REGULATORY AFFAIRS : Entry Strategies -

OPTIONS FOR SETTING ENTITY IN INDIA

A foreign company planning to set up business operations in India has the following options:

As an Indian Company :

A foreign company can commence operations in India by incorporating a company under the Companies Act, 1956 through

• Joint Ventures; or
• Wholly Owned Subsidiaries

Joint Venture with an Indian Partner

Foreign Companies can set up their operations in India by forging strategic alliances with Indian partners. Joint Venture may entail the following advantages for a foreign investor:

• Established distribution/ marketing set up of the Indian partner
• Available financial resource of the Indian partners.
• Established contacts of the Indian partners which help smoothen the process of setting up of operations.

Wholly Owned Subsidiary Company

Foreign equity in wholly owned subsidiary Company can be up to 100% depending on the requirements of the investor, subject to equity caps in respect of the area of activities under the Foreign Direct Investment (FDI) policy.

• Private Limited Company
• Public Limited Company

AS A FOREIGN COMPANY

Foreign Companies can set up their operations in India through

• Liaison Office/Representative Office
• Project Office
• Branch Office

Such offices can undertake any permitted activities. Companies have to register themselves with Registrar of Companies (ROC) within 30 days of setting up a place of business in India.

Liaison office/ Representative office

Liaison office acts as a channel of communication between the principal place of business or head office and entities in India. Liaison office cannot undertake any commercial activity directly or indirectly and cannot, therefore, earn any income in India. Its role is limited to collecting information about possible market opportunities and providing information about the company and its products to prospective Indian customers. It can promote export/import from/to India and also facilitate technical/financial collaboration between parent company and companies in India. The approval for establishing a liaison office in India is granted by the Reserve Bank of India (RBI).

Project Office

Foreign Companies planning to execute specific projects in India can set up temporary project/site offices in India. RBI has now granted general permission to foreign entities to establish Project Offices subject to specified conditions. Such offices cannot undertake or carry on any activity other than the activity relating and incidental to execution of the project. Project Offices may remit outside India the surplus of the project on its completion, general permission for which has been granted by the RBI.

Branch Office

Foreign companies engaged in manufacturing and trading activities abroad are allowed to set up 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. 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).