PRIMER ON ENTRY STRATEGIES IN INDIA FOR FOREIGN BUSINESS ENTITIES.


Dated 04th December 2011

A foreign company/business entity planning to set up business operations in India has the following options

AS AN INDIAN COMPANY 

A foreign company can commence operations in India by incorporating a company under the Companies Act,1956 through

i)          Joint Ventures

ii)         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 respect of the area of activities under the Foreign Direct Investment (FDI) policy.

Incorporation of Company For registration and incorporation, an application has to be filed with 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.

FOREIGN ENTITIES CAN NOW ALSO ENTER THE INDIAN MARKET AS AN LIMITED LIABILITY PATNERSHIP WHICH IS ALSO SUBJECT TO COMPANY LAW REGULATIONS.

AS A FOREIGN COMPANY

i)          Liaison Office/Representative Office

ii)         Project Office

iii)        Branch 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.

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 can not undertake any commercial activity directly or indirectly and can not,  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).

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 can not undertake or carry on any activity other than the activity relating and incidental to 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.

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

ii)         Rendering professional or consultancy services

iii)        Carrying out research work, in which the parent company is engaged.

iv)        Promoting technical or financial collaborations between Indian companies and parent or overseas group company.

v)         Representing  the parent company in India and acting as buying/selling agents in India.

vi)        Rendering services in Information Technology and development of software in India.

vii)       Rendering technical support to the products supplied by the parent/ group companies.

viii)      Foreign airline/shipping company.

A branch office is not allowed to carry out manufacturing activities on its own but is permitted to subcontract these to an Indian manufacturer.  Branch Offices established with the approval of RBI, may remit outside India profit of the branch, net of applicable Indian taxes and subject to RBI guidelines Permission for setting up branch offices is granted by the Reserve Bank of India (RBI).

SOURCE: RESERVE BANK OF INDIA

 

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