Registration of Foreign Companies in India

India is one of the largest democracies in the world, with a stable political environment, responsive administrative set-up, a strong and independent judiciary and a robust banking and financial system. It is a young nation with large pool of skilled manpower, strong knowledge base with low Labour Cost and high domestic consumption. The Government of India promotes Investor Friendly Policies with progressive simplification and rationalisation of the direct and indirect tax structures in India. India presents beneficial opportunities for Foreign Companies to set-up their business and offices in India.

Foreign Companies can set-up their business in india under following legal structures:-

AS AN INDIAN COMPANY:- A foreign company can incorporate a company under The Companies Act, 2013 as a Wholly Owned Subsidiary (WOS) or as a Joint Venture (JV) with an Indian Partner. In most cases, Foreign Companies are permitted to hold upto 100% Equity in the Indian Company except for certain areas where Equity Caps have been imposed under the Foreign Direct Investment (FDI) Policy of the Government of India or the area that are restricted for FDI in India

For Formation of Indian Subsidiary, preliminary requirements are:-

• One Resident Indian Director (with or without shareholding); and
• Place of Business for registered office in India

Process for Registration of Indian Company

• Obtaining Directors Identification Number (DIN) and Digital Signature for the Proposed Directors of the Indian Company;
• Preparation of the Object Clause of the Proposed Company;
• Approval of the Proposed Name of the Company from Registrar of Companies (ROC);
• Drawing up the Articles of Association (AOA) and Memorandum of Association (MOA) of the Proposed Company;
• Getting the appropriate persons to subscribe the Memorandum of Association (minimum 2 in case of private company and minimum 7 in case of publc company);
• Payment of Registration Fees with the Registrar of Companies (ROC);
• Receipt of the Certificate of Incorporation;
• In case of Public Companies – A certificate of commencement of business is to be obtained from the ROC;

For documentation requirements for registration of subsidiary Company in India – (Click for a Quick Query)

AS A FOREIGN COMPANY – A Foreign Company can start operations in India without registering a subsidiary in the following formats:-

• As a Liaison Office
  A Liaison Office (also known as Representative Office) can undertake only liaison activities, i.e. it can act as a channel of communication between Head Office abroad and parties in India. It is not allowed to undertake any business activity in India and cannot earn any income in India. Expenses of such offices are to be met entirely through inward remittances of foreign exchange from the Head Office outside India. The role of such offices is, therefore, limited to collecting information about possible market opportunities and providing information about the company and its products to the prospective Indian customers. A Liaison Office can undertake the following activities in India:
• Representing in India the parent company / group companies
• Promoting export / import from / to India
• Promoting technical/financial collaborations between parent/group companies and companies in India
• Acting as a communication channel between the parent company and Indian companies

• As a Project Office
  Reserve Bank has granted general permission to foreign companies to establish Project Offices in India, provided they have secured a contract from an Indian company to execute a project in India, and
• the project is funded directly by inward remittance from abroad; or
• the project is funded by a bilateral or multilateral International Financing Agency; or
• the project has been cleared by an appropriate authority; or
• a company or entity in India awarding the contract has been granted Term Loan by a Public Financial Institution or a bank in India for the project. However, if the above criteria are not met, the foreign entity has to approach the Reserve Bank of India, Central Office, for approval

Setting up of Project Offices by foreign Non-Government Organisations/Non-Profit Organisations/Foreign Government Bodies/Departments, by whatever name called, are under the Government Route. Accordingly, such entities are required to apply to the Reserve Bank for prior permission to establish an office in India, whether Project Office or otherwise

• As a Branch Office
  Companies incorporated outside India and engaged in manufacturing or trading activities are allowed to set up Branch Offices in India with specific approval of the Reserve Bank of India/ GOI. Normally, the Branch Office should be engaged in the activity in which the parent company is engaged. Such Branch Offices are permitted to represent the parent / group companies and undertake the following activities in India:
• Export / Import of goods
• Rendering professional or consultancy services
• Carrying out research work, in areas 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 agent in India
• Rendering services in information technology and development of software in India
• Rendering technical support to the products supplied by parent/group companies
• Foreign airline / shipping company

NOTES:-

• Retail trading activities of any nature is not allowed for a Branch Office in India
• A Branch Office is not allowed to carry out manufacturing or processing activities in India, directly or indirectly
• Profits earned by the Branch Offices are freely remittable from India, subject to payment of applicable taxes

PRE-CONDITION FOR APPROVAL OF BRANCH/ LIASION OFFICE BY RBI

• Track Record
• For Branch Office — a profit making track record during the immediately preceding five financial years in the home country
• For Liaison Office — a profit making track record during the immediately preceding three financial years in the home country
• Net Worth [total of paid-up capital and free reserves, less intangible assets as per the latest Audited Balance Sheet or Account Statement certified by a Certified Public Accountant or any Registered Accounts Practitioner by whatever name].
• For Branch Office — not less than USD 100,000 or its equivalent
• For Liaison Office — not less than USD 50,000 or its equivalent