There is a lot of interest among foreign companies to start their operations in India and tap into one of the largest and fast-growing market, and have access to some of the best human resources in the world. A Foreign National (other than a citizen of Pakistan or Bangladesh) or an entity incorporated outside India (other than entity incorporated in Pakistan or Bangladesh) can invest and own a Company in India by acquiring shares of the company, subject to the FDI Policy of India. Also, a minimum of one Indian Director who is a Indian Director and Indian Resident is required for incorporation of an Indian Company along with an address in India. Advice House can help you register an Indian Subsidiary while also providing Nominee Directors and Registered Office service in India.
The following are some of the India entry strategies for foreign corporates:
Incorporation of a private limited company is the easiest and fastest type of India entry strategy for foreign nationals and foreign companies. Foreign direct investment of upto 100% into a private limited company or limited company is allowed under the automatic route, wherein no Central Government permission is required. Hence, incorporation of a private limited company as a wholly-owned subsidiary of a foreign company or joint venture is the cheapest, easiest and fastest entry strategy for foreign corporations into India.
Incorporation of a Limited Liability Partnership (LLP) is also an India entry strategy for foreign nationals or foreign citizens as 100% FDI in LLP is now allowed. An LLP, however, cannot have shareholders and must be represented by Partners – thereby making it an ideal choice for investment vehicles and professional firms.
Proprietorship firms or Partnership firms are the most basic types of business entities used by tiny businesses or unorganised players. Foreign investment into a proprietorship firm or partnership firm requires prior RBI approval. Hence, proprietorship firms or partnership firms are not suitable for a foreign corporation or foreign national investment into India.
Registration of Branch Office, Liaison Office or Project Office requires RBI and/or Government approval. Therefore, the cost and time taken for the registration of branch office, liaison office or project office for a foreign company are higher than the cost and time associated with incorporation of a private limited company. Further, foreign nationals cannot open a branch office, liaison office or project office and is permitted only for well established foreign corporates. Hence, this option is limited to being an India entry strategy only for large foreign companies.
Foreign Direct Investment (FDI) into an Indian Private Limited Company or Limited Company is allowed upto 100% in most sectors. Only a very few industries require prior Central Government approval for investment by a foreign company or foreign national. The following industries require Government Approval for investment by Foreign Company or Foreign National:
A private limited company must have a minimum of two Shareholders and two Directors. A shareholder can be a person or a corporate entity. However, the Director has to be a person. Foreign nationals are allowed to become Directors of an Indian Private Limited Company.
The Board of Directors of the Indian Private Limited Company must have one Director who is both an Indian Citizen and Indian Resident. However, there is no requirement for the Indian Director to be a shareholder in the company. Hence, most foreign companies or foreign nationals prefer to incorporate a company in India with three Directors – two Foreign National Directors and one Indian National Director.
The 100% shares of the Indian Company can be held by a combination of Foreign Companies and/or Foreign Nationals. Indian private limited companies require a minimum of two shareholders mandatorily. Hence, one corporate entity or person cannot hold all the shares of an Indian Private Limited Company.
A digital signature is required for filing the incorporation documents and continued compliance documents for a company. Hence, Digital Signatures must be obtained for one or more Director(s) of the company.
The following documents and information are required for obtaining Digital Signature for a foreign national:
The following documents should be certified by Individual’s Embassy
In parallel to the digital signature application process, name approval can be obtained for the proposed company. The name of the Indian Company must be unique and should end with the words “Private Limited”. Click here to know more about Naming an Indian Private Limited Company.
Once name approval is obtained, incorporation documents can be filed with the Ministry of Corporate Affairs to incorporate the company. The incorporation documents to be filed include affidavits & declarations from Directors, Memorandum of Association, Articles of Association and Registered Office Address proof.
The affidavit and declarations from the Directors contain certain declaration from the Directors. Affidavit and declaration would have to be executed independently for each of the Director and notarized.
By subscribing to the MOA & AOA, the shareholders (either foreign companies or foreign nationals or Indian companies or Indian national) show their intention for becoming a shareholder in the company to be incorporated.
In case a Foreign Company is a subscriber to the MOA & AOA of the proposed Indian Company, the following documents pertaining to the foreign entity subscribing to the shares of the Indian Company must be submitted:
On submitting the above documents along with the application for incorporation of a company, the Registrar would issue a Certificate of Incorporation for the Indian Private Limited Company, if the documents submitted are acceptable. After obtaining the incorporation certificate, the Indian Company can apply for a PAN Card and take the necessary steps for opening a bank account for the company in India.
