ENTRY STRATEGY / INVESTMENT ROUTE
Foreign companies / entities can set up business in India in any of the following manner.
I. Set up a subsidiary, or
II. Joint venture(s) with an Indian partner. For company formation click here.
III. Establish Branch office, Liaison office and/or project office.
Overseas companies (known / referred as foreign companies) which do not opt to set up a subsidiary or form a joint venture with an Indian partner can open:
1. Branch office
Branch offices are a part of the foreign company and are not treated as a separate legal entity in India.
Foreign companies engaged in manufacturing and trading activities abroad are allowed to set up branch offices in India for the following purposes:
- undertaking export/import activities;
- rendering consultancy services;
- rendering technical support to the products supplied by the parent/ group companies;
- rendering services in Information Technology and development of software in India;
- representing foreign companies, like acting as buying/selling agents;
- conducting research, in which the parent company is engaged, provided that the results of the research work are made available to the Indian Companies;
- to promote possible providing technical and financial collaborations between Indian and foreign companies.
Foreign airlines or shipping companies are also permitted to open their branch offices in India.
A branch office is not allowed to carry out manufacturing activities on its own but is permitted to subcontract these to an Indian manufacturer.
Further,
- the branch office cannot expand its activities or undertake any new trading, commercial or industrial activity other than those which are expressly approved by the RBI,
- the entire expense of the branch office in India will be met either out of the funds received by it from abroad through normal banking channels or through income generated by it in India,
- the branch office cannot accept any deposits in India;
- the commission earned by the branch office from parties abroad for any agency business will be repatriated to India through normal banking channels.
Stand Alone Branch Offices are isolated and restricted to the Special Economic Zone (SEZ) alone and no business activity/transaction is allowed outside the SEZs in India, which include branches/subsidiaries of its parent office in India.
Branch Offices established with the approval of RBI, may remit outside India profit of the branch, net of applicable Indian taxes and subject to RBI guidelines. Permission for setting up branch offices is granted by the Reserve Bank of India (RBI).
Foreign companies need to register itself within 30 days of establishing branch office in India with the Ministry of Corporate Affairs, under the Indian Companies Act 1956. It is different from formation of company in India. Similarly, foreign Limited Liability Partnerships need to register itself under the Indian Limited Liability Partnership Act 2008.
2. Representative/liaison office
which would not be directly engaged in commercial activities in India.
Foreign companies usually open Liaison office to assess possible market opportunities and providing information about the company and its products to the prospective Indian customers.
Representative/ liaison offices are not allowed to carry on any business or earn any income in India. Liaison office cannot undertake any trading or commercial activities. All expenses for liaison office in India are to be borne by remittances from outside India by foreign company.
Foreign companies need to register itself within 30 days of establishing Representative/ liaison offices in India with the Ministry of Corporate Affairs, under the Indian Companies Act 1956. It is different from formation of company in India. Similarly, foreign Limited Liability Partnerships need to register itself under the Indian Limited Liability Partnership Act 2008.
3. Project office
to undertake projects in India.
A project office is the ideal method to establish a business presence for a limited period of time. It is more common mode when specific assignment/project is awarded to the foreign company.
Foreign companies planning to execute specific projects in India can set up temporary project /site offices in India for the purpose without obtaining prior permission from RBI. The exchange control regulations prescribe certain additional requirements for setting up project office without its approval.
The foreign corporation which sets up such a project office is required to furnish a prescribed report to the concerned regional office of RBI under whose jurisdiction the project office is set up.
Project Offices, may remit outside India profit of the project, net of applicable Indian taxes and subject to RBI guidelines.
Foreign companies need to register itself within 30 days of establishing project office in India with the Ministry of Corporate Affairs, under the Indian Companies Act 1956. It is different from formation of company in India. Similarly, foreign Limited Liability Partnerships need to register itself under the Indian Limited Liability Partnership Act 2008.
Keep exit options: A ship should essentially carry lifeboats! Planning exit options in case the project does not proceed as desired is good decision before commencing business.
We assist you to determine the mode of entry to do business in India, based on what you intend to achieve.
We guide you on regulatory requirements.
To know obligations of foreign companies under the Indian Companies Act Click here.
To know our services to foreign entities, click here.
To know on applicable laws and doing business in India, click here.
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