As per the provisions of the Companies Act, 2013, a Foreign Company refers to a company that is incorporated outside India but has an established place of business within India. This may include a physical office, branch, or any other arrangement through which the company conducts commercial activities or maintains business presence in India.
A foreign entity can establish its operations in India by adhering to the rules and regulations prescribed under the Companies Act, 2013 and other applicable laws. With proper legal guidance and professional assistance, the registration process can be completed smoothly.
By incorporating an Indian Company under the Companies Act, 2013
Setting up a Wholly Owned Subsidiary
Entering into a Joint Venture with an Indian partner
Registering directly as a Foreign Company
Establishing a Liaison Office
Opening a Representative Office or Project Office
Setting up a Branch Office in India
These options allow foreign businesses to choose a structure that best suits their operational, financial, and regulatory requirements.
A Liaison Office, commonly referred to as a Representative Office, is established in India mainly to study the local market conditions, explore potential business opportunities, and understand the investment climate. It acts as a communication bridge between the foreign parent company and Indian customers or business partners, helping the parent entity expand its presence strategically.
It is important to note that a Liaison Office is not permitted to undertake any commercial, trading, or revenue-generating activities in India. All its operational expenses must be met exclusively through funds remitted by the foreign parent company.
The approval and regulatory framework for setting up a Liaison or Representative Office in India is governed by the Reserve Bank of India (RBI) under the provisions of Foreign Exchange Management Act (FEMA), 1999. In certain sectors such as insurance, additional approval may be required from the Insurance Regulatory and Development Authority of India (IRDAI).
The foreign entity should have earned profits during the last three financial years in its home country.
The company’s net worth must be at least USD 50,000.
If the applicant is a subsidiary that does not meet these criteria, the parent company must provide a Letter of Comfort or authorization fulfilling the required financial conditions.
An Authorized Dealer Category–I Bank must submit the application to the RBI on behalf of the foreign company.
Upon approval, the RBI issues a Unique Identification Number (UIN) for the Liaison Office.
Proper compliance with RBI guidelines and FEMA regulations is essential to ensure smooth establishment and functioning of the Liaison or Representative Office in India.
When a foreign company intends to execute a specific project in India and has already entered into a contract with an Indian company, it may establish a Project Office in India. In certain situations, prior approval from the Reserve Bank of India (RBI) is not required.
RBI approval is not necessary if any of the following conditions are satisfied:
The project is fully financed through inward remittance from abroad.
The funding is provided by a bilateral or multilateral international financial institution.
The project has received clearance from the relevant Indian authority.
The project is awarded to an Indian company or entity, and a term loan has been sanctioned by an Indian bank or public financial institution to finance the project.
However, if none of the above conditions are fulfilled, the foreign company must obtain prior approval from the RBI before setting up a Project Office in India. Proper compliance with regulatory requirements is essential to ensure smooth execution of the project activities.
A foreign company may establish a Branch Office in India to carry out business operations, subject to prior approval from the Reserve Bank of India (RBI). This route allows the foreign entity to operate in India more comprehensively compared to a Liaison or Project Office.
To be eligible for setting up a Branch Office, the foreign company must meet the following conditions:
It should be actively engaged in manufacturing or trading activities in its home country.
It must have earned profits during the immediately preceding five financial years.
The company’s net worth should not be less than USD 100,000 in its country of incorporation.
As defined under Section 2(13) of the Companies Act 2013, a “branch office” refers to any establishment described as such by the company. Through a Branch Office, foreign companies can undertake business activities in India that are similar or substantially the same as those carried out by their parent or group companies abroad.
A Branch Office is not permitted to directly undertake manufacturing activities in India. However, it may outsource or subcontract such manufacturing work to an Indian manufacturer in accordance with applicable laws.
The profits generated by the Branch Office can be repatriated to the parent company after payment of applicable taxes and in compliance with the regulations prescribed by the Reserve Bank of India (RBI).
A Branch Office does not have a separate ownership structure in India, as it is merely an extension of the foreign parent company and not an independent legal entity.
After establishing a place of business in India, a foreign company must submit the prescribed documents within 30 days for registration of its Liaison Office or Branch Office.
Below are the key documents and details required:
| S. No. | Particulars |
|---|---|
| 1 | Details of the company’s business activities to determine whether approval from the Reserve Bank of India (RBI) is required. |
| 2 | Certified copy of the Charter Documents, including Memorandum and Articles of Association (or equivalent documents). If these documents are not in English, a certified English translation must be provided. |
| 3 | Complete address of the registered or principal office of the foreign company in its home country. |
| 4 | List of Directors and Company Secretary along with their prescribed details. |
| 5 | Name and address of the authorized representative(s) in India who are empowered to receive legal notices and other official communications on behalf of the company. |
| 6 | Full address of the office in India, which will be treated as the principal place of business. |
| 7 | Details regarding any previous opening or closure of a place of business in India, if applicable. |
| 8 | A declaration confirming that none of the company’s directors or authorized representatives in India have been convicted or disqualified from forming or managing companies in India or abroad. |
Within 30 days of establishing its place of business in India, the foreign company is required to file Form FC-1 with the Registrar of Companies under Section 380(1) of the Companies Act 2013, along with the prescribed fees as per the Companies (Registration Offices and Fees) Rules, 2014.
The application must also include a duly attested copy of the approval granted by the RBI under the Foreign Exchange Management Act (FEMA) or any other applicable regulatory law. Proper documentation and timely filing are essential to ensure legal compliance and smooth operation in India.
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