Open a foreign company in Kerala

Options for foreign companies in India

 

A physical existence is basic to enter the developing sector in India. Foreign companies prior to entering the market in India should consider a few key points such as assessment of total market, their target market, and potential buyers, knowing about the existing competition, entry options, product mix and pricing, regulatory environment, and choosing of impactful model of business.

 

India is a progressive country and has an enormous market and large potential. Foreign companies are investing in India to get the benefit of special investment privileges mainly the tax exemptions and low wages. Foreign investments in India also mean acquiring the know-how of technical advances and generating employment.

What are the options that the foreign companies have to seek entry into the Indian market?

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

  • Liaison Office
  • Branch Office
  • Project Office
  • Limited Liability Company
  • Limited Liability Partnership
  • Joint Ventures

 

Company registration Kochi, Kerala

Advantages that foreign companies will enjoy in India

  • Growth Potential: This is the largest democracy in the world and also a fast growing economy.
  • Skilled workforce: The human capital base in India is highly-skilled.
  • Work Ethics: Willingness to learn and professional working manner
  • Government Stability: Political stability is crucial to foreign investments
  • Legal system: There is healthy legal and judicial system with supportive enforcement of laws.
  • Tax support: The tax regime is competitive and there is comprehensive tax treaties network.
  • Extensive Network of trade: The network of trade is backed by bilateral and regional free trade agreements leveraging the investor’s role.
  • Developed financial system: There is well-regulated system of finance to access capital markets as alternative financing source.

A foreign company may start its processes in India under the companies Act, 1956 by incorporating a company. This can be done by establishing a liaison or branch office or by registration of a company.

Initiating a private limited company in India is the fastest way to start. You can get FDI up to 100% into a private/public limited under the FDI policy.

Other entry strategy suitable for a liaison or branch office and Project Office is to receive Central Government or RBI approval. It means more time is required than setting up a Private Ltd Company.

 

Operating in India for Foreign Companies

 Liaison Office

A Liaison Office is a nice way of establishing presence in India. It allows communicating with Indian entities and the parent company. A liaison office can promote the interests of the parent company and create a network, but is not undertaking any industrial/trading/commercial activity, indirectly or directly, while it maintains out of the inward remittances that is received via normal banking channel.

 

Requirements to Establish

Registration takes normally 45 days and renewal is after 3 years. The activities permitted are:

  • Representing the parent company/companies.
  • Promoting import export to/from India.
  • Acting as a channel for communication between India companies and the parent company.
  • Promoting financial/technical collaborations between Indian companies and parent companies.

 

Branch Office

Branch office is a foreign company extension. BO allows engaging as a representative in the parent company commercial business.

 

Requirements to Establish

A BO Registration is RBI approved and by MCA. The registration is done in 45 days and renewal is not required, but if approval is for 2-3 years, there is a need for renewal. The permitted activities are:

  • Perform export and import activities
  • Perform research
  • Provide IT services and consultancy support
  • Provide technical support to the parent company supplied products

 

The Branch offices are prohibited by RBI from directly manufacturing and processing. They should subcontract with an Indian manufacturer.

 

Project Office

The operation of a project office is same as a branch office. Project offices may be set to perform construction by International and Indian financial institutions.

 

Requirements to Establish

Project office registration requires no RBI approval and is automatically approved by Authorized Dealer Bank. The time taken is 15-20 days and can be closed with project completion. The permitted activities are:

  • A contract to perform a project in India
  • Permission from an Indian company to open in India a Project Office.
  • Should do activities relating to project execution only.

 

Limited Liability Company

This is an incorporated entity. There is a need for two shareholders minimum with 99.9% shares held by foreign companies.

 

Requirements to Establish

A private limited company registration is done in 15 days under MCA.  There is a need for two directors and two shareholders. There is no requirement of minimum paid-up capital. The permitted activities are:

  • Limited companies can hire employees
  • Own property
  • Can be sued and can sue
  • They can borrow funds.

 

The prohibited categories include lottery business, betting, casinos and gambling, TDRs Chit funds, cigar, cigarettes, cigarillos, cheroots, or tobacco substitutes manufacturing, real estate business or activities disallowing private sector investment such as Atomic Energy.

 

Limited Liability Partnership (LLP)

An LLP is between a limited company and partnership firms. Here the RBI permits FDI to 100%. The existing Indian government has FDI restrictions at ease and FDI is observed to be growing.

 

Requirements to Establish

The paperwork for an LLP is less and the record keeping is minimal. An LLP should register with MCA and there is a need to give credible proof of the existence of the company and this offers LLP a reputational advantage. The permitted activities are:

  • Own and buy property
  • Remit earning out of India
  • Produce revenue

 

Joint Ventures

This is a partnership of two or more individuals or companies agreeing to pool goods or capital into a consistent project. In India, Joint ventures are popular in sectors that have no 100 percent FDI. The permitted activities are:

  • Low risk
  • Allows foreign companies to use networks existing
  • Can remit Indian profits outside

 

Choosing to set up a company, firm, or an office in India should be a decision taken considering the following: Review of latest regulations and laws, diligence for service providers and would-be partners, exit strategy planning for ltd establishments, and functional issues such as labor laws, connectivity, and state-based regulations.

 

For further details contact us at associatesageorge@gmail.com

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