Incorporation of Foreign Company

Advantages of Incorporating a Foreign Company in India

  • Limited Liability Protection
  • Foreign Direct Investment (FDI) Opportunities
  • Lower Registration Costs
  • Separate Legal Entity Status
  • Fewer Procedural Compliances

Minimum Requirements

  • Minimum Two Persons
  • DIN (Director Identification Number) for the applicant
  • No minimum capital requirement
  • Digital Signature Certificate (DSC) for at least one person
  • At least one partner must be an Indian resident

Introduction

Under the Companies Act, 2013, a Foreign Company is defined as an entity incorporated outside India but has a place of business or conducts business activity in India. A Foreign Company can be incorporated in India by following the regulatory requirements of the Companies Act, 2013.

Ways to Set Up a Foreign Company in India:

  1. As an Indian Company (Registered under the Companies Act, 2013)
    • Wholly Owned Subsidiary
    • Joint Venture
  2. As a Foreign Company
    • Liaison Office / Representative Office
    • Project Office
    • Branch Office

Setting Up a Liaison Office (Representative Office)

A Liaison Office (also known as a Representative Office) is primarily set up to explore business opportunities and understand the investment climate in India. It acts as a communication bridge between the parent company and Indian entities but cannot conduct commercial activities.

Conditions for Setting Up a Liaison Office:

  • The foreign company must have a profit-making record in the last 3 financial years.
  • The net worth should be at least USD 50,000.
  • If the subsidiary does not meet the above conditions, the parent company must authorize it.
  • Specific approval from the Reserve Bank of India (RBI) and Insurance Regulatory and Development Authority (IRDA) is required.
  • A designated Authorized Dealer Category-I Bank must forward the application to the RBI.
  • The RBI assigns a unique identification number to the Liaison Office.

Setting Up a Project Office

A foreign company can establish a Project Office in India if it has entered into a contract with an Indian company. RBI approval is not required if:

  • The project is funded by inward remittance from abroad.
  • The project is financed by a bilateral/multilateral international financial institution.
  • The project has been approved by an appropriate authority in India.
  • An Indian company has provided a term loan for the project from a public financial institution or bank.

If the above conditions are not met, RBI approval is required.

Setting Up a Branch Office

A Branch Office allows a foreign company to conduct business activities in India with RBI approval, provided:

  • The foreign company is engaged in manufacturing or trading activities.
  • It has made profits in the last five financial years.
  • The net worth is at least USD 100,000 in its home country.

Permitted Activities of a Branch Office:

  • Import and export of goods
  • Providing professional or consultancy services
  • Conducting research work related to the parent company’s field
  • Promoting technical or financial collaborations between Indian and foreign companies
  • Acting as a buying/selling agent in India
  • Rendering IT and software development services
  • Providing technical support services
  • Operating foreign airlines or shipping companies
  • Functioning as a Foreign Bank

Restrictions on Branch Offices:

  • Cannot engage in manufacturing (only subcontracting to Indian manufacturers is permitted)
  • Profits can be repatriated after paying applicable Indian taxes
  • The Branch Office is an extension of the parent company and does not have separate ownership

Documents Required for Setting Up a Liaison/Branch Office

The following documents must be filed within 30 days of establishing a business presence in India:

  1. Business sector details to check whether RBI approval is required
  2. Certified true copy of the parent company's charter, memorandum, or articles (translated if not in English)
  3. Complete address of the registered or principal office of the company
  4. List of directors and secretaries of the company, including their details
  5. Name and address of the authorized person in India to accept notices on behalf of the company
  6. Full address of the principal place of business in India
  7. Details of previous business presence in India, if applicable
  8. Declaration stating that none of the company’s directors or authorized representatives have been convicted or debarred from forming/managing a company in India or abroad

Registration Process:

Within 30 days of establishing a place of business in India, a foreign company must file Form FC-1 with the Registrar of Companies (ROC) along with the prescribed fees and necessary documents.

The application must be supported by an attested copy of RBI approval under the Foreign Exchange Management Act (FEMA), 1999.

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