Procedure for Foreign Companies to Setup in India

The Reserve Bank of India grants the permission to set up a project office in India. The applicant company should have received a contract from an Indian company to execute a project in the country, in order to be eligible for setting up a project office. The project should be funded directly by inward remittance from abroad by a bilateral or multilateral international financing agency or passed by an appropriate authority.

Foreign companies can set up wholly owned subsidiaries in areas laid out by Government of India’s FDI policy where 100 percent foreign direct investment is allowed. A set of applications have to be filed for registration and incorporation with Registrar of Companies. After a company has been duly incorporated and registered, it is subject to Indian laws and regulations as applicable to other domestic Indian companies.

The Foreign Exchange Management Act of 1999 regulates the foreign investment in India and is allowed under the automatic and approval route. As per RBI’s notifications, 100% foreign investment is allowed in sectors covered under the automatic route. The caps are defined and government approval is required for other industries and sectors which involves a separate set of procedures to be followed.

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Foreign entities that wish to set up of Liaison Office or Branch Office in India are required to submit their application in relevant form along with the documents to Reserve Bank of India, Foreign Exchange Department, Central Office, Mumbai, through an Authorised Dealer bank.

A liaison office cannot undertake any industrial, trading or commercial activity. Neither it is allowed to earn income not it can enter into any agreement on behalf of the company’s head office. The net worth of the foreign company should not be less than fifty thousand dollars or its equivalent. It should be able to show a profit making track record during the preceding three financial years in the parent country. The Reserve Bank of India takes into consideration the track record of the applicant company, current trade relations with India, the activity of the company proposing to set up office in India as well as its financial position.

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