Registration of Foreign Companies in India Step by Step Guide

Owing to its huge middle-class consumer base with good purchasing power, fastest-growing economy, democratic governmental setup, government's initiative of ease of doing business in India, and schemes like Make in India are attracting more and more foreign companies and people in business for setting up their businesses in India.

Any company can do business and invest in India through various routes and conduct business operations. However, first, they need to decide whether they will be engaged in commercial activity or a non-commercial activity in India since that will be deciding factor to make a further decision about the type of entity to be set up in India.

In this write-up, we will discuss various options available for foreign company registration in India and its procedure.

What is a foreign company in India?

As per the Companies Act, 2013, a foreign company is a company or body that has been incorporated outside India and whose place of business in this country is through an agent or by itself. Accordingly, foreign companies are not Indian companies.

What are the various options available for foreign company registration in India?

Various options available for foreign company registration in India are as follows:

1.    In case the foreign company wants to do only water testing in India. The best option is to register a liaison office in India. It is a representative office that cannot do any commercial activities and only acts as a communication channel between the foreign parent company and other Indian customers. RBI approves the liaison office. For the same, an application needs to be filed to RBI through AD Banker, and once approval is granted, ROC needs to be intimated about the registered office of the LO. RBI permits only limited activities in which LO can be engaged. Approval for liaison office registration is given only for three years, after which an application needs to be made for an extension. Wholly Owned subsidiary Company in India

2.    Another option available to a foreign company is establishing a branch office of the parent company in India. However, a branch office is always considered a permanent establishment of a parent company in India. Accordingly, all transactions between the Indian branch and the parent company shall be at arm's length. The branch office can also be engaged in only those activities which are permissible by RBI. They cannot apply to any manufacturing activities of their own. RBI approves Branch office registration. For the same, the application needs to be filed to RBI through AD Banker, and once approval is granted, ROC needs to be intimated about the registered office of the BO.

3.    Suppose a foreign company has obtained any project for execution in India and the duration for short terms, say six months to 2-3 years. In that case, the Foreign Company can establish a project office in India. RBI approves the project office. For the same, the application needs to be filed to RBI through AD Banker.

4.    When a foreign company intends to have full-scale business operations in India and with a long-term vision of business operations, it can opt for subsidiary company registration in India or LLP registration. A subsidiary company would be considered an Indian company and would have a separate legal entity compared to a foreign parent company. Here, a foreign parent company would hold almost all or majority shareholding in the Indian company. One of the advantages of a subsidiary company is that an Indian company can retain the parent company's brand name.

5.    ROC/MCA grants approval for both subsidiary companies as well as Limited Liability Partnership. The subsidiary company can be set up as a private limited company or a public limited company.

Following steps are involved in private limited company registration in India:

1.    Obtaining a Digital Signature Certificate (DSC).

2.    Apply for name availability through the Reserve Unique Name (RUN) form.

3.    E-Form SPICe INC 32

4.    Drafting and printing the Memorandum of Association (MOA) and Articles of Association (AOA). In the Indian subsidiary registration process, physical copies of both are required.

5.    Application for Permanent Account Number (PAN) and Tax Account Number (TAN).

6.    Provident Fund (PF) and Employee State Insurance (ESI) Registration.

7.    Once the procedure is completed, the Registrar of Companies (ROC) issues an Incorporation Certificate as proof of the company being registered.

What additional things need to be done once the foreign company is registered in India?

1.    If business activities fall under the government approval route, prior approval of FIFP needs to be taken before doing any business activities in India.

2.    Suppose the foreign company has been registered as a subsidiary company in India immediately upon incorporation. In that case, it needs to open a current account in Bank, and shareholders need to contribute share subscription money in a said bank account.

3.    After receipt of share subscription money, RBI compliance needs to be done to intimate them about the receipt of FDI by filing necessary forms.

4.    Share allotment needs to be done, and share certificates need to be issued.

5.    GST registration need to be applied for selling goods or providing services in India

6.    Import Export Code (IEC) needs to be applied in the import of goods or export of goods from India.

7.    Any other sector-specific registration needs to be taken, as applicable.