Business Setup in India

India being developing country and having more business prospects, foreigner see India as a flourishing market and the Reserve Bank of India understands the same so they have provided some option to have legal existence in India by way of opening Liaison Office, Branch Office or Wholly Owned Subsidiary as described below:

A. Liaison Office

A Liaison Office a.k.a. Representative Office, can undertake only liaisoning activities, i.e. it can act as a channel of communication between Head Office abroad and parties in India. Liaison Offices are not allowed to undertake any sort of business activities in India and cannot earn any income in India.

Expenses of such offices are to be met entirely through inward remittances of foreign exchange from the Head Office outside India. The role of such offices is, therefore, limited to collecting information about possible market opportunities and providing information about the company and its products to the prospective Indian customers. Permission to set up such offices is initially granted for a period of 3 years and this may be extended from time to time by Authorized Dealers.

Additional criteria to be met before the apex bank sanction a liaison office in India:

  • A profit making track record during the immediately preceding three financial years in the home country;
  • Net Worth of not less than USD 50,000 or its equivalent [total of paid-up capital and free reserves, less intangible assets as per the latest Audited Balance Sheet or Account Statement certified by a Certified Public Accountant or any Registered Accounts Practitioner by whatever name].

B. Branch Office

Companies incorporated outside India and engaged in manufacturing or trading activities are allowed to New Business Setup in India & also set up Branch Offices in India with specific approval of the Reserve Bank. Such Branch Offices are permitted to represent the parent / group companies and undertake the following activities in India:

  • Export / Import of goods.
  • Rendering professional or consultancy services.
  • Carrying out research work, in areas in which the parent company is engaged.
  • Promoting technical or financial collaborations between Indian companies and parent or overseas group company.
  • Representing the parent company in India and acting as buying / selling agent in India.
  • Rendering services in information technology and devel¬opment of software in India.
  • Rendering technical support to the products sup¬plied by parent/group companies.
  • Foreign airline / shipping company.

Normally, the Branch Office should be engaged in the activity in which the parent company is engaged.

  • Retail trading activities of any nature is not allowed for a Branch Office in India.
  • A Branch Office is not allowed to carry out manufacturing or processing activities in India, directly or indirectly.
  • Profits earned by the Branch Offices are freely remittable from India, subject to payment of applicable taxes.

Additional criteria to be met before the apex bank sanction a liaison office in India:

  • A profit making track record during the immediately preceding five financial years in the home country.
  • Net Worth of not less than USD 100,000 or its equivalent [total of paid-up capital and free reserves, less intangible assets as per the latest Audited Balance Sheet or Account Statement certified by a Certified Public Accountant or any Registered Accounts Practitioner by whatever name].

 

C. Wholly Owned Subsidiary/ Joint Venture in India by way of Foreign Direct Investment

Another form of having existence and New Business Setup in India is to have incorporated an Indian company wholly owned by foreign company or joint venture. The same form can conduct business in India.

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