Establishing Business in India – What Foreign Companies Must Know

Foreign companies may set up business in India in any one of pursuing manners while retaining its status as the 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 with the company’s products and to explore further open positions. Liaison offices are not allowed to preserve any business or earn any income in India and all sorts of 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 home-based business presence in India, if the object is to possess a presence for a limited period of a period of time. It is essentially a branch office arranged with the limited purpose for executing a specific project. Foreign companies engaged in turnkey construction or installation normally set-up a project office for their operations in India.

Branch Offices – Foreign companies involved LLP Formation Online in India manufacturing and trading activities outside India may open branch offices for the purpose of:

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

oConducting research, during which the parent company is engaged, provided the outcomes of this research are made there for 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 good Indian Company a good independent legal status, distinct from parents foreign company.

Under the current foreign investment policy, a wholly owned subsidiary can be established either under the automatic route, if for example the conditions specified therein are complied with (specific high priority industries) or obtain an 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, that 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 automated route, if the physical conditions specified therein are complied with or obtain an approval from the FIPB.

Foreign companies intending to build any form of office mentioned previously activities component the parent company or foreign trading companies in India for promotion of exports from India should obtain a previous approval of the Reserve Bank by submitting an application in the prescribed form to the Central Office of Reserve Bank. On approval of such cases, permission is granted initially a period of three years, subject to the condition that expenses of such office will met exclusively out of inward remittances; such offices are not permitted produce any income in In india.