Registration of foreign companies in India is a type of company registration in which the organization incorporated is owned by a foreign company or in which the shares are held by a company set-up outside India. It is regulated by the following statutes namely;
- Companies Act, 2013
- Companies (Registration of Foreign Companies) Rules, 2014
The definition of Foreign Company is provided in Section 2(42) of the Companies Act, 2013. For registration of foreign companies in India many ways have been provided by the Indian statutes through which such registrations can operate the business in the country. Here how foreign companies can register them and the facts related to each one of them that must be kept in mind.
- Registration of Foreign Companies in case of an Indian Company-
- Wholly Owned Subsidiary: An Indian company can become a wholly-owned subsidiary of a foreign company when the foreign company invests 100% Foreign Direct Investments (FDIs) in the Indian company through an automatic route.
- Joint Venture: The foreign companies are required to elect or select a partner in the local region with whom the company enters into a joint venture. The joint venture registration takes place when an agreement is stated with the help of a signed Letter of Intent or Memorandum of Understanding between the parties. The parties must have a thorough session of discussion considering all the terms and conditions related to the venture. It must address the following important matters such as-
- Agreement on resolution of disputes
- Applicability of various local and international laws
- Confidentiality
- Non-competing Board of Directors
- Shareholdings
- Share transferability
- In case of Registration of Foreign Companies-
- Liaison Office: If the registration of a foreign companies is done through the mode of opening a liaison office then the criteria prescribed by the Reserve Bank of India (RBI) must be followed by the companies. These criteria are as follows-
- The company must have profit-making history and records for at least three financial years preceding each other. Also, the net value of the business must be above USD 50000 in the home country.
- If a subsidiary company putting in the Foreign Direct Investments (FDIs) does not fulfill the above criteria, then the parent company must satisfy the required condition for the registration of a foreign company as a branch office.
- A bank having the designation of Authorized Dealer Category-I must forward the application to the RBI for opening the liaison office.
- The companies must take RBIs specific approval as per the FEMA, 1999, and the Insurance Regulatory and Development Authority (IRDA).
- The company must apply along with the incorporation certificate and the latest audited balance sheet or financial statements of the entity with the help of the Unique Identification Number issued by the RBI.
- Project Office: A project office is also called as a representative office. If registration of the foreign companies is through the way of project office establishment then it must secure a contract from an Indian Company for executing the project in the country. It will not require any prior approval from the RBI in case-
- The project office is directly funded through an inward remittance from a company abroad.
- If the funds are provided by a bilateral or multilateral Internal Financing Agency.
- If a bank or public financial institution has provided a term loan with a proper contract to the company in India for the project.
- If the project has been cleared by the concerned appropriate authority.
- Branch Office under Registration of foreign companies: A foreign company can also operate through a branch office with the prior permission of the RBI, in the following cases-
- The company operates in trading or manufacturing business activities.
- If the company has profit records for five preceding financial years.
- If in the home country, it has a net value of above USD 100000.
