INCORPORATION OF BUSINESS ENTITY IN INDIA
A foreign company planning to set up business operations in India has the following options to set up a business entity:-
1. As an incorporated entity under the Companies Act 1956 through JVs or wholly owned subsidiaries
2. As an unincorporated entity through liaison office/representative office or project office or branch office of a foreign company. Such offices can undertake activities permitted under the Foreign Exchange Management (establishment in India of branch office of other place of business) Regulations 2000.
Setting up Liaison / Representative / Branch/ Project Office
Liaison Office /Representative Office
A foreign company may open a liaison office in India to promote its business interest, spread awareness of its products, explore further opportunities and act as a communication channel between itself and various Indian companies. A Liaison Office could be established with the approval of Reserve Bank of India. The role of Liaison Office is limited to collection of information, promotion of exports/imports and facilitate technical/financial collaborations. It is required to maintain itself out of inward remittances received from abroad through normal banking channels. Liaison office cannot undertake any commercial activity directly or indirectly. Permission for such offices is initially granted for a period of three years and may be extended from time to time. Applications for renewal of permission is required to be made to the concerned regional office of Reserve Bank under whose jurisdiction the office is situated.
Foreign companies planning to execute specific projects in India can set up a temporary project/site offices in India for carrying out activities only relating to that project. RBI has now granted general permission to foreign entities to establish project offices subject to specified conditions
Foreign companies engaged in manufacturing and trading activities abroad are allowed to set up branch offices in India for the purposes of export/import of goods, rendering professional or consultancies services, R&D, promoting technical or financial collaborations, representing the parent company, acting as buying/selling agents, rendering services in IT and development of software, rendering technical support to the products supplied by the parent/group companies, foreign airline/shipping companies. Branch offices could be established with the approval of RBI and may remit outside India profit of the branch, subject to RBI guidelines after payment of applicable Indian taxes.
Procedure for establishing Liaison Office/Project Office/BranchOffice
Application for setting up these offices may be submitted to Chief General Manger, Exchange Control Department (Foreign Investment Division), RBI, Central Office, Mumbai in Form FNC-I.