Foreign Company Registration in India- Various Options available

 Foreign Company Registration in India


Over the years, India has become an attractive destination for setting up businesses and making foreign direct investment. Accordingly, it has been witnessing more and more companies willing to set up business in India. Under the Foreign Direct Investment (FDI) policy of India, 100 percent foreign equity is permitted in Indian enterprises, subject to equity caps in respect of the areas of activities. When a business is incorporated in India, it has to follow Indian rules and regulations, even if a foreign business owns the entire business.

In this write up, we are discussing about various options available for foreign company registration in India.

Liaison Office registration

 

They act as a representative office of foreign company in India without any intention of doing any commercial activities in India.

After receiving prior approval from the Reserve Bank of India (RBI), the country's main bank, and foreign businesses are permitted to open liaison offices in India. The approval is given by the RBI and is valid for a period of one to three years. It serves largely as a communication link between the international business and its Indian clients or potential clients. The Liaison Office might be established up to make business contacts or gather market research to advertise the parent company's goods or services. It isn't allowed to do anything that would make money.

Branch office registration

Unlike Liaison office, branch can do commercial activities in India except manufacturing activities. It has to take prior approval of RBI. Also, it can do only those activities which are permissible by RBI. One drawback of branch office is that it has maximum tax rate.

Joint Venture Registration

Through a joint venture agreement, a foreign business may engage in an Indian company in the industries that accept foreign investment. Some industries, such real estate, agriculture, and plantations, are solely reserved for the public sector, and participation by foreigners is prohibited in other industries.

Therefore, it is crucial to confirm whether there is a cap on foreign investment in the industry where the prospective JVC would operate. For the purpose of purchasing firm shares and setting up shop in India, approval from the Reserve Bank of India (RBI) or the Foreign Investment Promotion Board (FIPB), as appropriate, is required.

Although most sectors are now accessible to 100 percent FDI since India first authorized foreign investment in the early 1990s, JVC continues to be a popular vehicle for international businesses. While JVC has many advantages, it also carries a risk of failure due to participant incompatibility, management deadlocks, poor research, lack of participation, incorrect role interpretation, etc.

Therefore, it's crucial to pick the appropriate partners and define each participant's roles, obligations, and rights in detail.

 

Wholly Owned Subsidiary Company (WOS)

Another way of setting up business in India is in the form of subsidiary. Subsidiary company registration in India is one of the most popular forms of entity registration in India.

Foreign businesses may establish wholly-owned subsidiaries in industries where the FDI policy permits 100 percent foreign direct investment. A WOS can be incorporated as a private or public business, one with shares or a guarantee limiting its liability, or one with unlimited liability. The most frequently chosen form for a WOS is a Private Limited Company because of its distinct advantages. A foreign investor has the best freedom and protection with this arrangement.

Project Office

A foreign corporation that has obtained a contract from an Indian company to carry out a project in India is permitted to open a project office there without first seeking RBI approval. In accordance with the terms outlined below, RBI has now given broad authorization to foreign firms to establish Project Offices:-

ü  The project is directly supported by inbound remittances from outside;

ü  It is funded by a bilateral or multilateral international financing agency;

ü  It has the approval of the relevant authorities; or it is funded in some other way.

ü  A public financial institution or an Indian bank has provided a term loan for the project to the organization or person in India that is awarding the contract.

Thus, it may be seen from above that there are many options available for foreign company registration in India and depending upon the nature of business and long term vision of the foreign company, one may decide upon the type of entity to be registered.

Location: India

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