100% Subsidiary of a Foreign Company

Most foreign companies that are interested in setting up their operations in India, do so by the way of a wholly owned subsidiary. The subsidiary will have to be 'incorporated' as a company and will have to obtain certain registrations with the government authorities.

• RMC on behalf of the foreign holding company will submit an application in the specified form (form no. 1A) with the Ministry of Corporate Affairs for obtaining their approval for the proposed name of the Indian entity. The foreign holding company will have to provide a no objection certificate (NOC) for this purpose.
• RMC will draft the Memorandum & Articles of Association of the Indian subsidiary company and submit the same to the Registrar of Companies along with forms 1, 18, 32, power of authorization and extract of Board resolution of the holding company. The Power of authorization and extract of Board resolution is to be attested by a notary public and the Indian Consulate.

RMC will prepare relevant applications and liaise with the RBI to obtain permission under the Foreign Exchange Management Act (FEMA) with respect to investment into India by the foreign holding company.

A foreign company instead of having a subsidiary in India, can start their operations in any other forms as mentioned below:

BRANCH OFFICE

A branch would mean an establishment carrying on substantially the same activity as its Head Office. Foreign companies intending to open a Branch Office (BO) in India need to obtain prior permission of RBI which would encompass even approval to the scope of activities that are intended to be carried out in India. As per the guidelines laid down by the RBI, the BO in India is allowed to carry on only the following activities:

• Export / Import of goods
• Rendering professional or consultancy services
• Carrying out research work, in which the parent company is engaged
• Promoting technical or financial collaboration 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 development of software in India
• Rendering technical support to the products supplied by parent / group companies
• Foreign airline / shipping company

LIAISON OFFICE

A Liaison Office (LO) is in the nature of a representative office set up primarily to explore and understand the business and investment climate. A LO is not permitted to undertake any commercial / trading / industrial activity, directly or indirectly, and is required to maintain itself out of inward remittances received from abroad through normal banking channels. The LO is permitted to undertake only the following activities:

• Representing in India the parent Company / group Company
• Promoting export/ import from/ to India
• Promoting technical / financial collaborations between the parent / group companies and companies in India
• Acting as a communication channel between the parent Company and Indian companies

Any company intending to open a LO in India is required to obtain prior approval from the RBI, the apex foreign exchange management authority in India. Approval is usually granted for three years and can be renewed on expiry thereof.

PROJECT OFFICE

Foreign companies can establish Project Offices (POs) in India specifically for the purpose of execution of specific projects. A PO is similar to a branch office opened for the limited purpose of executing a particular contract. As POs are opened for undertaking a specific activity they cannot perform any other function or undertake any other activity. Generally, companies engaged in turnkey projects or installation projects set up PO's. All expenses of POs must be met through inward foreign currency remittances if the rupee component of the contract, if any, is not sufficient to meet the said expenses. RBI approval is required to open a PO.

RMC assists the foreign companies in the areas of obtaining permissions from the RBI for setting up Branch Office or approval for setting up Liaison office or Project Office in the shortest possible time.