Various Options for Foreign Companies to Setup Business in India?

 

Indian economy is one of the fastest-growing economies in the world. It is considered one of the major driving forces of the global economic market. It is the 6th highest growing international economy. Even though India is still a developing nation, it has a vast impact on trading worldwide. Many developed countries have expanded their relations with India, and many more developed nations are keen on making ties with us. 

 

The major factors that have driven foreigners for setting up businesses in India are:-

1.      Large population and a massive base consumer market.

2.      The Indian economy has shown stable and steady growth in recent years. Its ranking on the Global Competitiveness Index by the World Economic Forum is exceptionally high. This high macroeconomic stability ranking has opened the foreign corridors for business setup in India.

3.      The Indian taxation system is very comprehensive due to its treaties or agreements with other countries, enhancing the ease of doing business in India.

4.      The financial system in India is well developed and well connected to the leading markets. It is properly regularized by the Reserve Bank of India, diminishing the chances of any fraudulent activity.

5.      The friendly Indian business laws and procedures make it easier for international investors for setting up businesses in India.

Some of the laws that have eased the laws for business setup are:-

a) Goods and Services Tax Regulations including the GST, CGST, SGST and IGST.

b) Companies Bill.

c) Land Acquisition Bill.

6. There are many possibilities for lower operational costs during business setup in India, from infrastructural costs to cheap labour, inexpensive internet, etc. The tax strategies in India are quite moderate in comparison to other countries. These factors can cut the cost of business operations. Foreign Company Registration in India

7. Startup India Initiative, introduced by the Government of India, is a major reform to encourage foreigners to invest in the country and enhance the business culture. This initiative is in alignment with the parameters of Ease of Doing Business of the World Bank. It will help India to improve its ranking on this index.

8. The Government of India undertakes various initiatives to boost Foreign Direct Investment (FDI) across various sectors. The attempts to ease the rules and regulations regarding FDIs could boost foreign companies setting up business in India.

9. India has a vast trading network that can help foreigners in company incorporation in India.

10. Digitalization in the country has made it more competitive and a powerhouse of modern technology.

How Foreign Investors can set up Business in India:-

Any foreign investors can set up business in India in one of the following manners:

The first option to set up business in India is in the form of an Indian Company:-

1.      Joint Venture: In this, two or more parties agree on pooling their resources to achieve a specific target or project.

2.      Wholly-owned Subsidiary: It is the most popular form of business set up in India in which the parent company completely owns the shares.

3.      Public Limited Company: Here, a minimum of 7 members and up to unlimited members are required. It has limited liability and can offer its share to the general public.

4.      Private Limited Company: Here, a minimum of 2 members and up to 200 members are required to set up a private company. It is a privately owned company.

Another option to set up business in India is in the form of a Foreign Company:-

1.      The branch office undertakes functions like import, export, consultancy, professional services, research and development, services related to information and technology, shipping, product supply support, and representation of the parent company. To open a branch office in India, the parent company requires a minimum of five years of profit records in its home country and a net worth of more than $100,000.

2.      Project office that commences activities as mentioned in the contract of the project. It cannot render any activity other than the ones related and incidental to the project execution. No eligibility requirements are compulsory for the parent company to open a project office in India. Company Registration in India

3.      Liaison office of the parent company. It is prohibited from commencing any commercial activity or earning any income in India. It acts as a communication channel between the head office of the parent company and other business entities all over India. To open a liaison office in India, the parent company requires a minimum of three years of profit records in its home country and a net worth of more than $50,000.

4.      Limited Liability Partnership (LLP) regulated by the LLP Act, 2008. It is a form of company registration in which the partners have limited liability.

Setting up Wholly Owned Subsidiary Company in India

Wholly-owned subsidiary in India is a form of company registration in which the parent company owns all the shares of the subsidiary company. It implicates that the parent company has full control over the subsidiary and can select the board of directors in such a company. As per the local laws in India, this type of company are recognized as an Indian company making it eligible for benefits like deduction and exemption from taxes.

 

 

 

Advantages of Subsidiary Company Registration in India:

1. Since the parent company already has its brand name, the Indian subsidiary can also use it; thus, it provides lots of benefits to both the subsidiary and the parent company.
2. Such companies have limited liabilities making it one of the best forms of company registration.
3. Provides the parent company with strategic control that it can execute over the wholly-owned subsidiary.
4. The parent and the subsidiary company can have a common financial system by sharing administrative and other expenses, which can be cost-effective in the long run.
5. The trade secrets, confidentiality, expertise, operational control, and technical knowledge of the parent company is fully protected and secure in the Incorporation of a wholly-owned subsidiary.

Subsidiary company registration in India is the most popular form of Foreign company registrationin India.

 

Requisites for registration of Wholly Owned Subsidiary in India:

1. A minimum of two shareholders or members are required for Incorporation.
2. At least two directors are required. Out of this, one must be an Indian citizen.
3. Directors can be shareholders.
4. No limit on minimum paid-up capital is required.
5. All the directors in the subsidiary company must have Director Identification Number (DIN).
6. All the directors must have Digital Signature Certificate (DSC).

Procedure for Subsidiary Company Registration in India:

1. Application for obtaining Digital Signature Certificate (DSC) by any two directors.
2. Reservation of the company's name by filling the form with the Registrar of Companies (ROC) to approve the company's proposed name.
3. Once the ROC approves the name, drafting of Memorandum of Association (MoA) and Articles of Association (AoA) is done, and All the directors apply director's Identification Number (DIN).
4. An application through Form INC-7 is to be filed for Incorporation of the wholly-owned subsidiary in India.

Once the applicant files all the applications, forms, and documents for Incorporation, they must pay stamp duty and ROC fees online, based on the company's authorized capital. If the ROC verifies all the documents, the Registration Certificate of the Wholly Owned Subsidiary Company is sent through email to the applicant.

 

Certain Post Incorporation formalities are also required to be done by Subsidiary Company in India, like opening a bank account, bringing share subscription money in the bank account, applying for GST registration, RBI and ROC compliance relating to sharing subscription money received in India, which is considered as FDI.

 

Documentation Required for Incorporation of Wholly-owned subsidiary:

 

1. Address proof of the office: Rent agreement, latest electricity bill or any other equivalent document.
2. Permanent Account Number (PAN) for the Indian nationals.
3. Address proof such as electricity bill, bank statements, rent agreement, telephone bill etc.
4. Photo identity proof such as driving license, AADHAAR card, passport etc.
5. For Foreign Nationals: 
6. Passport
7. Photo Identity Proof certified by the Indian consulate, such as any government license, document.
8. Address proof containing the full name, date of birth and photo certified by the Indian consulate, such as bank statement, ID, electricity bill etc.

To incorporate a wholly-owned subsidiary in India a foreign company must carry out the aforementioned procedure without a hitch. However, since the Indian subcontinent has become a hotspot for growing and expanding businesses and making an investment, the ease of in-laws and procedures have given the foreign companies and investors ample chances in setting up business in India.