Company Registration

Foreign Company Registration in India

India is a fast developing country with a lot of opportunities for not only Indians but also a foreign citizen. Due to globalization and many other promotional schemes like make in India initiative, is an encouraging step for investors to invest their money in India. Any Foreign Company in India incorporating registered office has to follow certain rules, regulations, and guidelines as laid down by Companies Act, 2013^[1] and RBI Guidelines etc. This article describes the procedure of Foreign Company Registration in India.

Companies Act defines Foreign Company Registration in India as follows:

“A foreign company is any company or body corporate which is incorporated outside India which either —

1. a)   Having a place of business whether by itself or through an agent in India, physically or through electronic mode; and b)   Conducts any business activity in India in any other prescribed manner.

A foreign company can enter the market of India and set up its business operations in India by following methods:

2. As an Indian company:
   • Wholly Owned Subsidiary.
   • Joint Venture
3. As a foreign company:
   • Setting up a Liaison Office
   • Representative Office or a Project Office or
   • A Branch Office of the foreign company

I. As Indian Company Way Foreign Company Registration in India

(1) Wholly owned subsidiary Company

A foreign company invests 100% FDI in private limited company through automatic route then it becomes a Wholly Owned Subsidiary Company of that Foreign Company. Like if XYZ of US owns 100% shares in AB Ltd of India then AB Ltd becomes a subsidiary company of XYZ

WOS is an entity whose whole share capital is in the hand of a foreign corporate body. It can be incorporated into a Private Limited Company by guarantee or shares or an unlimited liability company.

Documents required

1. Address proof of the office and if accommodation is rented then the latest electricity bill.
2. For Indian citizen
   1. PAN card mandatory
   2. Address proof
   3. Photograph ID proof like passport, Aadhaar card or driving license.
3. For foreign national
   1. Passport mandatory
   2. Address Proof
   3. Photograph ID Proof like any government license or document containing the name in full, photo and date of birth.)
   4. Documents submitted must be certified by the Indian Consular or consulate.

Procedure:

1. It requires 2 minimum shareholders, directors.
2. All directors have to apply for DIN (Director’s Identification No.) and digital signature certificate.
3. In Form INC-1 application for the name of the company has to be filed.
4. You have to draft your MOA and AOA and then a subscription to MOA has to be done by the shareholder and appropriate persons.
5. When the registrar of the company approves the applicant has to file form INC-7 (Application for Incorporation of Company), form DIR-12 (Particulars regarding appointment of directors, the key managerial personnel and any changes in them) and form INC-22 (Notice of location or change of address of the registered office of the company) along with MOA and AOA
6. Pay ROC online fees and stamp duty as per the authorized capital of the company.
7. The registrar verifies all the documents and Form INC-22 and DIR-12 are approved and INC-7 is verified.
8. When the registrar is satisfied with the documents certificate of incorporation is sent.
9. apply for PAN card and for the opening bank account of the company
10. After subscription of share, capital documents have to be submitted for FDI compliance.

(2) Joint Venture

It is an arrangement where two or more parties cooperate to achieve a commercial object or run a business. It may take various forms like Company, Limited Liability Partnership, partnership firm etc. it can be on a long-term basis like running for perpetuity or for a limited time based on the object. It can involve an entirely new entity or an existing business. Hence it is a very flexible concept.

Governmental approval of either from RBI or FIPB shall be required if any foreign partner or NRI is involved in a joint venture. If incorporation is done through approval route then RBI Approval shall be required and in case the incorporation is be done through approval route then FIPB approval shall be required.

The entity has to select a local partner with whom you want to enter into joint venture then a Memorandum of Understanding or a Letter of Intent is to be signed which will state the basis for the joint venture agreement. All the terms should be discussed thoroughly and negotiated and must be consistent with regional as well as international law. It should address the important matters like Dispute resolution agreements, law Applicable, holding shares, Transfer of shares, Board of Directors Non-Compete, Confidentiality etc.

II. As Foreign Company way Foreign Company Registration in India

(1) Setting up a Liaison Office or Representative Office

1. For setting up a Liaison office or representative office in India the criteria have been prescribed by RBI.
   • They must have a profit-making record in the immediately preceding 3 financial years in the home country and their net value should not be less than USD 50,000
   • A subsidiary of another company which does not satisfy the above condition can submit a letter of comfort from their parent company if the parent company satisfies the above condition.
2. All the expenses are to be met entirely through inward remittances of foreign exchange from the Head Office outside India.
3. It requires specific approval of RBI under FEMA 1999 as well as approval from the Insurance Regulatory and Development Authority (IRDA).
4. The application for establishing the office will be forwarded by the foreign entity to RBI through a designated Authorised Dealer Category–I Bank
5. required documents should also be filed with application including an English version of the Certificate of Incorporation/Registration or MOA & AOA attested by the Indian Embassy/Notary Public in the Country of Registration, along with the latest Audited Balance Sheet of the applicant entity
6. The office will be given a Unique Identification Number by RBI. It has to obtain PAN from Income Tax Authorities when setting up the office in India.

It can undertake the following activities

• Representing the parent company in India
• Promoting import/export in India
• Promoting technical/financial collaborations on parent company behalf
• Coordinating communications between parent/group companies and Indian entity.
• It cannot undertake any business activity and cannot earn any income in India.

(2) Project Office

RBI prescribes the setting up of Project office in India by a foreign company.

• a foreign company can establishment office without the prior permission from RBI only when they have secured a contract with an Indian company to execute a project in India and
  1. it is funded directly by inward remittance from abroad or
  2. it is funded by a bilateral or multilateral International Financing Agency or

• it has been cleared by an appropriate authority or

1. A company or entity in India providing the contract has been granted Term Loan by a Public Financial Institution or a bank in India for the project
2. If the above conditions are not met the foreign entity has to approach the RBI for the approval.

(3) A Branch Office of the Foreign Company

A Foreign company can conduct business activity in India by opening a branch office with the prior approval of RBI.

1. The company should be engaged in manufacturing or trading activities.
2. It should have a profit in the immediately preceding five financial years and should have a net worth of not less than USD 100,000 in its home country.
3. The subsidiary company of others if does not fulfil the above condition then they can submit a Letter of Comfort from their parent company if the parent company fulfils the above condition.

It can undertake the following activities:

• Import & Export of goods.
• Providing professional or consultancy services.
• To carry out the research work in all those areas in which the parent company is engaged.
• Promoting technical/financial collaborations on behalf of the parent
• The representing parent company in India and acting as buying/selling agent in India.
• Providing IT services and developing software in India.
• Providing technical support for products supplied by the parent
• Foreign Airline/ Shipping Company.