Establishing 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 a foreign company:
Liaison Offices – A foreign company can open a liaison office in India to handle its Indian operations, to promote its business interests, to spread awareness among the company’s products in addition to explore further avenues. Liaison offices are not allowed to preserve any business or earn any income in India and all expenses are in order to become borne by remittances from abroad.
Project Offices – The project office is the ideal method for companies to establish a legitimate income opportunity presence in India, if the object is to possess a presence for minimal period of a period of time. It is essentially a branch office set up with the limited purpose for executing a specific undertaking. Foreign companies engaged in turnkey construction or installation normally set up 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 in a variety of matters in India, like acting as buying and selling agents.
oConducting research, wherein the parent company is engaged, provided the results of this research are made available 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 up to 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 a Indian Company through having an independent legal status, distinct from parents foreign company.
Under the current foreign investment policy, a wholly owned subsidiary can be established either the particular automatic route, if for example the conditions specified therein are complied with (specific high priority industries) or get the approval from the FIPB.
Joint venture companies – Foreign companies may set up a joint venture company i.e. economic collaboration with an Indian business house/company in India, and 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 set up any regarding office mentioned previously activities portion of the parent company or foreign trading companies in India for promotion of exports from India should obtain an earlier approval of this Reserve Bank by submitting an application LLP Incorproation Online in India the prescribed form to the Central Office of Reserve Bank. On approval of the cases, permission is granted initially for a period of 3 years, foreclosures the condition that expenses of such office is actually met exclusively out of inward remittances; such offices are not permitted produce any income in Of india.
