India is among the fastest-growing economies in the world with an immense human potential and a large market comprising of over 1.2 billion people. Opportunities in India has however attracted a large amount of Foreign Direct Investment into the country and each year the amount of FDI inflow keeps on increasing due to more number of foreign businesses who start their operations in India. The article will tell us as to how can a foreign company start a new company in India and also other details which would help us to understand the topic in a better way.
There are mainly two types of entry strategy for the foreign businesses in India, the registration of a company or the establishing a branch/liaison office.
Incorporation of a private limited company is the easiest and the fastest type of India entry strategy for the foreign nationals and for the foreign companies. Foreign direct investment of up to 100% into a private limited company or a limited company is under the automatic route, in which no permission form the Central Government is required. Hence, the incorporation of a private limited company as a wholly owned subsidiary of a foreign company or a joint venture is the cheapest, the easiest and the fastest entry strategy for the foreign companies and the foreign nationals into India.
The Registration of the Branch Office, taken the Liaison Office or the Project Office requires RBI and/or the Government approval. Therefore, the cost and the is taken for the registration of the branch office, the liaison office or the project office for a foreign company is higher than the cost and the time associated with incorporation of a private limited company. Further, the foreign nationals cannot open a branch office, a liaison office or a project office. Hence, this option is limited only to being an India entry strategy only for the foreign companies.
- The Requirements for Establishing a Company in India
In order To start a company in India, a minimum of two persons and an address in India are required. A private limited company in India is obligatory to have a minimum of two directors (persons) and a minimum of two shareholders (can be persons or corporate entities). Further, the incorporation rules in India states that one of the Director of the Company must be both an Indian Citizen and an Indian Resident .
The preferred legal entity structure for the foreign companies is to establish a company with three Directors, two of them being foreign nationals from the parent company and one director being a local Indian citizen. Since, there are no requirements for the minimum shareholding with the Indian Director, 100% of the shares of the Indian Company can be held by the foreign nationals or entities.
An address in India is however required to serve as the registered office of the Company. The city in which the registered office address of the company will be setup also helps to determine the legal jurisdiction which is applicable for the company. Most of the foreign companies setup their registered offices in the major metros of India like Delhi, Mumbai, Bangalore, Hyderabad, Chennai, etc.,
- The Documents Required for Company Registration in India
In order To register the company, the nationals who will basically serve as the Directors of the company shall submit a copy of their passport along with any address proof (such as Driver’s license, Bank statement etc.,) and the copies of the original documents shall also be attested by a Notary of the home or by the Indian Embassy in the country of the foreign Director.
In case of a corporate entity becomes a shareholder in the Indian Company, then the Board Resolution from the foreign company who authorize the investment in the Indian Company would also be required. The Board Resolution must however be attached with the notarized copy of the certificate of incorporation of the foreign entity.
The presence of any of the foreign Directors is however not required in India at any time during the process of incorporation . Thus, the foreign citizens can comfortably establish and operate a business in India without the hassles of travelling to India.
- The Cost for Registering a Company in India
The cost for registering a business in India is relatively inexpensive and the Registration of a company in India can also be completed within a few weeks, thus making India an easy place in order to start a business.
- The Post Incorporation Formalities
For the process of Post registration of the company in India, the Indian Director can help in order to open a bank account for the company in India. Once the bank account is opened, the Company is required to make FDI reporting to the Reserve Bank of India. The procedure for the reporting of FDI inflow into the company is simple and it can be completed easily by a legal or an accounting professional in India. Completing the FDI reporting would help to that the business is in compliance with all the regulations in India and they are ready to operate.