How Foreign Companies Start a Business in India

India is among the fastest growing economies in the world with immense human potential and a large market comprising of over 1.2 billion people. Opportunities in India has attracted a large amount of Foreign Direct Investment into the country and each year the amount of FDI inflow keeps increasing due to more number of foreign businesses starting their operations in India. In this post, the way to setup a business is in India is detailed for foreign companies.

Entry Strategy into India for Foreign Businesses

There are mainly two types of entry strategy for foreign businesses in India, registration of a company or establishing a branch/liaison office.

Incorporation of a private limited company is the easiest and fastest type of India entry strategy for foreign nationals and foreign companies. Foreign direct investment of upto 100% into a private limited company or limited company is under the automatic route, wherein no Central Government permission is required. Hence, incorporation of a private limited company as a wholly owned subsidiary of a foreign company or joint venture is the cheapest, easiest and fastest entry strategy for foreign companies and foreign nationals into India.

Registration of Branch Office, Liaison Office or Project Office requires RBI and/or Government approval. Therefore, the cost and time taken for registration of branch office, liaison office or project office for a foreign company is higher than the cost and time associated with incorporation of a private limited company. Further, foreign nationals cannot open branch office, liaison office or project office. Hence, this option is limited to being an India entry strategy only for foreign companies.

Requirements for Establishing a Company in India

To start a company in India, a minimum of two persons and an address in India are required. A private limited company in India must have a minimum of two directors (persons) and a minimum of two shareholders (can be persons or corporate entities). Further, the incorporation rules in India states that one of the Director of the Company must be both an Indian Citizen and Indian Resident (any person who has lived in India for over 186 days is considered an Indian Resident).

The preferred legal entity structure for foreign companies is to establish a company with three Directors, two being foreign nationals from the parent company and one director being a local Indian citizen. Since, there are no requirements for minimum shareholding with the Indian Director, 100% of the shares of the Indian Company can be held by foreign nationals or entities.

An address in India is required to serve as the registered office of the Company. The city in which the registered office address of the company will be setup will also determine the legal jurisdiction applicable for the company.  Most foreign companies’ setup their registered offices in major metros of India like Delhi, Mumbai, Bangalore, Hyderabad, Chennai, etc.,

Documents Required for Company Registration in India 

To register the company, foreign nationals who will serve as Directors of the Company will have to submit a copy of their Passport along with an address proof (Driving License, Bank Statement, etc.,). The copy of the original documents must be notarized by a Notary in the home country or by the Indian Embassy in the country of the foreign Director.

In case of a corporate entity becoming a shareholder in the Indian Company, then Board Resolution from the foreign company authorizing the investment in the Indian Company would also be required. The Board Resolution must be attached with notarized copy of the certificate of incorporation of the foreign entity.

The presence of any of the foreign Directors is not required in India at any time during the incorporation process. Thus, foreign citizens can easily establish and operate a business in India without the hassles of travelling to India.

Cost for Registering a Company in India

The cost for registering a business in India is relatively inexpensive. Registration of a company in India can also be completed within a few weeks, making India an easy place to start a business.

Post Incorporation Formalities 

Post registration of the company in India, the Indian Director can help open a bank account for the company in India. Once the bank account is opened, the Company must make FDI reporting to the Reserve Bank of India. The procedure for reporting FDI inflow into the company is simple and can be completed easily by a legal or accounting professional in India.  Completing the FDI reporting would ensure that the business is in compliance with all regulations in India and ready to operate.

SETTING UP BRANCH OFFICE OF A FOREIGN

COMPANY IN INDIA.

Pre- Requisites and Conditions of a Branch Office

·        The name of Indian Branch office shall be same as parent company.

·        The Branch office does not have any ownership; it is just extension of the exiting company in the foreign country.

·        All the expenses of the BRANCH office are met by the head office, if it does not have the revenue from Indian operations.

·        The foreign parent company looking to start a Branch office in India shall have a profitable track record during immediately preceding five years in the home country.

·        The Net Worth i.e. total of paid-up capital and free reserves, less intangible assets as per the latest Audited Balance Sheet or Account Statement certified by a Certified Public Accountant or any Registered Accounts Practitioner by whatever name shall be not less than or equal to USD 100,000.

           

S.NO	PARTICULAR		TIME LINE		REMARKS
OBTAINING APPROVAL FROM RBI
	Filing documents with the Reserve Bank of India (RBI) Prepare and file Form FNC-1 for obtaining approval pertaining to setting up of Branch Office in India. Liaison and obtain approval from RBI for setting up of Branch Office		25-30 days from the date of receipt of ALL the relevant documents and information		Every company desirous of setting up a Branch Office in India is required to file the requisite documents with the Reserve Bank of India.
INTIMATION TO REGISTRAR OF COMPANIES
STEP 1		Obtaining DIN and Digital Signatures for the proposed Directors. Prepare and File Form DIR 3 for obtaining DIN for the proposed Directors Prepare the Form for obtaining Digital Signatures for the Director(s).		4-7 days from the date of receipt of ALL the relevant documents and information
STEP 2		Intimation to ROC Prepare and file Form FC-1 with regard to obtaining registration with MCA.		15-20 Days from the receipt of all relevant documents and information		Every Branch office registered with RBI shall get itself registered with the Ministry of Corporate Affairs within a period of 30days of setting up of place of business in India.

List of Documents required

1. OBTAINING APPROVAL FROM RBI

·        Letter from the principal officer of the Parent company to RBI.

·        Letter of authority from the parent company in favor of Local Representative.

·        Letter of authority/ Resolution from parent company for setting up BRANCH office in India.

·        Comfort letter from the parent company intending to support the operation in India.

·        Two copies of the English version of the Certificate of Incorporation, Memorandum & Articles of association (Charter Document) of the parent company duly attested by the Indian embassy or notary public in the country of registration.

·        Certification of Incorporation - Translated & Duly Notarized and properly authenticated.

·        The Latest audited Balance sheet and annual accounts of parent company duly Translated notarized for past Three years and properly authenticated

·        Name, Address, email ID and telephone number of the authorized person in Home Country.

·        Details of Bankers of the Organization the Country of Origin along with the bank account number

·        Commitment from the Organization to the effect that it will be open to report / opinion sought from its banker by the Government of India / Reserve Bank of India.

·        Expected funding level for operations in India.

·        Details Relating to address of the proposed local office, number of persons likely to be employed, number of Foreigners among such employees and address of the head of the Local office, if decided.

·        Details of Activity carried out in Home Country by the applicant organization in brief about the product and services of company in Brief.

·        Bankers Certificate.

·        Latest Proof of identity of all the Directors - Properly Certified by Banker in Home Country and duly authenticated.

·        Latest Proof of address all of Directors - Properly Certified by Banker in Home Country and duly authenticated

·        Details of the Individuals / Company holding more 10% of Equity

·        Structure of the Organization and its Shareholding pattern

·        Complete KYC of Shareholders holding more than 10% Equity in the Applicant Company

·        Resolution for Opening up Bank Account with the Banker

·        Duly Signed Bank Account Opening Form for Indian Bank

2. INTIMATION TO ROC

·        Charter, statutes or memorandum and articles of association or other Instrument constituting or defining the constitution of the company

NOTE: If the above documents are not in English then the translated version of the documents.

·        Director(s) details – individuals

·        Director(s) details - bodies corporate

·        Reserve bank of India approval letter

·        Secretary(s) details, if any

·        Power of attorney or board resolution in favor of the authorized representative(s)