India is one of the fastest growing economies in the world with healthy resources and a large market base. In the past few years, there is a great boost in foreign direct investment in India (FDI) because of the changed regulatory environment in the past few years. Therefore, it is very easy for foreign nationals to start a business in India.
Sometimes people get often confused in “Indian Company” and “Foreign Company”. If a foreign national incorporates a company in India then it is an Indian Company. But when a foreign company set up a branch office in India then it is known as Foreign Company.
Foreign Direct Investment (FDI)
The amount/capital to be invested by any foreign national/NRI shall be classified as FDI in India. In 1990s, there was high number of restrictions on FDI in India where as today, there are amendments in all the rules and regulations of company formation in India.
FDI is classified as
- Business where FDI is not allowed at all.
- Business sectors where permission is required from Foreign Investment Promotion Board(FIBP)
- Business where no permission required.
All foreign nationals/ NRI’s must go through FDI policy before company incorporation in India in order to check any restrictions, prohibition in the proposed business activity
Entry Strategy into Indian Market
A foreign company can commence operations in India by incorporating a company under the companies Act, 1956 through registration of company or establishing a branch or liaison office.
Establishing a private limited company is the easiest and fastest way to set up in India. FDI of up to 100% into a public limited or private limited is permitted under the FDI policy wherein no approval from RBI or central government is required. For the purpose of registration or incorporation, an application has to be filed with Registrar of companies (ROC). For more information please visit http://dca.nic.in.
Other entry strategy as a foreign company is to open a branch office, liaison office and Project Office. In this case, approval from RBI or central government is mandatory. Therefore, the time and money required for setting up a private limited or public limited company is much less than forming such offices.
Requirements for incorporation of company in India
In order to start a company in India, a minimum of two persons and an address are required in India. A company must have a minimum of two directors and a minimum of two shareholders. According to Indian rules and regulations, one director must be both an Indian citizen and Indian resident.
One should establish a company with three directors which includes two foreign nationals and one local citizen. In this case, 100% of the shares of the Indian company can be held by foreign nationals/ NRI. The address in India is served as the registered office of the company. Foreign companies establish their offices in metro cities like Delhi, Bangalore, Mumbai and Chennai etc.
Cost for company registration in India
Company formation services in India are inexpensive. The company formation process can be completed within few weeks. The incorporation process can be easy with the help of tax advisors in India. It would cost you some pennies but the whole process will be easy for you.