Definition and Registration of a Foreign Company in India: A Complete Guide
Table of Contents
Introduction
In comparison to a domestic company, a foreign corporation operating in India is required to adhere to specific or altered regulations.
For example, when a foreign business establishes an office or invests in India, it must abide by the Foreign Exchange Management Act (FEMA). Similarly, the foreign business must abide by Indian tax regulations if it is engaged in the sale of goods or provision of services. This blog will discuss about what is as foreign company and foreign company registration in India.
Define Foreign Company
International Business A foreign company is defined by the Companies Act, 2013 (the “Act”), Section 2(42), as a body corporate or corporation that is formed outside of India, but
- possesses a company location in India, either physically or electronically, through an agency or on its own
- carries out business in India in any other way
What are the procedures for registering foreign businesses in India?
In India, a foreign national may form a foreign business as a private limited company. In India, the quickest option to incorporate is as a private limited company.
A private limited business may receive up to 100% of its FDI through the automatic route of the FDI policy. A private limited company may be incorporated by a foreign national as a wholly-owned subsidiary or joint venture.
Cooperative Enterprise
In order to run its business in India, a foreign corporation will choose a local partner with whom to form a joint venture.
The foreign entity and the local partner sign a Memorandum of Understanding (MOU) or Letter of Intent outlining the terms of their joint venture agreement.
All of the commercial terms are outlined in the joint venture agreement, which needs to abide by both local and international law.
Completely owned division
Through the automatic route, a foreign firm or national can invest 100% of its funds in an Indian company in order to register as foreign in India.
An Indian company that receives 100% foreign direct investment (FDI) from a foreign entity becomes the foreign entity’s wholly-owned subsidiary.
To conduct business in India, a foreign corporation may register a liaison office, project office, or branch office. However, the RBI or other government approval is needed to open these offices.
Liaison department
For all liaison purposes in India, a foreign business may open a liaison office. Through overseas remittance, the parent firm (foreign corporation) will cover all liaison office costs.
Project Management Office
In order to carry out contracts that an Indian firm has awarded to them, a foreign corporation may open a project office in India. However, the foreign corporation might need to get permission from the Reserve Bank of India in order to open such a project office.
Subordinate office
It is possible for a foreign business to open a branch office in India. The foreign company needs to be a big one and show financial stability in order to open a branch office.
Crucial Points
The concept of a foreign corporation has been expanded by the new Companies Act 2013, which also includes “body corporates” in its definition.
According to the new Companies Act of 2013, a business can be considered a foreign corporation even if it just has a virtual presence.
Under the New enterprises Act, there are now more stringent requirements and expanded controls for international enterprises. International businesses are required to abide by both the new law’s and chapter 22’s provisions.
Conclusion
As a foreign business, India offers enormous prospects, particularly in the E-commerce industry where 100% FDI was recently permitted by the government.
Among rising economies, India has open and accommodating FDI policies. With a few exceptions, practically all activities in India accept 100% foreign direct investment.
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