Registration of Foreign Companies in India
October 10, 2019
Foreign company registration in India is regulated by the Companies Act, 2013 along with Companies (Registration of Foreign Companies) Rules, 2014. Sec 2 (42) of the Companies Act 2013. The market of India serves the following classification of ways a foreign company registration can be initiated in India and set up business operations in India by following:
- As an Indian Company:
- Wholly Owned Subsidiary
- Joint Venture
- As a Foreign Company:
- Setting up a Liaison Office
- Representative Office or a Project Office or
- Branch Office of the foreign company
Ways to Foreign Company Registration in India
1. As an Indian Company-
Wholly owned subsidiary Company
For an Indian company to Become Wholly Owned Subsidiary Company of a Foreign Company, a foreign company needs to invest 100% FDI in that Indian company through automatic route, for the purpose of foreign company registration in India.
Example if ABC of US owns 100% shares in XY Ltd of India then XY Ltd becomes the subsidiary company of ABC. It is important to note that in such circumstances, the Indian company is an entity whose whole share capital is in the hand of a foreign corporate body, which can be a private limited company by guarantee or shares or an unlimited liability company.
Following documents are required for such foreign company registration in India:
- Address proof of the office (In case of a rented property, the latest electricity bill)
- For Indian citizen
- PAN card mandatory
- Address proof
- Photograph ID proof like Aadhar card.
- For foreign national
- Passport mandatory
- Address Proof
- Photograph ID Proof like any government license
- Documents submitted must be certified by the Indian Consular or consulate.
It is important for the foreign company to elect a local partner with whom it wants to enter into a joint venture. A Memorandum of Understanding or a Letter of Intent is to be signed which will state the basis for the joint venture agreement. A thorough discussion of all the terms should be done and they must be consistent with regional as well as international law. Important matters to be addressed are as follows:
- Dispute resolution agreements
- Law Applicable
- Holding shares
- Transfer of shares
- Board of Directors Non-Compete
- Confidentiality etc
2. As a Foreign Company
Setting up a Liaison Office or Representative Office
RBI prescribes the criteria for setting up a Liaison office or Representative Office in India, which are as follows:
- It is essential to have a profit making record in the immediately preceding 3 financial years in the home country, and the net value should be more than USD 50,000.
- In case, the above condition is not satisfied by the subsidiary company, a letter of comfort is to be submitted by the parent company which satisfies the above condition.
- Specific approval of RBI under FEMA 1999 and Insurance Regulatory and Development Authority (IRDA) is required.
- A designated Authorised Dealer Category–I Bank needs to forward an application for establishing an office to the RBI.
- The office will be given a Unique Identification Number by RBI.
- Along with the Application, English version of the Certificate of Incorporation/Registration or MOA & AOA (attested by the Indian Embassy/Notary Public), required documents should also be filed. Latest Audited Balance Sheet of the applicant entity should also be filed in the Country of Registration.
In case a foreign company wants to establishment office, and the foreign company has secured a contract from an Indian company to execute a project in India, prior permission from RBI is not needed, provided:
- Funded directly by inward remittance from abroad or
- Funded by a bilateral or multilateral International Financing Agency or
- Cleared by an appropriate authority or
- A company or entity in India provided that a contract has been granted Term Loan by a bank in India or a Public Financial Institution for the project.
Besides that, in case the above conditions are not met the foreign entity has to approach the RBI for the approval.
A Branch Office of the Foreign Company
By opening a branch office, a Foreign company can conduct business activity in India with the prior approval of RBI, provided:
- The company should be engaged in manufacturing or trading activities,
- Profit in the immediately preceding five financial years is necessary,
- The net worth of not less than USD 100,000 in its home country.
There are huge opportunities in India as a Foreign Company even in the E-commerce Sector where govt recently allow 100% FDI in the E-commerce Sector.