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FORMATS OF BUSINESS IN INDIA

Foreign investors can set up business in India in the following formats:

Wholly Owned Subsidiary Company

A foreign company may incorporate its wholly owned subsidiary ('WOS') in India, in the segments where 100 per cent FDI is permitted. A WOS incorporated as a private company, is treated as a private company for the purpose of the Act, even though the foreign holding company is a public company under the law of its country. It is regulated under the Companies Act, 1956.

Branch Office

Status of Branch Office in India is that of Person Resident in India. Foreign companies engaged in manufacturing and trading activities abroad may open branch offices for the purpose of:

  • Undertaking export and import of goods;


  • Rendering professional or consultancy services;


  • Carrying out research work in which the parent company is engaged;


  • Promoting technical and financial collaborations between Indian companies and parent company or overseas group companies;


  • Representing the parent company in India and acting as buying and selling agents;


  • Rendering services in information technology and development of software in India;


  • Rendering technical support to the products supplied by parent/group companies; and


  • Foreign airline /shipping company.

There is a general permission given to carry out any or all of the above activities once the permission from Reserve Bank of India (RBI) is received to set up a Branch office in India. However if the Branch has to carry out any activity other than the activities specified above, it has to take specific permission from RBI for each such activity.

Project offices

The project office is the ideal method for companies to establish a business presence in India, if the objective is to have a presence for a limited period of time. It is essentially a branch office set up with the limited purpose of executing a specific project.

'Project Office' means a place of business to represent the interests of the foreign company executing a project in India but excludes a Liaison Office. 'Site Office' means a sub-office of the Project Office established at the site of a project but does not include a Liaison Office. Foreign companies engaged in turnkey construction or installation normally set up a project office for their operations in India. The Government of India has now granted general permission to foreign entities to establish project offices subject to specified conditions

Liaison Office

A Liaison Office is only allowed to do what its name suggests act as an intermediary between the foreign enterprise and the Indian customers. It cannot do any other commercial activity with the objective to earn a profit. It can neither borrow nor lend money. It is required maintaining itself out of inward remittance received from parent company through normal banking channels.

Following are the permitted activities for a Liaison Office:

  • Representing in India the parent company / group companies
  • Promoting export/ import from /to India
  • Promoting technical/financial collaboration between parent / group companies and companies in India.


  • Acting as a communication channel between the parent company and Indian companies

Any foreign company intending to open a Liaison Office in India is required to obtain prior approval from the RBI. Approval is usually granted for one to three years and can be renewed on expiry thereof.

Joint Venture

These companies may be established in the following ways:

  • Incorporating a company in collaboration with an Indian partner (such companies are predominantly private companies).


  • Incorporating a company in collaboration with the general Indian public by way of a publicly listed company.

When the foreign contribution is in the form capital participation, the usual form of the venture is joint venture. The Indian experience shows that the most preferred mode for forming a joint venture is to set up a private company because under the Indian company law a private company, unlike a public company, is exempted from lot of legal compliance and statutory filings. Due care should be taken while forming JVC with respect to the controlling interests and rights of the foreign and Indian participants.


We invite you to browse our website for branch office & liaison office in India, wholly owned subsidiary in India, joint venture in India & liaisoning with government of India. For any further queries on contact us at companyadvice@gmail.com .



 
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