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Business Setup in India

India being one of the most accelerating countries in the world due to fast growing economy, availability of skilled manpower, pool of diversified potential customers and ease of doing business. Sighting this huge market, foreign direct investments (FDIs) are lured to set up business in India, resulting in a substantial amount of FDI coming in the country every year.

One such source of FDI is foreign companies setting up their business operations in India. Contemplating this to be the fuel in the process of moving India to a more developed nation, government of India has removed lots of restriction to a greater extent and provide ease of doing business, thus, enabling the infusion of more foreign investments in the economy.

Establishing An Indian Entity
Joint Venture Company

Setting up a Joint venture company with an Indian partner to undertaking a commercial enterprise jointly by two or more parties with the view of carrying out a particular project, which otherwise retain their distinct identities, it is suitable when purpose is to carry out business activities of manufacturing, marketing, selling, etc. in Indian market on behalf of foreign entity.

Wholly-Owned Subsidiary

Forming a Wholly-Owned Subsidiary i.e., establishing a company whose 100% equity share are owned by a parent company, in sectors which permit 100% FDI through the FDI policy formulated by Department for Promotion of Industry and Internal Trade (DPIIT). Subject to equity caps provided in the FDI policy concerning the various areas of activity and depending on the investor’s decision, 100% foreign equity in such Indian companies is permissible under automatic route.

Apart from incorporating a company, one can also choose to incorporate a limited liability partnership to establish a business in India: A Limited Liability Partnership (LLP) is a form of business structure in India that integrates the benefits of a company with the advantages of organizational flexibility associated with a partnership. The FDI policy for Limited Liability Partnership (LLPs) has been notified lately to feasible entity to form for foreign investors to establish their business operations in India.

Establishing A Foreign Company

Prior approval required from RBI and / or government for setting a business venture in India by virtue of a Liaison Office / Project Office / Branch Office. Also, the condition to open a branch office / project office / liaison office is that only a body corporate incorporated outside India can incorporate any of these offices.

  • A liaison office, also known as representative office to facilitates communication between headquarters or principle place of business in India and the offshore entities in India. The object to form a liaison office to collect information about business for opportunities in the present market and the same are made available by the parent company and its products to prospective clients in the region. It is suitable when the purpose is to form communication channel between parent foreign company and companies in India or to promote collaborations.

Following activities are allowed to liaison office in India:

  • Representation of parent company / group companies in India;
  • Promotion of technical / financial collaborations between parent company / group companies in India or enable to act as a communication channel between parent company / group companies in India.
  • Collection of information about possible market opportunities, source of supply, providing information about parent company and its products to the prospective Indian customers or vice versa to its vendor;

It is to be noted that a liaison office is not permitted to earn any income; to undertake any industrial, trading or commercial activity; enter into any agreement on behalf of the head office; borrow or lend money for any commercial activity; or charge any fee or commission or otherwise on earning any income, in respect of liaison activities carried on in India.

A branch office of a foreign company can carry out manufacturing and trading activities abroad and are established in the region / market of manufacture for the following purposes:

  • Import / export of goods / merchandise of raw material and finished product.
  • To bring about better technical / financial collaborations between Indian companies and the parent or overseas group company.
  • Providing consultancy, advisory or professional services.
  • Supplementing research work and experimentation, in which the parent company is engaged, making it more economical;
  • Catering to software development and Information Technology services.
  • Authorized buying / selling agents in India for the parent company.
  • Providing technical support to the products coming from the parent / group companies and troubleshooting any local issues. It is suitable when the purpose is to render services or sell products manufactured by foreign entity by establishing its presence in India.

It is to be noted that manufacturing activities have certain restrictions as a branch office is not permitted to carry out manufacturing activities by itself but is prescribed to sub-contract these to an Indian manufacturer. The profit of the branch may be remitted outside India for branch offices subject to the approval from RBI. The remittance is net of applicable Indian taxes and subject to RBI guidelines.

  • A project office of foreign companies can set up set up certain temporary offices / site offices; to execute specific projects in India that are linked to one-off contract. They can be termed as branch office set up with the limited purpose for executing a specific project.

RBI has granted certain permissions to foreign companies for setting up of project offices, subject to certain conditions:

  • RBI has granted general permission to foreign companies to establish project offices in India, provided they have secured a contract from an Indian company to execute a project in India.
  • The project is funded directly by inward remittance from abroad.
  • The project is funded by a bilateral or multilateral International Financing Agency.
  • The project has been cleared by an appropriate authority.
  • A company or entity in India awarding the contract has been granted term loan by a public financial institution or a bank in India for the project.

It is to be noted that, these offices cannot deviate and take steps or perform activities other than those related to the project for the purpose of which such office was set up.

Our expert team of professionals can assist you in the following areas:

  • Business entry advisory services.
  • Asist to Identifying the suitable form of business.
  • Acquisition of licenses and registration under various Acts.
  • Acquisition of permanent account number (PAN) / tax deduction or collection account number (TAN).
  • Preparation & filing of incorporation documents.
  • Attestation of legalization of documents.
  • Filing of application with RBI through Authorized Dealer bank.
  • Verification of know your client (KYC) from banker of parent company.
  • Registration of project office of foreign company with the ROC.
  • Drafting of charter documents (Memorandum of Association / Articles of Association).
  • Assistance in trademark & other intellectual property registration.
  • Secretarial and administrative support.
  • Post incorporation services (Accounting, bookkeeping, payroll, auditing, taxation, etc.).
  • Assistance in RBI compliances.