How Foreign Companies Start a Business in India

India is among the fastest growing economies in the world with immense human
potential and a large market comprising of over 1.2 billion people. Opportunities in
India has attracted a large amount of Foreign Direct Investment into the country and
each year the amount of FDI inflow keeps increasing due to more number of foreign
businesses starting their operations in India. In this post, the way to setup a business is
in India is detailed for foreign companies.
Entry Strategy into India for Foreign Businesses
There are mainly two types of entry strategy for foreign businesses in India,
registration of a company or establishing a branch/liaison office.
Incorporation of a private limited company is the easiest and fastest type of India
entry strategy for foreign nationals and foreign companies. Foreign direct investment
of upto 100% into a private limited company or limited company is under the
automatic route, wherein no Central Government permission is required. Hence,
incorporation of a private limited company as a wholly owned subsidiary of a foreign
company or joint venture is the cheapest, easiest and fastest entry strategy for foreign
companies and foreign nationals into India.
Registration of Branch Office, Liaison Office or Project Office requires RBI and/or
Government approval. Therefore, the cost and time taken for registration of branch
office, liaison office or project office for a foreign company is higher than the cost and
time associated with incorporation of a private limited company. Further, foreign
nationals cannot open branch office, liaison office or project office. Hence, this option
is limited to being an India entry strategy only for foreign companies.
Requirements for Establishing a Company in India
To start a company in India, a minimum of two persons and an address in India are
required. A private limited company in India must have a minimum of two directors
(persons) and a minimum of two shareholders (can be persons or corporate entities).
Further, the incorporation rules in India states that one of the Director of the Company
must be both an Indian Citizen and Indian Resident (any person who has lived in
India for over 186 days is considered an Indian Resident).
The preferred legal entity structure for foreign companies is to establish a company
with three Directors, two being foreign nationals from the parent company and one
director being a local Indian citizen. Since, there are no requirements for minimum
shareholding with the Indian Director, 100% of the shares of the Indian Company can
be held by foreign nationals or entities.
An address in India is required to serve as the registered office of the Company. The
city in which the registered office address of the company will be setup will also
determine the legal jurisdiction applicable for the company. Most foreign companies’
setup their registered offices in major metros of India like Delhi, Mumbai, Bangalore,
Hyderabad, Chennai, etc.,
Documents Required for Company Registration in India
To register the company, foreign nationals who will serve as Directors of the
Company will have to submit a copy of their Passport along with an address proof
(Driving License, Bank Statement, etc.,). The copy of the original documents must be
notarized by a Notary in the home country or by the Indian Embassy in the country of
the foreign Director.
In case of a corporate entity becoming a shareholder in the Indian Company, then
Board Resolution from the foreign company authorizing the investment in the Indian
 Company would also be required. The Board Resolution must be attached with
notarized copy of the certificate of incorporation of the foreign entity.
The presence of any of the foreign Directors is not required in India at any time
during the incorporation process. Thus, foreign citizens can easily establish and
operate a business in India without the hassles of travelling to India.
Cost for Registering a Company in India
The cost for registering a business in India is relatively inexpensive. Registration of a
company in India can also be completed within a few weeks, making India an easy
place to start a business.
Post Incorporation Formalities
Post registration of the company in India, the Indian Director can help open a bank
account for the company in India. Once the bank account is opened, the Company
must make FDI reporting to the Reserve Bank of India. The procedure for reporting
FDI inflow into the company is simple and can be completed easily by a legal or
accounting professional in India. Completing the FDI reporting would ensure that the
business is in compliance with all regulations in India and ready to operate.
SETTING UP BRANCH OFFICE OF A FOREIGN
COMPANY IN INDIA.
Pre- Requisites and Conditions of a Branch Office
 The name of Indian Branch office shall be same as parent company.
 The Branch office does not have any ownership; it is just extension of the
exiting company in the foreign country.
 All the expenses of the BRANCH office are met by the head office, if it does
not have the revenue from Indian operations.
 The foreign parent company looking to start a Branch office in India shall have
a profitable track record during immediately preceding five years in the home
country.
 The Net Worth i.e. 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 shall be not less than or equal to USD 100,000.

S.NO PARTICULAR TIME LINE REMARKS

OBTAINING APPROVAL FROM RBI
Filing documents with 25-30 days from Every company
the Reserve Bank of the date of receipt desirous of setting
India (RBI) of ALL the up a Branch Office
Prepare and file Form relevant in India is required
FNC-1 for obtaining documents and to file the requisite
approval pertaining to information documents with the
setting up of Branch Reserve Bank of
Office in India. India.
Liaison and obtain
approval from RBI for
setting up of Branch
Office
 INTIMATION TO REGISTRAR OF COMPANIES
STEP 1 Obtaining DIN and 4-7 days from the
Digital Signatures for date of receipt of
the proposed Directors. ALL the relevant
Prepare and File Form documents and
DIR 3 for obtaining DIN information
for the proposed Directors
Prepare the Form for
obtaining Digital
Signatures for the
Director(s).
STEP 2 Intimation to ROC 15-20 Days from Every Branch
Prepare and file Form FC- the receipt of all office registered
1 with regard to obtaining relevant with RBI shall get
registration with MCA. documents and itself registered
information with the Ministry
of Corporate
Affairs within a
period of 30days
of setting up of
place of business
in India.

List of Documents required

1. OBTAINING APPROVAL FROM RBI
 Letter from the principal officer of the Parent company to RBI.
 Letter of authority from the parent company in favor of Local Representative.
 Letter of authority/ Resolution from parent company for setting up BRANCH
office in India.
 Comfort letter from the parent company intending to support the operation in
India.
 Two copies of the English version of the Certificate of Incorporation,
Memorandum & Articles of association (Charter Document) of the parent
company duly attested by the Indian embassy or notary public in the country of
registration.
 Certification of Incorporation - Translated & Duly Notarized and properly
authenticated.
 The Latest audited Balance sheet and annual accounts of parent company duly
Translated notarized for past Three years and properly authenticated
 Name, Address, email ID and telephone number of the authorized person in
Home Country.
 Details of Bankers of the Organization the Country of Origin along with the
bank account number
 Commitment from the Organization to the effect that it will be open to report /
opinion sought from its banker by the Government of India / Reserve Bank of
India.
 Expected funding level for operations in India.
 Details Relating to address of the proposed local office, number of persons
likely to be employed, number of Foreigners among such employees and
address of the head of the Local office, if decided.
 Details of Activity carried out in Home Country by the applicant organization
in brief about the product and services of company in Brief.
 Bankers Certificate.
 Latest Proof of identity of all the Directors - Properly Certified by Banker in
Home Country and duly authenticated.
 Latest Proof of address all of Directors - Properly Certified by Banker in Home
Country and duly authenticated
 Details of the Individuals / Company holding more 10% of Equity
 Structure of the Organization and its Shareholding pattern
 Complete KYC of Shareholders holding more than 10% Equity in the
Applicant Company
 Resolution for Opening up Bank Account with the Banker
 Duly Signed Bank Account Opening Form for Indian Bank
2. INTIMATION TO ROC
 Charter, statutes or memorandum and articles of association or other
Instrument constituting or defining the constitution of the company
NOTE: If the above documents are not in English then the translated
version of the documents.
 Director(s) details – individuals
 Director(s) details - bodies corporate
 Reserve bank of India approval letter
 Secretary(s) details, if any
 Power of attorney or board resolution in favor of the authorized
representative(s)