How to Register a Foreign Company in India?

A foreign company can register in India by choosing a structure. It includes a joint venture, wholly-owned subsidiaries, branch office, liaison office, etc. The process for registration may vary based on the type of structure selected. The key steps include obtaining a DIN and DSC for directors or an authorized representative of the foreign entity. Registering a foreign company in India helps the company gain legal recognition, access to a wide consumer base, and ease of operation. Keep reading further to know more about the steps to register a foreign company in India, based on the structure.

What is a Foreign Company?

A foreign company is a company incorporated outside India. However,

• It has a place of business in India, whether by itself or through an agent, physically or online.
• It conducts any business activity in India in any other manner.

A foreign company can choose to register in India from several registration options. Let's look at the types of foreign companies registration in India.

What are the Types of Foreign Company Registration in India?

Foreign companies seeking to set up their operations in India can choose to register from the following options:

Joint Ventures

The foreign entity will choose a local Indian partner to create a Joint Venture (JV). The foreign entity and the local partner sign the letter of intent or memorandum of understanding (MOU) to start a JV. This document outlines the key terms, such as purpose and shareholding. The final Joint Venture Agreement (JVA) states the detailed, binding legal terms. It includes management control, profit sharing, resolving issues, and complying with regional and international laws.

Wholly Owned Subsidiary

A foreign company is allowed to invest 100% FDI in an Indian company via the automatic route (Subject to sectoral caps and FDI policy) for registering in India. With this type, the Indian company becomes a wholly-owned subsidiary of the foreign entity/company.

To carry on operations in India, the foreign company can register a liaison office, project office, or branch in India. However, approval from the RBI or the government is required to open these offices.

Liaison Office

It serves as a communication channel between the foreign company and potential Indian customers and business partners. It mainly does market research, promotes the parent company's products, and facilitates communication. However, it cannot generate direct revenue or participate in commercial activities.

Project Office

A foreign company can establish a project office in India to carry out projects assigned to the foreign company by an Indian company. However, the foreign company may need to obtain approval from the RBI to establish a project office.

Branch Office

A foreign company can incorporate a branch office in India to conduct business, import/export goods, or offer services. To do the same, the foreign company must provide proof of profitability and be a large business.

What is the Process for Foreign Company Registration in India?

The process to register a foreign company in India varies based on the structure of the company. Here are the steps to register a foreign company in India based on its types:

Process to Register a Joint Venture (JV)

A joint venture is a contract/agreement where two or more parties come together to run a business or achieve a commercial goal. To establish a company in India through a joint venture:

• The foreign entity/national must choose a local partner with whom they wish to enter into a Joint Venture.
• After that, the foreign entity and local partner should sign a Memorandum of Understanding (MOU) or a letter of intent.
• The MOU or letter of intent must define the basis for the joint venture agreement.
• The foreign entity and local partner must discuss every term of the joint venture agreement (JVA) in detail. The JVA must be in accordance with both regional and international law.
• It must include all the important matters. It includes an agreement for dispute resolution, confidentiality, holding shares, applicable law, board of directors, etc.

Process to Register a Wholly-Owned Subsidiary

To register a wholly-owned subsidiary in India, a minimum of two directors is required. Out of the two directors, one must be an Indian resident.

• All directors are required to apply for a DIN (Director Identification Number) and a DSC (Digital Signature Certificate).
• Draft a Memorandum of Association (MOA) and Articles of Association (AOA). The shareholders must subscribe to the MOA.
• Reserve the company's name through Part A of the SPICe+ form (company registration application).
• On the Ministry of Affairs (MCA) portal, file the registration application (Part B of the SPICe+ form).
• Along with the SPICe+ form, submit the following documents:
• Proof of address of the company
• PAN card, address proof, and identity proof of the Indian directors
• Passport and address proof of the foreign directors. It includes a driving license, utility bills, or any government license certified by the Indian consulate or consultants.
• Once the documents are submitted, pay the applicable fees and submit the registration application.
• All the documents and SPICe+ form will be verified by the Registrar of Companies (ROC).
• Upon successful verification of the form, the ROC will issue the certification of incorporation and the PAN number.
• Additionally, the company must open a bank account. Once the company's share is subscribed, submit the share capital documents to ensure compliance with FDI regulations.

Process to Set Up a Liaison Office

A foreign company can open a liaison office in India by seeking prior approval from the RBI. The process to set up a liaison office is as follows:

• The foreign company must have a proven history of profitability during the prior three financial years in the home country. Also, its net value must not be less than 50,000 USD.
• The foreign company must submit the application to set up a liaison office to the foreign exchange department. This can be done through a designated authorized dealer category-I Bank (AD).
• File the English version of the certificate of incorporation/registration or MOA or AOA. Also, submit its latest audited balance sheet attested by the Indian embassy or notary public in the registration country.
• A unique identification number will be provided by the RBI to the liaison office. The foreign company must obtain a PAN from the Income Tax Authorities.
• Meet all the expenses through inward remittances of foreign exchange from the head office situated abroad.
• In case a foreign entity, which is also a subsidiary of another company, doesn't meet the above condition, submit a letter of comfort. Obtain the letter from its parent company, which fulfills the above condition.
• Upon getting approval from the IRDAI (Insurance Regulatory and Development Authority), a foreign insurance company can also set up a liaison office.
• After getting approval from the Department of Banking Regulation (DBR), a foreign bank can set up a liaison office.

Process to Register a Project Office

A foreign company can set up a project office in India when it fulfills the following conditions:

• No prior permission from the RBI is needed by a foreign company to set up a project office. It applies only if the company has obtained a contract from an Indian company for executing a project in India.
• Fund the project directly by inward remittance from abroad. A Bilateral or Multilateral international financing agency must fund the project.
• A relevant authority has cleared the project. An Indian entity or a company has obtained term loan financing from an Indian bank or public financial institution for the project.

In case the aforementioned conditions are not fulfilled, the foreign entity must seek approval from the RBI to set up a project office.

Process to Set Up A Branch Office

Seeking prior approval from the RBI is important for a foreign company to set up a branch office in India. Here is the process:

• The foreign company must be engaged in trading or manufacturing activities. It must have a proven history of profitability during the preceding five financial years.
• A net worth of not less than $1,00,000 in its home country is required.
• Submit the application to set up a branch office to the foreign exchange department. This can be done through a designated Authorised Dealer Category -I Bank (AD).
• The Certificate of Incorporation/Registration, or MOA, or AOA's English version must be filed. Also, provide its latest audited balance sheet attested by the Indian Embassy or Notary Public in the registration country.
• The RBI will issue the branch office a unique identification number, and the company must obtain a PAN.
• Use inward remittances of foreign exchange from the head office situated abroad to meet all the expenses.
• An approval from the Reserve Bank of India (RBI) under FEMA, 1999, is required. Additionally, approval from the insurance regulatory and development authority (IRDA) is also required.
• In case the aforementioned conditions are not met, submit a letter of comfort from its parent company. This applies if the parent company satisfies the above conditions.

To Conclude

Foreign company registration in India is a key step for global businesses aiming to step into one of the fastest-growing markets in the world. Although the process requires careful documentation and compliance with various regulations, expert guidance from Savetaxs can help. Our team of experts will ensure you follow the right steps, rules, and procedures. Foreign companies can benefit from all the opportunities in India while staying compliant. Contact us right away, and ensure legal compliance and a smooth journey in the Indian market.