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 like 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 belonging to the company’s products and to explore further opportunities. Liaison offices are not allowed to carry on any business or earn any income in India and every one of expenses are to be borne by remittances from abroad.

Project Offices – The project office is the ideal method for companies to establish profitable business presence in India, if the object is to have a presence for a limited period of time. It is essentially a branch office launched with the limited 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 involved in manufacturing and trading activities outside India may open branch offices for medicine of:

oRepresenting the parent company or other foreign companies within a matters in India, like acting as buying and selling agents.

oConducting research, wherein the parent company is engaged, provided the outcomes of this research are made available to Indian companies

oUndertaking export and import trading games.

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 a Indian Company by independent legal status, distinct from parents foreign company.

Under the current foreign investment policy, a wholly owned subsidiary can be established either the actual automatic route, when 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, which is 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 stipulations specified therein are complied with or obtain an approval from the FIPB.

Foreign companies intending to put in any involving office mentioned previously activities portion of the parent company or foreign trading companies in India for promotion of exports from India have to obtain a previous approval for the Reserve Bank by submitting an application Online LLP Formation in India the prescribed form to the Central Office of Reserve Bank. On approval of this cases, permission is granted initially a period of three years, cause to undergo the condition that expenses of such office in order to met exclusively out of inward remittances; such offices are not permitted to get any income in Japan.