Registration of Foreign Company in India

Feature Image Registration of Foreign Company in India
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Registration of a foreign company in India refers to the process by which a foreign company establishes a subsidiary or branch office in India.  The technical term is incorporation of a foreign company in India.

This is done by registering the company with the Registrar of Companies (ROC) under the Companies Act of 2013. 

The process typically involves obtaining various approvals and licences from the Indian government, as well as compliance with regulations related to foreign investment.

History of Incorporation of Foreign Companies in India

The history of incorporation of foreign companies in India began during the colonial era when British companies established operations in India. 

The Indian Companies Act of 1866 provided for registration and regulation of companies, but regulations for foreign companies were minimal.

In the 1980s, the government began to liberalise its economic policies to encourage foreign investment, and the Foreign Exchange Management Act (FEMA) of 1999 replaced FERA and liberalised rules for foreign investment. 

The Companies (Amendment) Act of 2000 simplified the process for incorporating foreign companies in India and the Companies Act of 2013 updated regulations and introduced new compliance requirements. 

The Indian government continues to make efforts to attract foreign investment by simplifying the incorporation process and reducing compliance burden.

Why Do Foreign Companies Come To India?

Motive of Foreign Companies to come to India

The main motive behind incorporating foreign companies in India is to take advantage of the-

  • Country’s large market potential
  • Skilled labour pool 
  • Strategic location 
  • Well-developed infrastructure. 

Foreign companies can benefit from India’s low labour costs, government incentives, and free trade agreements, which can help to improve margins and boost sales. 

Incorporation in India also allows access to growing markets, new customers and suppliers, and a skilled workforce in sectors such as

  • IT 
  • Engineering 
  • Finance 
  • Healthcare

Difference Between Indian Company and Foreign Company

An Indian company refers to a business entity that is 

  • Incorporated & registered in India, under the Companies Act, 1956 or 2013.
  • Governed by Indian laws and regulations
  • Subject to taxes & compliance requirements in India.

A foreign company refers to a business entity that is 

  • Incorporated outside of India 
  • Operates in India through a branch or subsidiary
  • Subject to the laws and regulations of its country of incorporation, as well as those of India where it operates.

It may also be referred to as a multinational company or a multinational corporation (MNC). 

Foreign companies may face additional regulations and restrictions in India compared to Indian companies.

Types Of Foreign Company Incorporation In India

Employees working in Office

There are several different types of entities that foreign companies can incorporate in India, depending on the nature of their business activities and the level of control they wish to retain over the Indian operations. These include:

  • Liaison office: A liaison office is a representative office of a foreign company that is not allowed to undertake any commercial activities in India and can only engage in liaison activities.
  • Branch office: A branch office is a foreign company’s extension in India and can undertake activities that are specific to the parent company’s business. 

However, the branch office is required to obtain specific approvals from the Reserve Bank of India (RBI) before it can start its operations.

  • Project office: A project office is set up to execute a specific project in India and can undertake activities that are specific to the project. 

It is required to obtain specific approvals from the Reserve Bank of India (RBI) before it can start its operations.

  • Wholly Owned Subsidiary: A Wholly Owned Subsidiary is a separate legal entity incorporated in India and is 100% owned by the foreign parent company. 

Wholly Owned Subsidiary companies can undertake any lawful business activity and have the same rights and liabilities as any other Indian company.

  • Joint venture: A joint venture is a partnership between a foreign company and an Indian company, where both companies jointly invest and control the business.

How to Register a Foreign Company In India?

The incorporation process and documentation for a foreign company in India can vary depending on the type of entity being incorporated and the nature of its business activities.

Generally, the process involves the following steps:

  • Choose a name: The foreign company will have to select a unique name for its Indian entity and file an application for name approval with the Registrar of Companies (ROC).
  • File incorporation documents: The foreign company will have to file the necessary incorporation documents with the ROC.
  • Register for taxes: The foreign company will have to register for taxes, such as Goods & Services Tax on the GST Portal.

List of Documents for Foreign Company Registration In India

  • Certificate of Incorporation
  • Memorandum of Association (MOA) and Articles of Association (AOA)
  • Proof of identity and address of the authorised representatives
  • Proof of registered address of the Indian entity
  • PAN and TAN application forms
  • GST registration forms 
  • Import-export code ( In case of Import or Export requirements)
  • Product Related licences and permits

Legal & Regulatory Requirement Of Foreign Companies Set Up in India

Once a foreign company has been incorporated in India, it will be subject to various compliance and ongoing requirements to maintain its legal status and operations in the country. These may include:

  • Filing monthly & annual returns for TDS, GST, Income Tax, Etc.
  • Annual Compliance with Companies Act
  • Maintaining financial records and books of accounts
  • Holding board meetings & Appointing auditors

How Many Foreign Companies In India?

It is difficult to determine the exact number of foreign companies operating in India, as the number is constantly changing and may include subsidiaries, branches, joint ventures, and other forms of business presence. 

However, as of 2021, there were thousands of foreign companies operating in various sectors in India, including information technology, automotive, pharmaceuticals, consumer goods, and more.

Conclusion

Overall, Incorporating a foreign company in India can provide a range of benefits, including access to a large market, a skilled workforce, and a strategic location. 

It is important to follow the proper procedures and comply with the relevant laws and regulations.

At JPARKS INDIA, we provide end to end solutions to not only help you register a foreign company in India, but also procure all relevant licences and certifications based on your requirements.

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