India is one of the fastest growing Asian economies of today. It is
the hub of global BPO and software industry. Today, more and more
companies from around the world are interested in a base in India. This
aim of this article is to provide information in brief regarding setup
of company and legal requirement for starting a business in India.
The first and foremost thing is setting up/ forming a company in India. Here, an international company has three modes for forming a company in India i.e. opening foreign branch office, open liaison office or register a fully owned foreign subsidiary company. A brief detail of all the three modes is given below:
Liaison Office – This kind of office is setup wherein only liaison work is undertaken by the entity in India and all transactions whether related to Sale/ Purchase/ Provision of any services is undertaken directly by the parent company. Liaison office is not authorized to undertaken any type of commercial activity.
Foreign Brach Office – This kind of office is setup is one step ahead of Liaison Office. In this type of setup trading transactions i.e. sale / purchase of goods is allowed directly by the Foreign Branch Office itself but there are restrictions with regard to manufacturing and provision of services.
Wholly Owned Subsidiary – This type of setup is allowed to undertake all kinds of commercial transaction subject to general or specific restrictions imposed by the Reserve Bank of India (RBI) or Foreign Inward Promotion Board (FIPB). They are required to file necessary returns with various taxation and legal authorities as a separate entity from its parent.
After deciding on the mode for forming a company as mentioned above necessary permission of either the Reserve Bank of India (RBI) or Foreign Investment Promotion Board (FIPB) is required. There are certain industries where 100% foreign equity participation are allowed. There is no requirement for permission for them. For others permission is required from either FIPB or RBI before registration
After obtaining permission of Reserve Bank of India (RBI) or Foreign Investment Promotion Board (FIPB) company / branch office / liaison office is required to be registered with the Registrar of Companies under the Companies Act. Various forms and other legal requirements as required under the Companies Act is to be fulfilled before the Registrar of Companies including preparation of Memorandum and Articles of Association. The registrar on being satisfied issues certificate of incorporation and the company comes into existence.
After incorporation the company is required to be registered with various Tax and Legal Authorities to start commencement of business. These registrations range from registration with tax authorities like Income Tax Department, Sales Tax / Vat Department, Excise Department, Customs Department etc. and with other legal authorities like Provident Fund Authority, Employee State Insurance (ESI) Authority etc.
Detailed information for registration with various Tax and Legal Authorities and their Compliances shall be provided in the next part……………….
The first and foremost thing is setting up/ forming a company in India. Here, an international company has three modes for forming a company in India i.e. opening foreign branch office, open liaison office or register a fully owned foreign subsidiary company. A brief detail of all the three modes is given below:
Liaison Office – This kind of office is setup wherein only liaison work is undertaken by the entity in India and all transactions whether related to Sale/ Purchase/ Provision of any services is undertaken directly by the parent company. Liaison office is not authorized to undertaken any type of commercial activity.
Foreign Brach Office – This kind of office is setup is one step ahead of Liaison Office. In this type of setup trading transactions i.e. sale / purchase of goods is allowed directly by the Foreign Branch Office itself but there are restrictions with regard to manufacturing and provision of services.
Wholly Owned Subsidiary – This type of setup is allowed to undertake all kinds of commercial transaction subject to general or specific restrictions imposed by the Reserve Bank of India (RBI) or Foreign Inward Promotion Board (FIPB). They are required to file necessary returns with various taxation and legal authorities as a separate entity from its parent.
After deciding on the mode for forming a company as mentioned above necessary permission of either the Reserve Bank of India (RBI) or Foreign Investment Promotion Board (FIPB) is required. There are certain industries where 100% foreign equity participation are allowed. There is no requirement for permission for them. For others permission is required from either FIPB or RBI before registration
After obtaining permission of Reserve Bank of India (RBI) or Foreign Investment Promotion Board (FIPB) company / branch office / liaison office is required to be registered with the Registrar of Companies under the Companies Act. Various forms and other legal requirements as required under the Companies Act is to be fulfilled before the Registrar of Companies including preparation of Memorandum and Articles of Association. The registrar on being satisfied issues certificate of incorporation and the company comes into existence.
After incorporation the company is required to be registered with various Tax and Legal Authorities to start commencement of business. These registrations range from registration with tax authorities like Income Tax Department, Sales Tax / Vat Department, Excise Department, Customs Department etc. and with other legal authorities like Provident Fund Authority, Employee State Insurance (ESI) Authority etc.
Detailed information for registration with various Tax and Legal Authorities and their Compliances shall be provided in the next part……………….
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