Setting up a legal entity is the question of right timing. Once there is a substantial amount of sales achieved through partner or local distributors, it’s time to think about own sales team. Now when is the right time? Well the time is when we see we have the sales indication, right brand experience form the market, right people tin getting the required done at a right cost. Now, what are the ways to get it done.
In order for companies to register, an application needs to filed with ROC or Registrar of Companies. Once a foreign company completes the due diligence and registers itself with ROC, it becomes subject to all the laws that are applicable to any Indian company. For example, labour law, PF, ESI, tax etc., all have to be as per defined Indian standards.
- As a foreign company – setting up base in India as a foreign company by either of the following ways:
- Liaison office – also known as representative office, they act as connecting link between the head office and its entities in India. They cannot indulge in any commercial activity, their role is to study the market in India and disseminate the information to the parent company. It can only export or import from or to India and also helps in aiding the technical partnership between the parent company and companies of India.
- Branch offices – this way is the best for those foreign companies who are in the business of manufacturing and trading. It serves the following purpose:
- Export and import of goods
- Carry research work
- Consultancy services
- Rendering technical support to the products supplied by the parent/group companies.
- Promoting technical collaboration between the parent company and other companies in India
- Rendering IT services in India
- Project office – the best way for companies that are looking towards India for specific projects. Project offices are not allowed to carry out any other work apart from those specified at the time of establishment.
- Registration of the entity:-
- Two people or companies in case of private limited company and seven people or companies in case of public limited company
- One director must be resident of India i.e., he must have been residing in India for 182 days or more in the preceding financial year)
- Indian address
- Registration of the company
- Reporting to Reserve Bank of India.
- FDI in Limited Liability Partnership:-
The foreign nationals/companies can now enter India as Limited Liability Partnership. The LLP makes you responsible only to a limited amount of debts for a company, but requires pre-approval from the government in FDI as compared to the private limited company.
- With 100 percent FDI in LLP there are certain norms that are to be followed:-
- An LLP operating in sectors/activities where 100 percent FDI is allowed under the automatic route of FDI scheme would only be eligible to receive FDI.
- LLP shall not be eligible to accept FDI in sectors in which less than 100 percent FDI under automatic route
- LLP shall not be eligible to accept FDI in sectors in which FDI is allowed under government approval route
- FDI in a LLP shall always require prior government/FIPB approval
- No FDI in LLP to operate in agriculture, real estate, plantation and print media
- Foreign venture capital investors and FPI or foreign portfolio investors will not be allowed to make investment in LLPs
- In the case of LLP with FDI, that has a body corporate as a designated partner or nominates someone as a designated partner (as defined in h).Section 7 of LLP Act 2008) must be a company registered under the Company’s Act 1956/2013.
- FDI in private limited & public limited vs LLP – we find the following differences:-
- In case of private limited/public limited company FDI is allowed in both automatic route and approval route, whereas in case of LLP, FDI is allowed only in automatic route.
- LLPs investing in sectors that fall under category of automatic route still need to take government/FIPB approval, whereas in case of private limited/public limited company if investment is made in automatic route no prior government/FIPB approval is required