Venturing to set up its business operations in India, a foreign company can explore the following set of options. To launch a new company in India, a foreign firm needs to incorporate its new operations in India under the Companies Act 1956, either through a joint venture or as a wholly owned subsidiary.
Meeting the requirements of the investor and subject to equity caps with respect to the area of operation under the Foreign Direct Investment (FDI) policy, foreign equity in Indian companies are allowed up to 100%. Details pertaining to the FDI policy, sectoral equity caps & procedures are available in the website http://www.dipp.nic.in
Joint ventures in India can mean forging strategic alliances with Indian partners, which entail the investor with a range of advantages like benefiting from the established distribution or marketing networks and contacts of the Indian partners, in addition to the financial resources available with them. These factors can ease the process of setting up operations.
As an alternative, FDI policy also permits foreign firms to set up wholly owned subsidiary companies with 100% direct foreign investment. Under this, company incorporation needs to file an application with the Registrar of companies (ROC). A company incorporated and registered, as an Indian company is subject to Indian laws and regulations applicable to other domestic Indian companies.
Foreign Company incorporation in India can be done in India under several modes like Liaison or Representative Office, Project Office, or Branch Office, and take up any permitted activities. It is important that Company Registration is made with the Registrar of Companies (ROC) within 30 days of footing in India.
A Liaison or Representative Office can only function as a channel of communication between the head office and entities in India. This set up cannot involve in direct or indirect commercial activity apart from gathering information about market prospects in India, publicizing the products of the company in India, facilitating export and import activities to/from India, and establishing technical/financial collaboration between parent company and Indian firms. Reserve Bank of India (RBI) is the authority to approve the establishment of a liaison office in India.
As approved by the RBI under specific conditions, companies attempting to launch specific projects in India can set up temporary Project Offices in India. Such establishments cannot act outside the purview of the specific projects. On project completion, as per the general permission granted by the RBI, the surplus may be remitted outside India.
Companies with production and marketing activities abroad can set up their Branch Offices in India for the purposes of export/import of goods, rendering professional or consultancy services, undertaking the research work of the parent company, promoting technical or financial collaborations with Indian companies, acting as buying/selling agents in India, rendering IT and software development services in India, providing technical support to the products supplied by the parent company in India, and for foreign airline or shipping services in India. Branch Offices cannot involve in manufacturing activity in India.