India. RBI has now granted general permission to foreign entities to establish Project Offices subject to specified conditions. Such offices cannot undertake or carry on any activity other than the activity relating and incidental to execution of the project. Project Offices may remit outside India the surplus of the project on its completion, general permission for which has been granted by the RBI.

 

Branch Office

 

 

Foreign companies engaged in manufacturing and trading activities abroad are allowed to set up Branch Offices in India for the following purposes:

 

* Export/Import of goods

* Rendering professional or consultancy services

* Carrying out research work, in which the parent company is engaged.

* Promoting technical or financial collaborations between Indian companies and parent or   overseas group company.

* Representing the parent company in India and acting as buying/selling agents in India.

* Rendering services in Information Technology and development of software in India.

* Rendering technical support to the products supplied by the parent/ group companies.

* Foreign Airline/shipping Company.

 

A branch office is not allowed to carry out manufacturing activities on its own but is permitted to subcontract these to an Indian manufacturer. Branch Offices established with the approval of RBI, may remit outside India profit of the branch, net of applicable Indian taxes and subject to RBI guidelines Permission for setting up branch offices is granted by the Reserve Bank of India (RBI).

 

Branch Office on "Stand Alone Basis"

 

 

Such Branch Offices would be isolated and restricted to the Special Economic zone (SEZ) alone and no business activity/transaction will be allowed outside the SEZs in India, which include branches/subsidiaries of its parent office in India. No approval shall be necessary from RBI for a company to establish a branch/unit in SEZs to undertake manufacturing and service activities subject to specified conditions.

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