SETTING UP BUSINESS IN INDIA BY FOREIGN COMPANIES
A foreign company planning to set up business operations in India has the following TWO options:
1. AS AN INDIAN COMPANY
A foreign company can commence operations in India by incorporating a company under the Companies Act, 1956 through:
a. Joint Ventures; or
b. Wholly Owned Subsidiaries
Foreign equity in such Indian companies can be up to 100% depending on the requirements of the investor, subject to equity caps in respe ct of the area of activities under the Foreign Direct Investment (FDI) policy. Details of the FDI policy, sectoral equity caps & procedures can be obtained from Department of Industrial Policy & Promotion, Government of India (www.dipp.nic.in).
1. (a) Joint Venture With An Indian Partner
Foreign Companies can set up their operations in India by forging strategic alliances with Indian partners.
Joint Venture may entail the following advantages for a foreign investor:
Established distribution/ marketing set up of the Indian partner Available financial resource of the Indian partners
Established contacts of the Indian partners which help smoothen the process of setting up of operations.
1. (b) Wholly Owned Subsidiary Company
Foreign companies can also set up wholly owned subsidiary in sectors where 100% foreign direct investment is permitted under the FDI policy. Incorporation of Company
For registration and incorporation, set of applications have to be filed wit h 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.
For details please visit the website of Department of Company Affairs under Ministry of Finance at http://dca.nic.in.
2. AS A FOREIGN COMPANY
Foreign Companies can set up their operations in India through:
Liaison Office/Representative 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.
2. (a) 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. Approval for establishing a liaison office in India is granted by Reserve Bank of India (RBI).
2. (b) 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 t o 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. 2. (c) Branch Office
Foreign companies engaged in manufacturing and trading activities abroad are allowed to set up Branch Offices in India for the following purposes: i.
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...