Updated : October 07, 2024How to Register a Foreign Company in India? | Process, Types
Overview :With several anticipations of better and higher economic growth probability and strong key contributing factors like cost-effective and skilled manpower, availability of requisite resources, and a gigantic customer base, foreign direct investment (FDI) has increased dramatically in India and is still rapidly counting!
If you are a business person from outside India looking for a great investment opportunity, the Indian market can be an opportunity you can’t afford to miss. You can make the most out of your investment by choosing one of the most appropriate types of foreign company registration by a foreigner and following the process of how to register a foreign company.
India is among the fastest-growing economies in the world, making it a desirable destination for foreign companies looking to tap into the global market. With a diverse consumer base of 1.4 billion people and a considerable amount of skilled human potential available, more and more foreign direct investment (FDI) is pouring into the Indian market every year. As a result, the FDI inflow in India has witnessed a sharp rise in the last few years.
Similar to Indian companies, foreign companies in India also have to adhere to certain rules and guidelines laid down under the Companies Act 2013, RBI Guidelines, etc. A foreign company looking to incorporate its business in India has two ways to do it: either by registering a new company or opening a branch of the company registered in any other country. This written piece covers the types and process of incorporation of foreign companies in India.
What is a Foreign Company?
So, what is a foreign company? Can it start its business in India? In the further section, we’ll try to clear away all such queries rolling into your mind, related to company registration for foreigners.
A foreign company, generally known as an international or multinational company (MNC), is a business entity that operates in a country or countries apart from the country where it is originally registered/incorporated. Such companies operate beyond the borders of their originating nation.
According to the Companies Act 2013, a foreign company is defined as a company that originally belongs to any other country where it is also registered but;
- has also got a business place in India, whether through an agent or by itself, physically or through electronic mode.
- Conducts business activity in India in any other manner.
In simple words, a foreign company is a company that operates its business operations in more than one country.
Types of Foreign Company Registration in India
In order to initiate registration of a foreign company in India, firstly, it’s important to understand the types of foreign company registration in India. India offers several options for foreign companies to get registered and commence their operations legally. In India, there are two following ways foreigners can opt for foreign company registration in India;
1. If registering a Foreign Company as an Indian company
The category offers two different types of company structures that can be chosen for registering a foreign company in India; those are;
Wholly-Owned Subsidiary Company
A foreign national or company can invest 100% FDI in an Indian company through the automatic route to register foreign companies in India.
If a foreign entity or company invests 100% FDI in an Indian company, this Indian company is said to be a wholly-owned subsidiary of that foreign entity or company. Registration of a foreign subsidiary in India is suitable for initiating and carrying on activities related to production, marketing, and selling in the Indian market on behalf of that foreign company. It is also more tax efficient as compared to other options available.
Joint Venture
As the name implies, a joint venture is a type of partnership where two or more companies join hands and mutually agree to make an investment in capital and/or goods, or services for commercial purposes. One of those companies must be an Indian company. In the Indian sectors/companies where 100% FDI is not required, a joint venture can be a suitable option as it has a low-risk probability for the companies that are willing to enter the Indian market.
2. As A Foreign Company
If any foreign entity/company wants to start its operations in India but with the identity of the same foreign company, it has two options available;
Branch Office
The objective behind establishing a branch office of a foreign company in India is to establish an extension entity of its head/registered office incorporated outside India. It performs the same business activity as their head office. This concept is beneficial for those companies whose purpose is to render services or sell products manufactured by them.
Liaison Office
A Liason Office is typically a representative entity of the parent company located and incorporated outside India. Generally, it plays the role of a medium of communication between the foreign parent company and its counterpart in India. This structure is suitable for ensuring smooth collaboration-related activities by bridging the gap between parent foreign companies and companies in India under the same brand.
Step-by-Step Process to Register a Foreign Company in India
Similar to registering Indian companies, company registration by foreigners in India also involves certain steps that need to be followed.
The steps for registering a foreign company in India are described below;
Step 1: Obtain a Digital Signature Certificate (DSC)
A foreign company registration for foreigners in India starts with obtaining a Digital Signature Certificate (DSC). As the name implies, a DSC is an electronic or digital signature you can say. It is used while filing documents and forms online with the Ministry of Corporate Affairs (MCA).
Step 2: Obtain a Director Identification Number (DIN)
Each director of the Foreign Company must obtain a DIN. It is a unique number of identification which is issued by the MCA. It is necessary for each director of the Foreign Company to obtain a DIN. It is a unique number of identification for directors that can be obtained by the MCA. The DIN application form must be submitted online with the supporting documents.
Step 3: Reserve the Company Name
The next step is to reserve a unique name for your foreign company that can be done with the MCA’s Central Registration Centre (CRC). The MCA Portal facilitates you to submit your name reservation application online. Before submitting a name reservation application with a proposed name, make sure that the proposed name adheres to the naming guidelines set forth by the MCA.
Step 4: Prepare & File Registration Application
Prepare the application required for incorporating a foreign company in India. Also attach the legalized documents which include Certificate of Incorporation of the foreign parent company, Memorandum of Association (MOA), and Articles of Association (AoA), and the identity as well as address proofs of shareholders and directors.
Step 5: Obtain PAN & TAN
Upon successful company registration for foreigners in India, it is necessary to obtain a PAN and TAN in the name of the company for carrying out financial transactions and taxation-related activities. These two numbers are highly essential for complying with Indian tax laws and regulations.
Step 6: Open a Bank Account
Operating a foreign company in India without a bank account is not possible. Open a bank account for your foreign company in India to carry out financial transactions. Certain documents such as a Certificate of Incorporation, PAN, and a few other documents are required to open a bank account.
Step 7: Register your business under taxes
As per your business activities nature, your company may need to be registered under various taxes including Goods & Services Tax (GST), Professional Tax, and a few other taxes. In order to ensure compliance with applicable taxes, don’t forget to register your foreign company under such taxes.
Step 8: Seek necessary Licenses and Permits
Moreover, you may need to obtain some necessary licenses and permits to operate in India. Do your own research to determine the necessary licenses required for your business sector and activities.
If you adhere to these steps, you can get your foreign company registered successfully to initiate your business activities in India. Seek expert assistance to get these steps executed in a fully professional manner.
Note- Conduct Legalization of Documents: Legalization is a process of authenticating documents originated in a foreign country, before its submission with the Indian authorities. For this, the required documents need to be notarised, apostilled or stamped by the Indian embassy officials, as applicable. Later, when the document holder travels to India on a Business Visa, the same can be attested in India as well.
For the purpose of Foreign company registration in India, the documents that need to be legalised include Certificate of Incorporation of the Foreign parent, MOA & AOA drafted and signed in a foreign country, and the personal documents of the foreign shareholder and directors. Note that legalisation of documents needs to be done twice during the foreign company registration process – once before the name approval and then before filing the registration application.
Conclusion
With a massive consumer base of around 1.4 billion, and plentiful skilled labor, Foreign Direct Investment (FDI) has skyrocketed in India in the last few years. In short, the FDI in the country has surpassed its previous high and is hitting an all-time high. Learn about how to register a foreign company by a foreigner in India; types and processes to ensure that your business activities can go on smoothly in accordance with the Indian business laws and regulations.
