A foreign company planning to set up business operations in India has the following
options to set up a business entity:-
- As an incorporated entity under the Companies Act 1956 through JVs or wholly owned
subsidiaries
- As an unincorporated entity through liaison office/representative office or project
office or branch office of a foreign company. Such offices can undertake activities
permitted under the Foreign Exchange Management (establishment in India of branch
office of other place of business) Regulations 2000.
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Incorporation of a Company
Incorporation of a company in India is governed by the Companies Act 1956. A company
could be a private limited company or a public limited company.
A private limited company is one that through its Articles restricts the rights
to transfer its shares, limits the number of its members to 50, prohibits any invitation
to the public to subscribe for any shares in the company and prohibits any invitation
or acceptance of deposits from other than its members.
A public company is a company, which is not a private company.
For registration and incorporation of a company, an application has been filed with
Registrar of companies. Application for registration of a company accompanied by
the selected names, memorandum of association and articles of association and other
necessary documents is to be filed with the Registrar of companies of the State
in which the company is proposed to incorporated. The documents required to be filed
along with applications are as follows: -
- Memorandum of Association
- Articles of Association
- The agreement, if any, which the company proposes to enter into with any individual
for appointments as its managing or whole time director or manager
- A copy of the letter of the Registrar of Companies intimating the availability of
the proper time
- Documents evidencing payment of prescribed registration and filling fee
- Documents evidencing the directorship and situation of Registered Office inform
32 and Form 18 respectively and declaration of compliance with the requirements
of Companies Act for giving consent to act as a director.
Upon compliance with all requirements, the Registrar will register the company and
issue a certificate of incorporation of company that would bring the company into
existence as a legal entity. Once the company has been duly registered and incorporated
as an Indian company, it is subject to Indian laws and regulations as applicable
to other domestic Indian companies.
For further details please visit the website of Ministry of
Company Affairs http://dca.nic.in
Steps to form a new company http://dca.nic.in/steps.htm
Offices of Registrar of Companies http://dca.nic.in/ROC_2003.htm
Important Forms for incorporating a new company http://dcasearch.nic.in/forms.htm
Setting up Liaison /Representative /Branch/Project Office
Liaison Office/Representative Office
A Liaison Office could be established with the approval of Reserve Bank of India.
The role of Liaison Office is limited to collection of information, promotion of
exports/imports and facilitate technical/financial collaborations.
Liaison office cannot undertake any commercial activity directly or indirectly.
Project Office
Foreign companies planning to execute specific projects in India can set up a temporary
project/site offices in India for carrying out activities only relating to that
project. RBI has now granted general permission to foreign entities to establish
project offices subject to specified conditions.
Branch Office
Foreign companies engaged in manufacturing and trading activities abroad are allowed
to set up branch offices in India for the purposes of export/import of goods, rendering
professional or consultancies services, R&D, promoting technical or financial collaborations,
representing the parent company, acting as buying/selling agents, rendering services
in IT and development of software, rendering technical support to the products supplied
by the parent/group companies, foreign airline/shipping companies. Branch offices
could be established with the approval of RBI and may remit outside India profit
of the branch, subject to RBI guidelines after payment of applicable Indian taxes.
Procedure for establishing Liaison Office/Project Office/Branch Office
Application for setting up these offices may be submitted to Chief General Manger,
Exchange Control Department (Foreign Investment Division), RBI, Central Office,
Mumbai in Form FNC-I.
Website of Foreign Exchange management Department, RBI http://www.rbi.org.in/scripts/Fema.aspx
Foreign Exchange Management (Establishment in India of branch or office or other
place of business) Regulations, 2000 http://www.rbi.org.in/Scripts/BS_FemaNotifications.aspx?Id=176
Foreign Exchange Management (Establishment in India of branch or office or other
place of business) (Amendment) Regulations, 2003 http://www.rbi.org.in/Scripts/BS_FemaNotifications.aspx?Id=1416
Foreign Exchange Management (Establishment in India of branch or office or other
place of business) (Second Amendment) Regulations, 2003 http://www.rbi.org.in/Scripts/BS_FemaNotifications.aspx?Id=1450
Foreign Exchange Management (Establishment in India of Branch or Office or Other
Place of Business) (Amendment) Regulations, 2005 http://www.rbi.org.in/Scripts/BS_FemaNotifications.aspx?Id=2469
Form FNC-I for opening a Branch/Project/Liaison Office
http://rbidocs.rbi.org.in/rdocs/Forms/PDFs/form-fnc1.pdf
Exchange Control manual of RBI
http://www.rbi.org.in/scripts/BS_ECMCategory.aspx
Foreign Exchange Management Act 1999
http://indiacode.nic.in/fullact1.asp?tfnm=199942