Foreign Company Registration

India is among the fastest-growing economies on the planet and holds immense development potential. It has a great pool of talent and innumerable opportunities not only for Indian businesses but also for foreign ventures.

Foreign entities have come to realize the bright prospects of investing in India. Thus, many international ventures are setting up their business here. Various policies, projects and schemes of the Indian government such as the Make In India project, Vocal for Local program, and the very recent Atmanirbhar Bharat scheme encourages and promotes foreign companies to set up their subsidiaries and branches in India.
The foreign companies set up in India are regulated by the provisions of The Companies Act, 2013, along with the guidelines issued by the Reserve Bank of India.

Meaning of a Foreign Company

The definition of a foreign company, as stated in Section 2 (42) of the Companies Act and denotes that it is a company or body which has been established outside India and attracts the following conditions:

1. It includes India as one of the places where it carries out its, be it physically or through online medium.
2. It conducts business operations in India in the relevant way.

A foreign company can go for setting up a business entity in the Indian market in the following ways –

INDIAN OWNED COMPANY-

a. Wholly owned subsidiary- When an Indian company becomes a wholly-owned subsidiary of a foreign company, the concerned foreign company is required to invest 100% of its Foreign Direct Investment in that new subsidiary. This is a necessary part of foreign company registration in India.

Important documents required for foreign company registration include-

1. Valid Address proof for the office premises
2. As Indian citizens, it is necessary to submit copies of PAN card, Address proof and Photo ID proof.
3. As a foreign citizen, one needs to submit copies of passport, address proof and photo ID proof. Moreover, the documents submitted should be duly verified and checked by the Indian consulate.

b. Joint venture-

It refers to a business formed with a collaboration between a foreign company and a local business partner, which the foreign company itself generally chooses. The basis of the joint venture agreement is enclosed and contained in a Memorandum of Understanding (MoU) and Letter of Intent. Such documents must contain specific provisions and detailed information about the following-

• Dispute resolution mechanism,
• Legal regulations applicable
• Shareholders Info
• Non-compete clause for Board of Directors and
• Confidentiality agreement.

2.FOREIGN-OWNED COMPANY-

a. By setting up a Liaison Office-

In the case where a Liaison Office is set up, one needs to follow the following conditions as communicated by the Reserve Bank of India-

1. The company must have retained its profitability in the immediately preceding three years in its home country, and its total valuation should exceed USD 50000.
2. If the subsidiary company of the foreign-owned company cannot fulfil the above-stated condition, a letter of comfort shall be submitted by the parent company, assuring the same.
3. RBI's specific approval under FEMA and Insurance Regulatory And Development Authority (IRDA) provisions is crucial.
4. The company must file the English version of the certificate of incorporation, MoA or AoA, and other required documents with the Indian authorities.

b. Project Office -

When a foreigner wishes to establish a company in India and have contracted with an Indian company to carry out a certain project in the country, then prior permission of RBI isn't necessary, as long as-

1. It gets funded by inward remittance abroad, or
2. The funds are obtained through bilateral, multilateral International financing agency, orThe appropriate authority has already cleared the contract.
3. However, if your company does not meet any of the above-listed conditions, the approval of RBI is compulsory.

c. As Branch office of a foreign company-

Prior approval of RBI is required for a foreign company to open its branch in India and conduct business. However, it must adhere to the following qualifications-

• It should be involved in manufacturing and trading business,
• The company must necessarily have earned profits in the five preceding financial years,
• It must have a net worth not less than USD 100,000 in its native country.

Important points to consider before commencing foreign company registration in India

Being clear about foreign companies and the nuances of their registration, let's move forward to the process of foreign company registration in India.

Depending upon the type of business and company, there are the following ways to mark entry in India:-

Firstly, as a wholly-owned Indian subsidiary.

There is an availability of 100% Foreign Direct Investment (FDI) for such companies.

Secondly, as a joint venture in partnership with an Indian business entity

In this scenario, however, 100% Foreign Direct Investment (FDI) is not allowed.
These cases are more relevant when you intend to operate commercially in India. But what to do in other situations? Well, in that case, you wish not to work in India commercially, you can opt for creating a liaison/project/branch/representative office.

Another important point is to choose a unique company name for registration. The registration of a company in India gets covered under the Registrar of Companies. Such a company has to follow the rules formulated by the Ministry of Corporate Affairs. One can lucidly register the company's name with the help of the Reserve Unique Name (RUN) service available on the MCA website.

There are basically two types of ccompanies, private and public. The registration process and compliances for these variants differ. Hence, it would be ideal if you make an analytical decision about the same before beginning the registration process.

Foreign Company Registration Process

1. The priority step is to apply for the Digital Signature Certificate (DSC). A DSC is an e-signature necessary for the authentication of online documents and forms. The documentation required for DSC covers passports of owners, bank proofs, government-issued photo IDs.
2. The next step involves Obtaining the Director Identification Number (DIN). Depending upon the type of company, every company needs to have a minimum number of directors. Every director must apply for SPICe ( Simplified Proforma for incorporating a company) and have the unique Director Identification Number. The documents required to fill up the SPICe form include the MoA and AoA of the company. These documents should be prepared by a qualified professional such as a CA or CS in India.
3. The subsequent step is the registration on the MCA portal. You can successfully register on the MCA website as a new company or new user only after obtaining the DIN of the company. After successful compliance with incorporation rules of the Companies Act, your company will receive a certificate of incorporation.
4. The final step is the submission of e-form FC-1. This form will enable you to establish the place of business of your foreign company in India.

Assuming that you have all the documents in place, it may take you around two weeks to conclude the foreign company registration in India. It's recommendatory to engage a team of certified accountants, professional company secretaries and lawyers to achieve the project objectives within set timelines.

Coherent Foreign Company Registration Support in India with Gotaxfile!

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We at Gotaxfile make sure to keep our clients updated with the latest requirements and deadlines. With the backing of our experienced and skilled team, we have given valuable guidance to many entities in their foreign company registration requisites. Consult our team now!