India has cheap human labour, land, water, electricity in abundance, which lures many foreign companies to establish their place of business in India also. Like other companies operating their businesses in India, foreign companies must comply with some rules and regulations. In this text, we have tried to cover how foreign companies start a business in India
and almost every requirement to be complied with by a foreign entity according to the Companies Act, 2013.
First, let's go through the definition of a foreign company to understand which company falls under its ambit-
What is a Foreign Company?
Foreign company means a company or a body corporate incorporated outside India which—
* is having a place of business in India whether by itself or through an agent, physically or through electronic mode; and
* is conducting any business activity in India in any other manner.
So, it can be concluded that the mere visual presence of a foreign company doing business in India falls under the ambit of this definition.
Indian subsidiary of foreign company
is any company where 50% or more of its equity shares are owned by a company that is incorporated in another foreign nation. The said foreign company in such a case is called the holding company or the parent company.
It is to be noted here that as per the Companies (Registration Offices and Fees) Rules, 2014, any document which foreign companies in India
are required to deliver to the Registrar is to be delivered to the Registrar of New Delhi irrespective of where it operates its business in India.
How to register a foreign company in India? What is the procedure for foreign company registration in India?
After establishing a place of business in India, for the purpose of foreign business registration
, a foreign company is required to file a form (FC-1) with the registrar (within 30 days) and deliver to the registrar certain documents-
its charter documents (in English);
address of the registered/principal office of the company;
a list of all the directors and secretaries;
the name(s) and address(es) of the person(s) resident in India and authorised to receive all notices or other documents on behalf of the company;
address of the place of business in India;
details of opening and closing of a place of business in India on an earlier occasion(s);
declaration that no director of the company or the authorised representative in India has ever been or is convicted or debarred from forming the companies and management in India or abroad; and
any other details
On the successful filing of this form, a Foreign Company Registration Number
will be generated, and a certificate of registration
will also be given to the company.
The list of directors and secretaries shall contain the following information about the directors-
* full name
* any former name or surname
* father's / mother's name
* spouse's name
* date of birth
* residential address
* nationality (current and of origin if any)
* Income tax PAN (if any)
* directorship details in other companies
* Membership Number (for Secretary only)
* passport number, date of issue and country of issue
* email id
We at MAG, have a professional team to provide the best foreign company registration services
How alteration in the documents of Foreign Company's place of business is made?
If any alteration is being made in the documents mentioned above, the company must intimate about the changes to the Registrar within 30 days of such changes being made. This intimation is to be made by filing Form FC-2. The attachments (in English) required are-
Certified copy of the Board resolution, if any
Copy of the resolution passed in General Meeting
Copy of approval letter (if any approval is required for such alteration).
Particulars of alterations in the place of business in India of the company
Particulars of alteration in details of the directors or secretaries
Particulars of alterations in details of the company authorised representative
Any other information can be provided as an optional attachment(s).
How Financial Statements are prepared?
Financial statements of Indian business carried on by a foreign company shall be prepared in accordance with Schedule III, and other documents shall be attached as prescribed under the rules applicable and delivered within six months from the end of the financial year. The registrar may extend this period of six months for a period not exceeding three months. These statements are filed in Form FC-3.
How Audit of Accounts is dealt?
The company's accounts relating to the Indian business shall be audited by a practising chartered accountant or a firm/LLP of practising chartered accountants.
Is it required to give details of all the places where business is conducted?
Along with the financial statements, the company is also required to provide details about all its places where it is conducting business in India as on the date of the balance sheet in Form FC-3
Attachments (in English)-
Consolidated financial statement of the company (Mandatory).
Copy of balance sheet and profit and loss account (Mandatory).
Details of related party transactions
Details of repatriation of profits
Details of transfer of funds
Approval letter obtained for every establishment in India
Any other information (optional attachment).
Whether Annual Return is to be filed? What are the attachments required?
The annual return
shall be filed within sixty days from the last day of the financial year to the registrar in Form FC-4.
Details of Promoters, Directors and Key managerial personnel and changes related to the previous financial year.
Details of Directors and key managerial personnel and their remuneration.
Details of the meeting of the members or class thereof, board and its various committees along with attendance details. (Mandatory)
Details of members and debenture holders and changes therein since the close of the previous financial year. (Mandatory)
Details of holding, subsidiary and associate companies and firms.
Details about Penalties / Punishment/ Compounding of offences if any. (optional)
Any other information can be provided as an optional attachment(s).
What is FCRN?
Corporate Identity Number (CIN) work as a unique identifier of an Indian company. Foreign Company Registration Number
(FCRN) is a unique identifier in the case of a Foreign Company.It is a Six-digit number. Foreign Company Registration Number (FCRN) is generated consequently upon approval of eForm FC-1.
How to set up a liaison/branch office in India?
A Foreign company or body corporate incorporated outside India, including a firm or other association of individuals) can open a place of business in India by establishing Liaison Office.
A person resident outside India for opening a BO/LO in India shall require prior approval of the Reserve Bank of India.However, in the case of the Company, such approval is exempt.
Following are some significant differences:
1. Eligibility Criteria a) For Liaison Office
— track record of profit-making during the immediately preceding three financial years in the home country along with the net worth of not less than USD 50,000 orits equivalent.
b) For Branch Office —
track record of profit-making during the immediately preceding five financial years in the home country along with net worth of not less than USD 100,000 or its equivalent.
* The Net Worth is the total of paid-up capital and free reserves, minus intangible assets according to the Account Statement certified by Certified Public Accountant or latest Audited Balance Sheet or any Registered Accounts Practitioner by whatever name called.
2. Time Limit for setup
a) For LO/BO —
It generally takes 3-4 months for setup, subject to the permissions from RBI.
3. Validity of Tenure
a) For Liaison Office —
Validity period of LO is for three years, except in the case of NBFCs (Non-Banking Finance Companies) and those entities engaged in development and construction sectors, which has validity period is two years only.
b) For Branch Office —
No Specific time frame, generally 2-3 years.
4. Taxability: Income Tax & GST
a) For Liaison Office
- No Income tax as there is no Income. The Income is taxable under the hands of the parent company.
b) For Branch Office
— Foreign Companies that have a branch office in India are taxable at the higher introductory rate of 40%, which with applicable surcharge & education cess, results in the rate of either 41.60%, 42.43% & 43.68%.
What is the relevance of DIN?
DIN is not mandatory for directors of foreign companies having branch offices in India.
Many foreign companies have already registered themselves in India and are setting up their businesses on a large scale. They have set up liason/ branch offices in India.
we help and assist our clients with the process of forming a company in India
, Indian Subsidiary of Foreign Company, Foreign subsidiary company in India, Foreign company franchise in India and business registration for foreigners. If you seek to register a foreign company, you can approach us at firstname.lastname@example.org