Setup an Indian Subsidiary Company
Subsidiary in India
Foreign companies can set up wholly-owned subsidiary in sectors where 100% foreign direct investment is permitted under the FDI policy. The wholly-owned subsidiary may be either of the following business entities:
- Private Limited Company
- Public Limited Company
- Unlimited Company
- Sole Proprietorship
Foreign Companies can also set up their operations in India through the business entities:
- 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.
Private Limited Company as a Subsidiary
A private company is a company which has the following characteristics:
- shareholder's right to transfer shares is restricted
- the number of shareholders is limited to fifty and
- An invitation to the public to subscribe to any shares or debentures is prohibited.
A Private Limited Company is the most popular form of business entity used for Foreign Investors in India, including USA investors in India. Incorporation of Private limited company has been made easy with introduction of e-governance for company incorporation.
Want to set up a Private limited company Click here.
Public Limited Company as Subsidiary
A public company is defined as a company which is not a private company. The following conditions apply only to a public company:
- It must have at least seven shareholders.
- A public company is not authorized to start business upon the grant of the certificate of incorporation. In order to be eligible to commence business as a corporation, it must obtain another document called 'trading certificate'.
- It must publish a prospectus or file a statement in lieu of a prospectus before it can start transacting business.
- A public company is required to have at least three directors.
- It must hold statutory meetings and obtain government approval for the appointment of the management.
Liaison Office/ Representative Office
Foreign companies are allowed to establish Liaison Office in India after obtaining prior approval from the Reserve Bank of India (RBI). The RBI grants approval, for one to three years, and it is renewable upon expiry. It is primarily a communication bridge between the foreign company and its customers or potential customers in India. The Liaison Office can also be setup to establish business contacts or gather market intelligence to promote the products or services of the parent company. It cannot engage in revenue generating activities.
Want to set up a Liaison Office/Representative Office Click here.
A foreign corporation, which has secured a contract from an Indian company to execute a project in India, without obtaining prior permission from RBI, is allowed to establish a Project Office in India. RBI has now granted general permission to foreign entities to establish Project Offices subject to conditions specified below:
- The project is funded directly by inward remittance from abroad or
- The project is funded by bilateral or multilateral International Financing Agency or
- The project has been cleared by an appropriate authority or
- A company or entity in India awarding the contract has been granted Term Loan by a Public Financial Institution or a bank in India for the project
If the above conditions are not met, the foreign entity has to approach RBI to obtain approval. The activities of the offices should remain limited to the purview of the project and must close after the project is completed.
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The provisions regarding setting up Branch Office in India are governed by Foreign Exchange Management (Establishment in India of branch or office or other place of business) Regulations, 2000. Foreign companies are allowed to setup branch office in India after obtaining the requisite approval from the Reserve Bank of India (RBI). Permission to set up such offices is initially granted for a period of 3 years and this may be extended from time to time by the Authorized Dealer in whose jurisdiction the office is set up. The general permission of RBI permits a Branch Office to conduct the following activities
Want to set up a Branch Office Click here.