Doing business in India

Given the current economic crisis in the developed world, international companies are increasingly looking towards emerging economies to seek new markets for their products and services. With India emerging as a destination of choice for investors and the government liberalizing Foreign Direct Investment (FDI) norms, many foreign companies are now looking to incorporate and register their companies in India.

How to set up a company in India,

Registrars of Companies (ROC) in India, appointed under Section 609, are vested with the principal duty of registering companies established in the respective States and Union Territories in India.

The setting up of business in India is regulated by the Indian Companies Act, 1956. The Act lays down the guidelines for foreign companies that wish to set up their business in India. As per the law, these companies can:

  • Incorporate a company under the Companies Act, 1956, as an Indian company - joint venture or a wholly owned subsidiary.
  • Set up a liaison/representative office or a branch or project office of a foreign company and undertake activities as governed by the Foreign Exchange Management (Establishment in India of Branch Office or Other Place of Business) Regulations, 2000.

Wholly owned Subsidiary: Under this form of business set-up, an Indian company is incorporated which is fully owned by the Foreign company. Where 100% FDI is allowed, there is no need to join hands with a local Indian national or a local company (JV partner) and the ownership can be kept concentrated in the hands of the Foreign Company desirous to venture into India. Foreign Individuals can also form an Indian company with 100% shareholding.

Liaison office: This is the preferred option for companies that wish to explore opportunities for business and investment and also create awareness about their products and services in the Indian market. Foreign companies can set up a liaison office only after obtaining approval from the Reserve Bank of India (RBI), the apex exchange control authority.

Project office: If a foreign company wishes to establish office in India for a limited period to execute a specific project, it may establish a project office as a temporary base for its Indian operation.

Branch office: A foreign company which does not wish to establish/invest into an Indian company, can set up a branch office in India for certain specified activities with the prior approval of RBI.

 

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