The last decade has seen India encouraging foreign direct investment (FDI) in almost all sectors including manufacturing, insurance, telecom, software, trading etc. This has lead to many international giants setting up operations in India, or entering into joint ventures with many Indian companies. It has become easier for international companies to trade in India as foreign exchange controls have been relaxed. Indian companies have also been allowed to raise money / funds from international markets and also invest abroad. Trade tariff levels have also been reduced for facilitating trade.
International companies can set up business operations in India by forming a new company, through wholly owned subsidiaries or joint ventures.
Private Limited Company
According to Section 3(1)(iii) a Private Company is one which
· Has a minimum paid-up capital of one lakh rupees.
· Restricts the right to transfer its shares (any restriction that enables the directors to maintain minimum limit of two members and the maximum limit of 50 members, shall serve the purpose).
Limits the number of its members to 50. This number does not include employees of the company and the ex-employees of the company who are still members of the company.
Prohibits the subscription of shares or debentures from general public.
Prohibits any invitation or acceptance of deposits from any person except its members, directors or their relatives.
Public Limited Company
According to Section 3(1)(iv), a Public Limited Company is a one which:
Is not a private company.
Has a minimum paid-up capital of Rs five lakhs.
Is a private company which is a subsidiary of a public company.
A public company cannot have less than seven members. There is no restriction with regard to the maximum number of persons who can acquire the shares or debentures of a public company.
The shares and debentures may be quoted in stock exchange and are freely transferable.
Opening a branch office
· Foreign companies engaged in manufacturing and trading activities abroad are allowed to set up Branch Offices in India after prior approval from Reserve Bank of India (RBI) for the following purposes:
· Export/Import of goods
· Rendering professional or consultancy services
· Carrying out research work, in which the parent company is engaged.
· Promoting technical or financial collaborations between Indian companies and parent or overseas group company.
· Representing the parent company in India and acting as buying/selling agents in India.
· Rendering services in Information Technology and development of software in India.
· Rendering technical support to the products supplied by the parent/group companies.
Foreign airline/shipping Company
· Branch Offices established with the approval of RBI, may remit outside India profit of the branch, net of applicable Indian taxes and subject to RBI guidelines .
Opening a project office
· Foreign companies planning to execute specific projects in India can set up a temporary project/site office in India for carrying out activities only relating to that project. The Government of India has now granted general permission to foreign entities to establish project offices subject to specified conditions.
Opening a liaison/representative office
· A Liaison Office could be established with prior approval of Reserve Bank of India (RBI). The role of Liaison Office is limited to collection of information, promotion of exports/imports and facilitate technical/financial collaborations. Liaison office cannot undertake any commercial activity directly or indirectly.