Setting up Business in India – What Foreign Companies Must Know

Foreign companies may set up business in India in any one of next manners while retaining its status as the foreign company:

Liaison Offices – A foreign company can open a liaison office in India to look after its Indian operations, to promote its business interests, to spread awareness among the company’s products and to explore further chances. Liaison offices are not allowed to carry on any business or earn any income in India and expenses are to be borne by remittances from abroad.

Project Offices – The project office is the ideal method for companies to establish a venture presence in India, if the object is to have a presence for modest period of schedule. It is essentially a branch office fitted with the Limited Liability Partnerhsip Registration in India Online purpose for executing a specific problem. Foreign companies engaged in turnkey construction or installation normally install a project office for their operations in India.

Branch Offices – Foreign companies engaged in manufacturing and trading activities outside India may open branch offices for write-up of:

oRepresenting the parent company or other foreign companies a number of matters in India, like acting as buying and selling agents.

oConducting research, in which the parent company is engaged, provided the outcomes of this research are made open to Indian companies

oUndertaking export and import trading ventures.

oPromoting technical and financial collaborations between Indian and foreign companies.

Trading companies – Foreign companies may invest in trading companies engaged primarily in exports. Such trading companies are treated at par with domestic trading companies in accordance with the trade policy.

The RBI accords automatic approval for foreign equity around 51 per cent for setting up trading companies engaged primarily in exports. All other proposals, which do not meet the criteria for automatic approval, can be addressed to the Foreign Investment Promotion Board, i.e. “FIPB”.

Wholly owned subsidiaries – Foreign companies may set up a wholly owned subsidiary, which is definitely an Indian Company by independent legal status, distinct from parents foreign company.

Under the current foreign investment policy, a wholly owned subsidiary can be established either underneath the automatic route, in the event the conditions specified therein are complied with (specific high priority industries) or ask for approval from the FIPB.

Joint venture companies – Foreign companies may set up a joint venture company i.e. in financial collaboration with an Indian business house/company in India, which can an Indian Company with an independent legal status, distinct from the parent foreign company.

Under the current foreign investment policy, a joint venture can be established either under the automatic route, if the physical conditions specified therein are complied with or obtain an approval from the FIPB.

Foreign companies intending to make any involving office already mentioned activities on the part the parent company or foreign trading companies in India for promotion of exports from India have to obtain a prior approval from the Reserve Bank by submitting an application in the prescribed form to the Central Office of Reserve Bank. On approval for these cases, permission is granted initially for a period of 3 years, foreclosures the condition that expenses of such office will met exclusively out of inward remittances; such offices are not permitted create any income in India.