India is one of the world’s economies that is expanding the fastest, and it has a sizable market with more than 1.2 billion people. A significant amount of foreign direct investment (FDI) has been drawn to India by the opportunities there. As more foreign companies set up shop in India, the amount of FDI increases every year.
To form a company in India, foreign businesses must adhere to the laws and regulations outlined by the Companies Act of 2013, the Companies (Registration of Foreign Companies) Rules of 2014, the RBI recommendations, and the FEMA.
Foreign Company Under the Companies Act, 2013
Foreign Business A foreign company is defined by the Companies Act of 2013’s Sec. 2(42) as a body corporate or corporation that is incorporated outside of India, but-
has a presence in India, whether it be directly or through an agency, and uses either physical or electronic means carries out business in India in any other way
What are the Ways in Which Foreign companies can be Registered in India?
In India, a foreign national may form a foreign private limited company. In India, forming a private limited company is the quickest way to start a business. The automatic route of the FDI policy permits FDI of up to 100% into private limited companies. A private limited company can be incorporated by a foreign national as a joint venture or a wholly owned subsidiary.
Joint venture
In order to form a joint venture in India to run its business, a foreign entity will choose a local partner there. The foreign entity and the local partner sign a Letter of Intent or Memorandum of Understanding (MOU), which outlines the basis for the joint venture agreement. All of the commercial terms are contained in the joint venture agreement, which must be compliant with national and international law.
Wholly owned subsidiary
100% FDI can be invested in an Indian company by a foreign person or company via the automatic method in order to register as a foreign entity in India. The Indian company will become a wholly-owned subsidiary of the foreign entity/business when it makes a 100% FDI investment in it.
Relational office
For any liaison-related activities in India, a foreign corporation may open a liaison office. All liaison office costs will be covered by the parent firm (a foreign company) using foreign remittances.
Undertaking office
For the purpose of carrying out projects given to them by an Indian company, a foreign corporation may open a project office in India. However, the foreign corporation might need to get permission from the Reserve Bank of India in order to open such a project office.
Sectional office
In India, a foreign business may open a branch office. A significant international corporation that can demonstrate profitability is required to open a branch office.
Foreign Company Registration process in India
Process for registering a joint venture
A joint venture is an agreement or contract where two or more parties join forces to operate a business or accomplish a commercial goal.
- The foreign corporation or national must select a local partner with whom they want to form a joint venture to start a company through a joint venture in India.
- Then, an MOU or Letter of Intent should be signed by the foreign party and the local partner.
- The grounds for the joint venture agreement should be stated in the MOU or a Letter of Intent.
- The joint venture agreement’s conditions must be carefully negotiated between the international partner and the local partner.
- Regional and global legal requirements must be met by the joint venture agreement.
- It should include pertinent information.
- Important topics including dispute resolution agreements, holding shares, applicable law, share transfers, confidentiality, board of directors non-compete clauses, etc. should be included.
Even in the recently permitted 100% FDI E-commerce sector, there are a tonne of prospects for foreign businesses in India. In comparison to other growing economies, India has open and liberal FDI policies. Except for a few activities, practically all activities in India are open to FDI up to 100%.