For Foreign owners (Indian Subsidiary)

Foreign companies may set up business in India in any one of the following manners while retaining its status as a foreign company:

A foreign company can open a liaison office in India to look after its Indian operations, to promote its business interests, to spread awareness of the company’s products and to explore further opportunities. Liaison offices are not allowed to carry on any business or earn any income in India and all expenses are to be borne by remittances from abroad.

The project office is the ideal method for companies to establish a business presence in India, if the object is to have a presence for a limited period of time. It is essentially a branch office set up with the limited purpose for executing a specific project. Foreign companies engaged in turnkey construction or installation normally set up a project office for their operations in India.

Foreign companies engaged in manufacturing and trading activities outside India may open branch offices for the purpose of:

1. Representing the parent company or other foreign companies in various matters in India, like acting as buying and selling agents.
2. Conducting research, in which the parent company is engaged, provided the results of this research are made available to Indian companies
3. Undertaking export and import trading activities.
4. Promoting technical and financial collaborations between Indian and foreign companies.

Foreign companies may invest in trading companies engaged primarily in exports. Such trading companies are treated at par with domestic trading companies in accordance with the trade policy.

The RBI accords automatic approval for foreign equity up to 51 per cent for setting up trading companies engaged primarily in exports. All other proposals, which do not meet the criteria for automatic approval, can be addressed to the Foreign Investment Promotion Board, i.e. “FIPB”.

Foreign companies may set up a wholly owned subsidiary, which is an Indian Company with an independent legal status, distinct from the parent foreign company.
Under the current foreign investment policy, a wholly owned subsidiary can be established either under the automatic route, if the conditions specified therein are complied with (specific high priority industries) or obtain an approval from the FIPB.

Foreign companies may set up a joint venture company i.e. in financial collaboration with an Indian business house/company in India, which is an Indian Company with an independent legal status, distinct from the parent foreign company.

Under the current foreign investment policy, a joint venture can be established either under the automatic route, if the conditions specified therein are complied with or obtain an approval from the FIPB.

Foreign companies intending to set up any kind of office mentioned above activities on behalf of the parent company or foreign trading companies in India for promotion of exports from India have to obtain a prior approval of the Reserve Bank by submitting an application in the prescribed form to the Central Office of Reserve Bank. On approval of such cases, permission is granted initially for a period of 3 years, subject to the condition that expenses of such office will be met exclusively out of inward remittances; such offices are not permitted to generate any income in India.

• A private limited company must have a minimum of two Shareholders and two Directors.
• A shareholder can be a person or a corporate entity.
• The Board of Directors of the Indian Private Limited Company must have one Director who is both an Indian Citizen and Indian Resident.
• There is no requirement for the Indian Director to be a shareholder in the Company.
• Most foreign companies prefer to register a company in India with three Directors – two Foreign National Directors and one Indian National Director.
• 100% shareholding can be held by either or a combination of Foreign Companies and Foreign Nationals.
• There is no minimum capital required to form a Private Limited Company in India.