Foreign company registration in India- Various Options

ezybizadviser · 15 Mar 2022, 09:42

Foreign company registration in India

Today, we will discuss about the various options of Foreign Company Registration in India.

India is one of the fastest-growing economies in the world with a lot of opportunities not only for Indians but also for foreign citizens. Further, various governments’ schemes including make in India scheme promotes globalization and attracts investors to invest in India. Accordingly, lots of foreign enterprises and citizens are showing interest in business set up in India.

Meaning of Foreign Company

Sec 2 (42) of the Companies Act 2013 describes a foreign company as:

“A foreign company is any company or body corporate incorporated outside India that—

A) Has a place of corporate in India whether by itself or through a mediator, actually or through electronic mode; and

B) performs any business activity in India in any manner.

There are many options for a foreign company to enter Indian market and do business as mentioned below:

an Indian company

1. In the form of Wholly Owned Subsidiary.
2. In the form of Joint Venture

a foreign company

1. establishing a Liaison Office
2. Representative Office or a Project Office
3. Branch Office of the foreign company

Wholly Owned Subsidiary

This is the most popular form of entity registration by foreign companies in India. Here, parent company holds almost 100% shares of the Indian company and Indian company becomes wholly owned subsidiary of the parent company. For getting approval of registration, relevant documents need to be filed with Registrar of Companies. Also, wrt share subscription money received from the parent shareholder, certain compliance needs to be done before RBI. Wholly owned subsidiary can do all the activities as prescribed in its MOA and AOA subject to FDI guidelines. This is opted by foreign companies when they want to do full-fledged business operations in India.

Joint Venture

In case of Joint Venture, 2 companies form a joint venture either by way of holding shares or by way of contractual agreement. Normally, joint ventures are done for a particular purpose and once the purpose is fulfilled, it is terminated. It can be in the form of normal private limited company registration wherein necessary approvals are taken from ROC.

Liaison Office or Representative Office

Liaison office acts as a communication channel between Indian customers and foreign company. It cannot do any business operations in India. Also, it cannot earn any profits in India. This is opted by foreign companies when they want to do water testing in India before going for full-fledged business operations in India. The approval for LO is given by RBI.

Following conditions need to be fulfilled for registration of Liaison office in India:

1) Parent company must have a profit-making record immediately preceding 3 financial years in the household country, and the net worth must not be less than USD 50,000.

2) If above criteria is not met, comfort letter from parent company would be required.

Project office

Normally, a project office is opened in India when a foreign company gets some projects from government or Indian company for execution in India. It is opened for a particular project and only for limited time period till the continuation of the project. The approval for project office is given by RBI and it cannot carry on any other activities other than activities related to particular project.

Branch Office

Branch office may be opened in India to undertake any one of the below mentioned activities as permissible by RBI namely,

·        Providing professional or consultancy services.
·        Acting as buying / selling agent on behalf of foreign company in India
·        Wholesale import and export of goods
·        Conducting some research work in areas similar to where parent company is engaged
·        Providing technical support to the products supplied by parent/group companies
·        Providing services related to IT and Development of software in India
·        Acting as representative of a foreign shipping company and Airline
·
BOs cannot do following activities in India:

·        Construction activities
·        Manufacturing activities
·        Activities of Retail Trading

For setting up BO, following conditions are required:

a)     Foreign company must have profit track record during immediately preceding 5 financial years in home country.

b)     Net worth of foreign company should not be less than USD 100,000 or its equivalent.

Thus, in the above write-up, we have provided a brief overview of various options of foreign company registration in India.