Setting up Business in India – What Foreign Companies Must Know

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

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

Project Offices – The project office is the ideal method for companies to establish a home-based business presence in India, if the object is to possess a presence for constrained period of any time. It is essentially a branch office set up with the Limited Liability Partnerhsip Registration in India Online purpose for executing a specific problem. Foreign companies engaged in turnkey construction or installation normally put in 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 outcome of this research are made in order to Indian companies

oUndertaking export and import trading situations.

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 an Indian Company through having an independent legal status, distinct from the parent foreign company.

Under the current foreign investment policy, a wholly owned subsidiary can be established either under the automatic route, if 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. economical collaboration with an Indian business house/company in India, could be 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 conditions specified therein are complied with or obtain an approval from the FIPB.

Foreign companies intending to set up any form of office mentioned above activities component the parent company or foreign trading companies in India for promotion of exports from India in order to be obtain a prior approval for the Reserve Bank by submitting an application in the prescribed form to the Central Office of Reserve Bank. On approval of such cases, permission is granted initially to secure a period of three years, foreclosures the condition that expenses of such office can met exclusively out of inward remittances; such offices are not permitted produce any income in India.