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India Investment Strategy
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India Investment Strategy

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INDIA INVESTMENT STRATGEY

Depending upon its business proposal and nature of proposed activities in India, a foreign company can choose either a liaison office or a branch office or a project office or incorporating an Indian company, either its wholly owned subsidiary or joint venture with an Indian/overseas partner.

INDIAN ENTRY OPTIONS FOR FOREIGN INVESTORS

A foreign investor can enter Indian markets by:

  1. Incorporating a Limited Company (Private or Public)
  2. Incorporating a Limited Liability Partnership
  3. Setting up of Liaison Office/Branch Office/Project Office

Indian Company

  • Foreign investor can commence its business operations by incorporating a company under the provisions of the Companies Act, 2013 as a –
    1. (a) Fully Owned Subsidiary (100% subsidiary); Or
    2. (b) Joint Venture Company.
  • The said Fully Owned Subsidiary or Joint Venture Company can be in the form of a private Limited company or a Public limited company. In a private company, at least two directors and two promoters are required for incorporation vis-à-vis a public company, where at least three directors and seven promoters are required for incorporation.
  • Foreign investor can invest in Indian company up to a maximum of 100% depending upon the sectoral caps prescribed under the FDI Policy issued by Government of India.
  • Fully owned subsidiaries can be set up only in the sectors where 100% FDI is allowed under the FDI Policy of the Government of India.
  • Joint Venture Company is best option in the sectors where 100% FDI is not allowed and/or where foreign investor intends to take benefit of the resources, established contacts and distribution/ marketing set up of the Indian partner. Joint Venture Company can be set up with foreign joint venture partner or Indian joint venture partner without violating the sectoral caps.

Limited Liability Partnership (LLP)

  • Foreign investor can commence its business operations by incorporating a company under the provisions of the Companies Act, 2013 as a –
    1. Fully Owned Subsidiary (100% subsidiary); Or
    2. Joint Venture Company.
  • A Foreign investor can start its business activities in India by incorporating a limited liability partnership under the provisions of the Limited Liability Partnership Act, 2008, only in sectors where 100% FDI is allowed under the automatic route.
  • A Minimum two partners are necessary to incorporate a LLP and one of whom shall be resident of India i.e. a person who has been staying in India for a period of not less than one hundred and eighty-two days in the immediately preceding year. Only individuals can be appointed as a designated partner. Thus, in case where foreign investors wish to incorporate a LLP in India, they can appoint their nominees as the designated partners. However, one of the nominee should have Indian resident.
  • The designated partners of a LLP will be responsible for compliance with the provisions of the Limited Liability Partnership Act, 2008 and other statutory provisions.

Liaison Office/Branch Office/Project Office

  • If a Foreign investor is not interested in incorporating a separate Company in India, then they can start their liaison office or branch office or Project office, per their requirements. A Foreign Investor can set up liaison office in India after the approval of the Reserve Bank of India (RBI) to
    1. Represent parent/group companies (Foreign Company) in India
    2. Promote import/export in India
    3. Promote technical/financial collaborations on behalf of a foreign parent company/group.
    4. To coordinate and maintain communications between parent/group companies and Indian parties.
  • A Foreign Investor can set up branch office of the foreign Company in India subject to the approval of the Reserve Bank of India relating to
    1. Import & export activities
    2. Professional, technical or consultancy services
    3. Research work in the area in which its parent company is engaged
    4. d) Promoting and facilitating technical/financial collaborations between parent company and an Indian company.
    5. Representing the parent company in India and acting as a buying/selling agent in India
    6. f) Providing technical support required by the parties for products supplied by the parent company/group in India
  • A Foreign Investor can set up a project office in India without obtaining approval of the Reserve Bank of India, if the parent company (Foreign Company) is engaged by an Indian company/ Government to execute a project in India. However, the said project office is not exempted from the prescribed reporting compliances. A project office of a Foreign Company is also a foreign Company as per the Income Tax Act and hence it is also taxed at the rate applicable to foreign companies.

The Firm has helped various foreign companies to start their business activities in India and hence we have a strong experience in handling such high value foreign investment proposals from Foreign Companies.

For any investment related service you can contact Mr S Ravi Shankar

 ravi@lawsenate.com