Foreign Company Registration in India
foreign company registration in India can be in 2 forms:
a) In the form of Unincorporated entities like Liaison office or Branch Office or Project office or
b) In the form of Incorporated entities like Wholly Owned Subsidiary or Limited Liability Partnerships or Joint Ventures.
In this article, we are discussing both the aforesaid options of foreign company registration in India.
Foreign Company Registration in India – In the form of an Incorporated Entity.
Here, most popular form of entity is wholly owned subsidiary.
Foreign Company Registration in India in the form of wholly-owned subsidiary?
Wholly Owned Subsidiary company is incorporated when 100% shares of subsidiary company is hold by its parent company.
For Subsidiary Company registration, some conditions needs to be fulfilled which is given as under:
- There should be minimum 2 Shareholders and 2 Directors.
- There can be any number of foreign Directors; however, it is mandatory to have at least 1 Local Indian Director.
- For showing registered office of the Indian subsidiary, it is compulsory to have 1 local Indian office address.
- For becoming subsidiary company, more than 50% shares its shares must be held by parent company.
- First step is that Digital Signature Certificates (DSC) of all the Directors need to be prepared.
- Second step is to apply for approval of proposed names of the company.
- Once name is approved we have to draft charter documents of the company and apply for final certificate of incorporation. While filing final form for incorporation, some other registrations like PAN, TAN, ESI, PF etc is also applied.
- Some fees need to be paid to ROC as incorporation based on authorized capital of the company..
- Finally company is incorporated and Certificate of Incorporation is issued by ROC.
- After Company incorporation, bank account needs to be opened and other registrations like GST, Import Export License etc are applied
- Also, Certificate of Commencement of Business is applied within 180 days of company incorporation.
Foreign Company Registration in India – In the form of the Branch office, Liaison Office, and Project Office.
LIAISON OFFICE- LO
A foreign company can open a Liaison office (L.O.) if it wants to do water testing in India. L.O. can only act as a communication channel between a parent company and Indian customers, and can do liaising in India without any authority to conclude contracts. LO cannot do any business activities in India.
Conditions required for setting up L.O.
- Foreign company must have a profit-making track record immediately preceding three financial years in the home country.
- Net worth of a foreign company should not be less than USD 50,000 or its equivalent.
For setting up L.O., Prior approval of Reserve Bank of India and A.D. Banker is required. Also, after incorporation, ROC needs to be intimated.
- BRANCH OFFICE
- The branch office is allowed to do permissible business activities prescribed by RBI.
- Normally, B.O.’s are open by a foreign company in India when it is already engaged in business in its home country and wants to undertake such business activities in India.
- BO are allowed to do the following activities by RBI.
- Rendering professional or consultancy services.
- Representing the parent company in India & acting as buying/selling agent in India
- Export/ Import of goods ( only on a wholesale basis)
- Carrying out research work in areas in which the parent company is engaged
- Rendering technical support to the products supplied by parent/group companies
- Rendering services in Information Technology and Development of software in India
- Representing a foreign shipping company and Airline
What activities cannot be done by B.O.?
BO cannot do the following activities in India:
- Construction Development activities
- Manufacturing and Processing
- Retail Trading
Conditions required for setting up B.O.
- Parent company must be having a profit-making track record during the immediately preceding five financial years in the home country.
- The net worth of the parent company should not be less than USD 100,000 or its equivalent.
- If foreign banks want to open B.O. in India, DBOD, RBI, prior approval is required.
BO are an extended arm of the parent company. Therefore, legal status is a foreign company in India.
For setting up BO/PO, Prior approval of the Reserve Bank of India and A.D. Banker is required. Also, after incorporation, ROC needs to be intimated.
- PROJECT OFFICE (P.O.)
- A Project office (P.O.) is established for a particular purpose and a limited period until that project continues. Normally, when a foreign company secures a project from an Indian company, then to carry out such a project. It is similar to B.O. but for a specific project.
- A PO cannot carry out any other activity other than incidental to or related to the project.
P.O.s are the extended arm of the parent company. Therefore, legal status is a foreign company in India.
- For setting up P.O., Prior approval of Reserve Bank of India and A.D. Banker is required. Also, after incorporation, ROC needs to be intimated.
- However, if the following conditions are fulfilled, no prior approval of RBI is required to establish P.O. in India.
Condition1– Foreign entity has secured a project from an Indian company; AND
Condition 2– An appropriate authority has cleared the project; AND
Condition 3– The project is funded directly by inward remittance from abroad; OR
The project is funded by a bilateral or multilateral International Financing Agency; OR
A company or entity in India awarding the contract has been granted a Term Loan by a Public Financial Institution or a bank in India for the project.
If the above criteria are not met, the foreign entity has to approach the RBI for approval.
- In case P.O. need to be set up by foreign Non-Government Organizations/ Non-Profit Organizations/ Foreign Government Bodies/ Departments, then such approval will fall under the government approval route, and such P.O.s are required to apply to the Reserve Bank for prior permission to establish an office in India,
Thus, the above shows that there are many options available for foreign company registration. Depending upon the actual need of the foreign enterprise, an entry strategy can be designed and planned.
We, at Ezy Biz India, provide complete handholding in foreign company registration in India, whether it is in the form of subsidiary company registration or a Branch office or a Liaison office or any other entry strategy.