CA Pankaj Panchal

Foreign National have to decide in what form it wants to do business in India keeping in mind the Pros or Cons of each type of available option along with the its requirement.

Following way are as follows:-

1. Incorporation of Wholly Owned Subsidiaries: – foreign company can commence operations in India by incorporating a company under the Companies Act, 2013 by way of incorporation of 100% wholly owned subsidiary company subject to equity cap in respect of area of activity under Foreign Direct Investment. For registration and incorporation, an application has to be filed with Registrar of Companies (ROC), Cost of formation depends on some factors like Capital and registered office of the Company and time take to compete process from 1 week to a month.

2. Liaison Offices/Representative office: – Such offices can undertake any permitted Companies have to register themselves with Registrar of Companies (ROC) within 30 days of setting up a place of business in India. Liaison office acts as a channel of communication between the principal place of business or head office and entities in India. Liaison office can not undertake any commercial activity directly or indirectly and cannot, therefore, earn any income in India. Its role is limited to collecting information about possible market opportunities and providing information about the company and its products to prospective Indian customers. It can promote export/import from/to India and also facilitate technical/financial collaboration between parent company and companies in India. Approval for establishing a liaison office in India is granted by Reserve Bank of India (RBI) and generally time taken for permission may vary from one month to three months.

3. Branch Office: – Foreign companies engaged in manufacturing and trading activities abroad are allowed to set up Branch Offices in India for the following purposes:

(i) Export/Import of goods

(ii) Rendering professional or consultancy services

(iii) Carrying out research work, in which the parent company is engaged.

(iv) Promoting technical or financial collaborations between Indian companies and parent or overseas group company.

(v) Representing the parent company in India and acting as buying/selling agents in India.

(vi) Rendering services in Information Technology and development of software in India.

(vii) Rendering technical support to the products supplied by the parent/ group

(viii) Foreign airline/shipping company.

A branch office is not allowed to carry out manufacturing activities on its own but is permitted to subcontract these to an Indian manufacturer. Branch Offices established with the approval of RBI, may remit outside India profit of the branch, net of applicable Indian taxes and subject to RBI guidelines Permission for setting up branch offices is granted by the Reserve Bank of India (RBI)

(Author can be reached at cadakshpanchal@gmail.com)

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