The procedure of establishment of business in India depends upon the type/form of registration in India.
The incorporation procedure in case of a subsidiary, wholly-owned subsidiary, an Indian company in the form of Joint Venture is the same , subject to different documents as applicable. The procedure for the same is discussed in detail in Part I of this Chapter.
In case, where a foreign company desires to set up its business in the form of Liaison Office/ Branch Office/ Project Office then the procedure as enlisted in Part II of this Chapter is to be followed. The various compliances under the Companies Act, 2013 which need to be adhered to as per Chapter XXII of the Act are elaborated therein.
For Foreign Entities setting up its business with the Objective of having Commercial Operations in India
In case a company wishes to operate in India by forming a subsidiary, wholly-owned subsidiary, or a Joint Venture Company then it needs to follow the procedure as mentioned below.
It is to be noted that if a foreign company wants to incorporate its subsidiary company in India, then the original name of the holding company may be allowed with the addition of the word “India” or name of any “Indian state or city”, subject to availability of the name and other conditions being satisfied.Rule 8 of the Companies (Incorporation) Rules, 2014 shall be referred to, while selecting the name of the Indian company to be established.
STEP – I: Apply for Name Approval:
Before application for name approval, a foreign company has to choose the name on basis of the following:
a. foreign company can apply the same name (name in the foreign country) in India by using the word “India” in its name.
b. If a foreign company is having any Registered Trade Mark then it can use such a trademark for the Incorporation of Company in India.
c. Any other name as decided by the Foreign Company.
Once the name has been selected, the application for name approval has to be filed in web-based form SPICE+ Part A.
Section 380 states that every foreign company shall, within thirty days of the establishment of its place of business in India, deliver to the Registrar for registration-
a certified copy of the charter, statutes or memorandum and articles, of the company or other instrument constituting or defining the constitution of the company and, if the instrument is not in the English language, a certified translation thereof in the English language;
the full address of the registered or principal office of the company;
a list of the directors and secretary of the company containing such particulars as prescribed under Rule 3;
the name and address or the names and addresses of one or more persons resident in India authorised to accept on behalf of the company service of process and any notices or other documents required to be served on the company;
the full address of the office of the company in India which is deemed to be its principal place of business in India;
particulars of opening and closing of a place of business in India on earlier occasion or occasions;
declaration that none of the directors of the company or the authorised representative in India has ever been convicted or debarred from formation of companies and management in India or abroad; and
any other information as may be prescribed.
Further, every foreign company existing at the commencement of this Act shall, if it has not delivered to the Registrar before such commencement, the documents and particulars specified in sub-section (1) of section 592 of the Companies Act, 1956, continue to be subject to the obligation to deliver those documents and particulars in accordance with that Act.
Moreover, where any alteration is made or occurs in the documents delivered to the Registrar under this section, the foreign company shall, within thirty days of such alteration, deliver to the Registrar for registration, a return containing the particulars of the alteration in the prescribed form.
It is also required that a foreign company shall, within a period of thirty days of the establishment of its place of business in India, file with the registrar Form FC-1 with such fee as provided in Companies (Registration Offices and Fees) Rules, 2014 and with the documents required to be delivered for registration by a foreign company in accordance with the provisions of section 380(1) and the application shall also be supported with an attested copy of approval from the Reserve Bank of India under Foreign Exchange Management Act or Regulations, and also from other regulators, if any, approval is required by such foreign company to establish a place of business in India or a declaration from the authorised representative of such foreign company that no such approval is required.
And in case any alteration is made or occurs in the document delivered to the Registrar for registration under section 380(1), the foreign company shall file with the Registrar, a return in Form FC-2 along with the fee as provided in the Companies (Registration Offices and Fees) Rules, 2014 containing the particulars of the alteration, within a period of thirty days from the date on which the alteration was made or occurred.
Laws other than Companies Act governing Foreign Company in India
A foreign company as defined under the Companies Act, 2013 must comply with regulations and rules established under multiple legislations and order(s) such as mentioned below. A foreign company whether established for commercial or non-commercial operations has to adhere to various Indian Acts, Rules and Regulations. It is pertinent to note that the compliances differ on the type of legal structure of the entity.
The Companies Act, 2013
The Income Tax Act, 1961
GST, 2017
SEBI Rules and Regulations
FEMA (Foreign Exchange Management Act), 1999
RBI compliances etc.
(1). Every foreign company shall, within thirty days of establishment of its place of business in India, in addition to the particulars specified in subsection (1) of section 380 of the Act (i.e, Companies Act, 2013), also deliver to the Registrar for registration, a list of directors and Secretary of such company.
(2). The list of directors and secretary or equivalent (by whatever name called) of the foreign company shall contain the prescribed particulars, for each of the persons included in such list.
(3) A foreign company shall, within a period of thirty days of the establishment of its place of business in India, file with the registrar Form FC-1 with such fee as provided in Companies (Registration Offices and Fees) Rules, 2014 and with the documents required to be delivered for registration by a foreign company in accordance with the provisions of sub-section (1) of section 380 and the application shall also be supported with an attested copy of approval from the Reserve Bank of India under Foreign Exchange Management Act or Regulations, and also from other regulators, if any, approval is required by such foreign company to establish a place of business in India or a declaration from the authorized representative of such foreign company that no such approval is required.
(4) Where any alteration is made or occurs in the document delivered to the Registrar for registration under sub-section (1) of section 380, the foreign company shall file with the Registrar, a return in Form FC2 along with the fee as provided in the Companies (Registration Offices and Fees) Rules, 2014 containing the particulars of the alteration, within a period of thirty days from the date on which the alteration was made or occurred.
(5). Financial Statement of Foreign company
(1) Every foreign company shall prepare financial statement of its Indian business operations in accordance with Schedule III or as near thereto as may be possible for each financial year including-
(i) documents required to be annexed thereto in accordance with the provisions of Chapter IX of the Act i.e. Accounts of Companies ;
(ii) documents relating to copies of latest consolidated financial statements of the parent foreign company , as submitted by it to the prescribed authority in the country of its incorporation under the provisions of the lawfor the time being in force in that country:
Provided that where such documents are not in English language, there shall be annexed to it a certified translation thereof in the English language:
Provided further that where the Central Government has exempted or specified different documents for any foreign company or a class of foreign companies, then documents as specified shall be submitted;
(iii) Such other documents as may be required to be annexed or attached in accordance with sub-rule (2).
(2) Every foreign company shall, along with the financial statement required to be filed with the Registrar, attach thereto the following documents; namely:-
(a) Statement of related party transaction, which shall include-
(i) name of the person in India which shall be deemed to be the related party within the meaning of clause (76) of section 2 of the Act of the foreign company or of any subsidiary or holding company of such foreign company or of any firm in which such foreign company or its subsidiary or holding company is a partner;
(ii) nature of such relationship;
(iii) description and nature of transaction;
(iv) amount of such transaction during the year with opening .closing, highest and lowest balance during the year and provisions made (if any) in respect of such transactions;
(v) reason of such transaction;
(vi) material effect of such transaction on both the parties;
(vii) amount written off or written back in respect of dues from or to the related parties;
(viii) a declaration that such transactions were carried out at arms length basis; and
(ix) any other details of the transaction necessary to understand the financial impact;
(b) Statement of repatriation of profits which shall include-
(i) amount of profits repatriated during the year;
(ii) recipients of the repatriation;
(iii) form of repatriation;
(iv) dates of repatriation;
(v) details if repatriation made to a jurisdiction other than the residence of the beneficiary;
(vi) mode of repatriation; and
(vii) approval of the Reserve Bank of India or any other authority, if any.
(c) Statement oftransfer of funds (including dividends if any) which shall, in relation of any fund transfer between place of business offoreign company in India and any other related party of the foreign company outside India including its holding, subsidiary and associate company, include-
(i) date of such transfer;
(ii) amount of fund transferred or received;
(iii) mode of receipt or transfer of fund;
(iv) purpose of such receipt or transfer; and
(v) approval of Reserve Bank of India or any other authority, if any.
(3) The documents referred to in this rule shall be delivered to the Registrar within a period of six months of the close of the financial year of the foreign company to which the documents relate:
Provided that the Registrar may, for any special reason, and on application made in writing by the foreign company concerned, extend the said period by a period not exceeding three months.
(4). list of places of business of foreign company: Every foreign company shall file with the registrar , along with the
financial statement , in Form FC-3 with such fees as provided under companies (Registration office and Fees) Rules 2014, a list of all the places of business established by the foreign company India as on the date of balance sheet.
(5). Annual Return : Every foreign company shall prepare and file , within a period of sixty days from the last date of its financial year , to the registrar annual return in Form FC-4 along with such fees as provided in the companies (Registration offices and Fees) Rules, 2014 , containing the particulars as they stood on the close of the financial year.
(6) . If any foreign company ceases to have a place of business in India, it shall forthwith give notice of the fact to the registrar , and as from the date on which notice so given , the obligation of the company to deliver any document to the Registrar shall cease , provided it has no other place of business in india.
(7). Documents to be Annexed to Prospectus
The following documents shall be annexed to the prospectus, namely:-
(a) any consent to the issue of the prospectus required from any person as an expert;
(b) a copy of contracts for appointment of managing director or manager and in case of a contract not reduced into writing, a memorandum giving full particulars thereof;
(c) a copy of any other material contracts, not entered in the ordinary course of business, but entered within preceding two years;
(d) a copy of underwriting agreement; and
(e) a copy of power of attorney, if the prospectus is signed through a duly authorized agent of directors.
(8). Action for Improper Use or Description as Foreign Company
if any person or persons trade or carry on business in any manner under any name or title or description as a foreign company registered under the Act or the rules made thereunder, that person or each of those persons shall, unless duly registered as foreign company under the Act and rules made thereunder, shall be liable for investigation under section 210 of the Act and action consequent upon that investigation shall be taken against that person.