Registering a Foreign Company in India is a good step, because India is developing and growing a lot in the present time. That’s one of the reasons, given India’s potential and rapidly expanding market, that a number of international businesses have chosen to locate there. But simultaneously establishing foreign companies in India is not as easy as registering a domestic company in India. There is a proper procedure of registering a foreign company in India by following the same one that can register a foreign company in India. If you are thinking about establishing a foreign company in India then you must go through this blog till its last word. It will help you to understand the key things regarding the same.
What are Foreign Companies?
Section 2 clause 42 of the Companies Act of 2013 talks about the foreign companies and their functioning. This section of the company law gives a clear picture regarding foreign companies and what exactly they are. As per this section of the company law foreign companies are those body corporations which are incorporated outside the limit of Indian territory but they are somehow connected with India like they are having a business place in India. This can be in any form like through agent, individual or in electronic form. Such companies conduct business in India either directly or indirectly. The following list includes some of the main entity kinds that allow international businesses to register in India:
- Liaison Office, primarily serves as a communication channel between the parent company and Indian businesses.
- Branch Office, engages in similar activities as the parent company and operates as an extension of it.
- Project Office for executing specific projects in India.
- Wholly-Owned Subsidiary a separate legal entity from the parent company, having its own management and liabilities.
Ways of Registering a Foreign Company in India
Mainly there are two ways for the registration of a Foreign Company in India. These two ways of registering a foreign company in India are mentioned below:
For Temporary Establishment
Either a company wants to register itself in India permanently or for a temporary period. For a temporary establishment, creating a liaison, project, or branch office will work. By doing so a foreign company can start doing business in India. Such establishments are established for a particular purpose for a particular duration after which they will not work in India. They have less formalities in comparison to those established which want to set up in India permanently.
For Permanent Establishment
Second way of establishments are those which are thinking about starting their venture in India for a long duration of time which can be considered as the permanent establishment. It will be appropriate to incorporate a limited liability partnership under the Limited Liability Act, 2008, or a private limited company under the Companies Act for a permanent establishment. There is a proper procedure of Private Limited Company Registration, LLP or any other corporate body, which one needs to follow in order to establish permanent establishment in India.
Pre-Requisites of Foreign Company Registration
Additionally, an Indian location and a minimum of two individuals are needed for the registration of international firms in India. Such foreign businesses operating in India are required to have a minimum of two directors and two shareholders. With all these one Unique Entity Identification Number (UEIN) which is obtained from the Reserve Bank of India (RBI) will be required. Additionally Digital Signature Certificate (DSC) are also required for online filings and transactions. One more thing which is crucial for registering a foreign company in India is the Director Identification Number which is commonly known as the DIN, of all the directors of the foreign company.
Post-Incorporation Compliances of Foreign Company Registration
Obtain Permanent Account Number (PAN) and Tax Deduction and Collection Account Number (TAN) from the Income Tax Department. If the foreign company is engaged in specific sectors like banking, insurance, etc., it needs further approvals from the RBI. Register under GST if the company’s turnover exceeds the prescribed threshold of the GST registration. Submit annual reports, financial statements, and other regulatory filings to the MCA.
Process of Registering a Foreign Company in India
Step by step process of registering a Foreign Company in India are given below:
Step 1: Name Reservation
Choose a unique name for the Indian entity following the guidelines laid out by the Companies Act. Apply for name reservation through the Ministry of Corporate Affairs (MCA).
Step 2: Documentation
- Prepare and submit the necessary documents, including:
- Memorandum of Association that is MoA
- Articles of Association that is AoA
- Board resolution approving the establishment of the Indian entity.
- Details of directors and authorized representatives.
- Address proof and identity proof of directors and authorized representatives.
- Financial statements of the foreign company.
- Power of Attorney for authorized signatories in India.
Step 3: Application Submission
Submit the incorporation application and required documents to the MCA.
Step 4: Payment of Fees
Pay the requisite fees for registration and other associated costs.
Step 5: Approval and Certificate Issuance
Upon successful review and compliance, the MCA issues a Certificate of Incorporation, marking the establishment of the foreign company in India.
Conclusion
The process of registering a foreign company in India can be pursued either for a temporary establishment through liaison, project, or branch offices or for a permanent establishment by incorporating a private limited company or a limited liability partnership. Key considerations include understanding the legal requirements, obtaining necessary approvals, and complying with post-incorporation obligations. It’s crucial for foreign companies to conduct thorough market research, assess the regulatory environment, and choose the right business entity to ensure a successful entry and sustained growth in the Indian market.
