Form a Subsidiary
In sectors where 100% Investment under the Automatic route is permitted by the Reserve Bank of India, foreign companies can set up their 100% wholly owned subsidiary companies in India. Such subsidiary companies can be in the form of Private Limited Company or Public Limited Company
Subsidiary in the form of a Private Limited Company
Forming a Private Limited Company in India is the most popular and common method used for setting up a wholly owned subsidiary. Though the incorporation of a Private Limited Company is slightly time consuming, it is the best form suited for foreign companies to set up their wholly owned subsidiaries. There are various steps and procedures involved in the incorporation of a Private Limited Company in India.
Subsidiary in the form of a Public Limited Company
A company that is not a Private Limited Company or a One Person Company is defined as a Public Limited Company. There are some additional steps involved in the incorporation of a Public Limited Company. The other ways in which a foreign company can set up its operations in India are by way of setting up their Liaison Office, Branch Office or Project Office in India
A Liaison office is in the nature of a Representative office set up primarily to explore and understand the business and investment climate in the country.
The major restrictions of a Liaison Office are as follows -
- A Liaison office cannot undertake any commercial / trading / industrial activity directly or indirectly.
- A Liaison office is required to maintain itself out of the inward remittances received from parent company through normal banking channels.
- A Liaison office can be opened only with the approval of the Reserve Bank of India.
Branch office of a Foreign entity can be set up in India only with the approval of the Reserve Bank of India. A Branch office can generate revenue from the Indian operation permitted by the Reserve Bank of India.
The Branch Offices can represent their parent companies and under the following activities -
- Export/Import of goods as well as Professional Consultancy Services.
- Undertake research work, in areas of operations / activities of the parent company.
- Act as Buying / Selling agent of the parent company in India.
- Render technical support to the products supplied by the parent company.
- Provide services in the field of development of software and information technology in India.
- Promote technical or financial collaborations between the parent company and other Indian companies.
The Reserve Bank has granted general permission to foreign companies to establish Project Offices in India, provided they have secured a contract from an Indian company to execute a project in India, and -
- The project is funded directly by inward remittance from abroad; or
- The project is funded by a 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.
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