Amongst the fastest growing economies globally, India ranks high and has impressive numbers judging by measures to project word major economies. If the numbers are to be believed, India is right on the verge of giving Chinese a run for their money. The resource base is solid, the potentials, abundant. Business opportunities in India have propelled large Foreign Direct Investment (FDI), and the annual remittance from Indians in the Diaspora keeps increasing.
The FDI rate has been fuelled by foreign investments across multiple industries in the country. So, we shall look at the processes all foreign companies undergo to register in India.
Entry Strategy into India for Foreign Businesses
In India, two major types of entry model exist for foreign companies. First is the registration of the business and the second is the establishment of a branch or liaison office.
Meanwhile, incorporating a private limited company appears to be the easiest and fastest entry model for foreign citizens and foreign companies alike. It has been established that about 100% of foreign direct investment into a private limited company or limited company is subjected to a certain method where the government does not have jurisdiction. Therefore, incorporating a private limited company as an owned part of a foreign business remains the cheapest and fastest method to enter the Indian market for foreign citizens and international companies.
Government approval is necessary for the registration of Branch Office and the Project Office. So in India, the time and cost expended on registration of a foreign company’s branch office and project office is usually higher than the cost and time expended on incorporating a private limited company. Also, foreigners do not have the privilege to open a branch office, project office or liaison office as this is made available exclusively for foreign companies’ entry model.
Requirements for Establishing a Company in India
At least two persons and an address in India are the two minimum requirements to start a company in India. For a private limited company, it must have at least two directors and at least two shareholders who are whether a person or corporate entity. In addition, India states stipulate that a director of the foreign company to be registered must be an India citizen and a resident. For an individual who has resided in India for 186 days, the status “resident” is applicable.
According to legal description, a foreign company must have three directors of which two can be foreigners from the parent company while the other must be an Indian. The foreigners can hold 100% of the Indian company shares because no requirements for minimum shareholding are required with the Indian director.
As the evidence of the registered company’s office, an India address is mandatory and it abides within the legal purview of the state where it is located. A good number of registered foreign companies in India are situated in the major metropolis of the country like Mumbai, Delhi, and Bangalore.
Documents Required for Company Registration in India
Foreign company registration in India involves certain personal details of the foreign citizens. Individuals who will serve as company directors must tender a copy of their passport and an address proof like financial affidavit, driver’s license, etc. It is essential to transcribe that a Notary in the home country or at the Indian embassy of the foreigner director’s country must notarize all copies of original documents.
Furthermore, a board decision from the foreign company permitting the investment in the Indian Company is mandatory if a corporate entity becomes a shareholder in the Indian company. A notarized copy of the certificate of incorporation of the foreign entity must accompany the board’s decision.
Meanwhile, the foreign directors are not expected to be India in the course of the incorporation process. So, upon registration, foreign nationals now have the luxury of setting up and operating their companies in India from any part of the world without the strain of having to be present in India.
Cost of Registering a Company in India
India is an excellent place to start a business because the process of company registration can be completed within fewer weeks. In fact, the registration cost is not expensive.
Post Incorporation Formalities
The Indian director could assist with the opening of a bank account for the company in India after registration. Then the FDI details must be drafted and tendered at the Reserve Bank of India. A legal consult could also assist with the drafting of the FDI report. The report affirms that the company is ready to function and it is in good standing with all regulations.