Procedure for Foreign Company Registration in India: All You need to Know
India has become one of the major business hotspots in the world and several foreign companies are looking forward to investing in the Indian market. Why is India such an attraction for the foreign investors? India is one of the largest and fast growing economies in the world right now. Moreover, the Indian market is huge; with over 1.2 billion people, the Indian market has a lot to offer to the foreign investors. But, how to register a foreign company in India? Maybe this is one question that comes to everybody’s mind while thinking about venturing the Indian market. So let us have a look on what you must know to register a company in India
Things that Every Foreign Company Needs to Know to Enter Indian Market:
There are certain directives that every foreign company needs to follow to enter the Indian diasporas. Though there are some guidelines that require being followed but that does not mean Indian government is trying to control the foreign direct investment or FDI. Rather the government is trying heart and soul to encourage the foreign investors to come to the country to invest in the market.
Now, how can a foreign company enter the Indian market? There are generally two distinct ways in which the foreign companies can enter India:
• Incorporating a private limited company
• Establishing a liaison or branch office
Incorporating a Private Limited Company:
Even though establishing a branch office sounds easy than registering the company but in reality, if you want to really take the advantage of the vast market of India then it is better to register the company. What will you get from incorporating a private limited company? Let us have a look:
• Incorporating the private limited company is the fastest way for the foreign companies to access the vast and growing market that India offers.
• In the recent financial budget, Government of India has reviewed the issue of Foreign Direct Investment or FDI and they have made the process of foreign investments automatic by abolishing the Foreign Investment Promotion Board or FIPB. Thus, foreign investors can invest directly in the private limited companies without any regulations.
• It is also the cheapest way to have access to the vast Indian market. By owning a private limited company as your own subsidiary organisation or by coming into a joint venture with an Indian company, you will be able to enter the country at cheapest rates without having to face any hassles.
Establishing a Liaison or Branch Office:
But the idea of establishing a liaison office or branch office may appeal to some foreign nationals or as a foreign company it might be more advantageous for you, thus it is an option of which you should be well aware of. Establishing a liaison or branch office also requires registration but in this case, the registration of the branch office is done instead of registering the company. How multinational companies can start a branch in India? Well, in order to establish a branch or liaison office, you need to get the approval of RBI or special permission must have to be taken from the Indian Government. But there are few things that you need to know before you get your branch office established.
• The branch offices are not allowed to be involved in any kind of production or manufacturing processes but they can give out these works to Indian companies in the subcontract.
• The profit gained from the branch office can be remitted outside India but only after the chargeable tax is cleared.
• The branch offices can actively provide the customer services, logistics services, IT services or can enter the Indian e-commerce sector without any hassles.
Registering a Foreign Company in India Through the Incorporation of a Private Limited Company:
As stated before, the most convenient way for the foreign nationals to enter the Indian market is by incorporating a private limited company. This can be done in two different ways:
• Registering the foreign company through a fully owned subsidiary
• Joined Venture
Registering a Foreign Company Through a Fully Owned Subsidiary:
As per the Union Budget of 2017, the Government has decided to make the foreign direct investment or FDI fully automated; hence, the investments made by the foreign nationals in India will no longer be regulated. Thus, the foreign companies can invest up to 100% in the Indian market.
Thus, a foreign company can register itself in India to make investments through a wholly-owned subsidiary company. But what is a wholly owned subsidiary company? Maybe that is one question playing in your mind. A wholly owned subsidiary company is a type of organisation whose capital share is owned by a foreign company. Suppose, ABC is a foreign company which owns the 100% share of the XYZ Private Ltd. Hence, the XYZ is a wholly subsidiary company owned by the ABC.
Documents Required for Registering a Fully Owned Subsidiary Company:
• The address proof of the office is a must requirement
• If the office place is rented by the subsidiary company, then the latest electricity bill is required
• In a subsidiary company, one of the two directors must be an Indian resident. Thus, for an Indian resident:
o Home Address proof
o PAN card
o Photo ID is required. The Aadhar card, driving license or the passport is considered as a valid photo ID proof
• For the foreign national, the following documents are required:
o For a foreign investor, having the passport is something highly necessary and mandatory too.
o Address proof is required
o A government issued photo ID proof giving all the basic information is required for the foreign national for registering the subsidiary company.
o Most importantly, all the documents must be verified by the Indian consulate
Steps Involved in The Registration of the Subsidiary of a Foreign Company:
• A minimum of two directors and shareholders are required
• Every director will have to apply for a Director’s Identification number along with a certificate for digital signature
• The INC-1 form must be filled to register the name of the subsidiary company
• You must draft the MOA as well as the AOA subscriptions. Then the subscription of MOA must also be done by the shareholder and other eligible personnel.
• Once the approval is received from the registrar of the company, then you must fill up the INC-7 form to incorporate the company under your wing, form DIR-12 for stating the particulars of the directors and personnel in the strategic managerial roles and lastly the form INC-22 must be filled to verify the location of the office along with the MOA as well as AOA.
• Online ROC fees and the stamp duty must be paid as per the total capital
• The Incorporation Certificate will be sent by the registrar after verifying the INC-7, DIR-12 and INC-22 forms.
• You must apply for the PAN card and bank account of the company
• Once the share has been subscripted the appropriate capital documents must be submitted for the compliance of FDI
Registration of a Foreign Company Through Joint Venture:
Working in cooperation with an Indian company is a good business choice for a foreign company entering the Indian market; since you can take advantage of the infrastructure of the business as well as the marketing infrastructure of the Indian company to maximise your profit. The joint venture can be of various types like LLP, Company, Partnership and so on. The venture can be for a limited period or a long term period based on your business objective.
If any foreign investor or Non-resident Indian is involved in a Joint Venture then the RBI approval is required and then the foreign or NRI investor will be able to investment without any worries. Previously, this process was controlled by the FIPB but since the Government has made the process automatic by abolishing the FIPB; hence just RBI approval is enough to start a joint venture. For getting the RBI approval, the intent of the venture must be clarified and the all international laws must be maintained.
Registration of a Foreign Company Through the Establishment of a Liaison or Branch Office:
There are some certain guidelines that must be followed to establish a branch office or liaison of your company in India. What are those conditions? Have a look:
• The foreign company wanting to establish a liaison or branch office must have a record of profit making for the last 3 years in their home turf
• Approval of RBI under the directives of FEMA 1999 and approval of IRDA is mandatory
• All the expenses of the branch office will have to be met by remittances generated outside India
• The documents must be filled in English and have to be submitted along with MOA as well as AOA and last audited balance sheet after attesting it by the Indian embassy.
• After approval, a UIN will be provided by RBI which you will be able to use to generate a PAN card for your branch office or liaison.
This all you need to know; about registering a foreign company in India. Follow the guidelines provided above; do your own research; take advice from legal personnel and register your foreign company in India to enjoy the benefits of the vast market that India has to offer.