Wholly owned subsidiary in India

Instead of having a joint venture company, a foreign company may incorporate its wholly owned subsidiary ('WOS') in India, where 100 per cent FDI is permitted .A 100 per cent subsidiary, incorporated as a private company, is treated as a private company for the purpose of the Act, even though the foreign holding company is a public company under the law of its country.

A person resident outside India shall be allowed to establish a branch or office or other place of business to act as a channel of communication between the principle place of business or head office by whatever name called or represent the interest of the foreign companies executing a project in India in accordance with the relevant provisions and regulations prescribed under FEMA, 1999.

Branch office in India

Foreign companies engaged in manufacturing and trading activities abroad may open branch offices for the purpose of:

• Undertaking export and import of goods;



• Rendering professional or consultancy services;



• Carrying out research work in which the parent company is engaged;



• Promoting technical and financial collaborations between Indian companies and parent company or overseas group companies;



• Representing the parent company in India and acting as buying and selling agents;



• Rendering services in information technology and development of software in India;



• Rendering technical support to the products supplied by parent/group companies; and



• Foreign airline /shipping company.

Project offices

The project office is the ideal method for companies to establish a business presence in India, if the objective is to have a presence for a limited period of time. It is essentially a branch office set up with the limited purpose of executing a specific project. Foreign companies engaged in turnkey construction or installation normally set up a project office for their operations in India.

Liaison office in India

A foreign company may open a liaison office in India to promote its business interest, spread awareness of its products, explore further opportunities and act as a communication channel between itself and various Indian companies. Liaison offices are not allowed to carry on any commercial, trading or industrial activity or earn any income in India. It is required to maintain itself out of inward remittances received from abroad through normal banking channels.

Permitted activities for a branch office in India of a person resident outside India

The following activities have been permitted by Reserve Bank for establishing branch office in India by a person resident outside India:

• Export/Import of goods.



• Rendering professional or consultancy services.



• Carrying out research work, in which the parent company is engaged.



• Promoting technical of financial collaborations 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 Informations Technology and development of software in India.



• Rendering technical support to the products supplied by parent/ group companies.



• Foreign airlines / shipping company
  

Permitted activities for a liaison office in India of a person resident outside India

The following activities have been permitted by Reserve Bank for establishing liaison office in India by a person resident outside India:

• Representing in India the parent company/ group companies.



• Promoting export from/ to India.



• Promoting technical/ financial collaborations between parent/ group companies and companies in India.



• Acting is a communication channel between the parent company and Indian companies.



• A person resident outside India permitted by Reserve Bank under regulation 5, to establish a project or site office in India shall not undertake or carry any activity other than the activity relating and incidental to execution of the project.

Joint Venture

These companies may be established in the following ways:

• Incorporating a company in collaboration with an Indian partner (such companies are predominantly private companies).



• Incorporating a company in collaboration with an Indian partner and /or with the general Indian public (such companies are necessarily public companies).

When the foreign contribution is in the form capital participation, the usual form of the venture is joint venture. Basically the organization that suits a joint venture is a company organization. The Indian experience shows that the most preferred mode is to set up a private company because under the Indian company law a private company, unlike a public company, is exempted from lot of legal compliance and statutory filings. Due care should be taken while forming JVC with respect to the controlling interests and rights of the foreign and Indian participants.

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