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Foreign Company Setup in India

Foreign Company Setup in India

India offers affordable human resources, land, water, and electricity in abundance, making it an attractive destination for foreign companies to establish their presence. Like domestic entities, foreign companies operating in India must comply with specific legal and regulatory requirements under Indian laws.

This guide explains how foreign companies can start a business in India and the compliance requirements under the Companies Act, 2013.

What is a Foreign Company?

A foreign company is defined as a company or body corporate incorporated outside India that:

  • Has a place of business in India, either physically or electronically, whether by itself or through an agent.
  • Conducts any business activity in India in any manner.

Even a mere virtual or visual presence in India qualifies a foreign entity under this definition.

An Indian subsidiary of a foreign company is one in which 50% or more of the equity shares are held by a company incorporated outside India. In such cases, the foreign entity is known as the holding or parent company.

As per the Companies (Registration Offices and Fees) Rules, 2014, all documents required to be filed by foreign companies must be submitted to the Registrar of Companies, New Delhi, irrespective of their place of business in India.

Procedure for Foreign Company Registration in India

Once a foreign company establishes a place of business in India, it must file Form FC-1 with the Registrar within 30 days, along with the following documents:

  • Charter documents (translated into English).
  • Address of the registered or principal office.
  • List of all directors and secretaries.
  • Name and address of the person(s) resident in India authorized to receive notices.
  • Address of the place of business in India.
  • Details of any previous place of business in India.
  • Declaration regarding non-conviction or debarment of directors or representatives.
  • Any other relevant information.

Upon successful filing, a Foreign Company Registration Number (FCRN) is generated and a certificate of registration is issued.

Information Required for Directors and Secretaries

  • Full name and previous names (if any).
  • Father’s/Mother’s name and spouse’s name.
  • Date of birth, nationality, and residential address.
  • PAN (if available) and passport details.
  • Occupation and directorship details in other entities.
  • Membership number (for secretaries).
  • Email ID.

Alteration in Foreign Company Documents

If there is any alteration in the documents submitted during registration, the company must file Form FC-2 within 30 days of such change.

Mandatory attachments include:

  • Certified copy of board resolution.
  • Copy of resolution passed in general meeting.
  • Approval letter (if applicable).
  • Changes in business address in India.
  • Changes in directors or secretaries.
  • Changes in authorized representatives.
  • Other relevant optional attachments.

Financial Statements and Audit Requirements

Foreign companies must prepare financial statements of their Indian business operations in accordance with Schedule III of the Companies Act, 2013 and file them using Form FC-3 within 6 months from the end of the financial year.

The Registrar may grant an extension of up to 3 months.

Accounts must be audited by a practicing Chartered Accountant or a CA firm/LLP.

Mandatory attachments include:

  • Consolidated financial statements.
  • Balance Sheet and Profit & Loss Account.
  • Details of related party transactions and fund repatriation.
  • Approval letters for Indian establishments.
  • Any other relevant optional information.

Annual Return Filing

Foreign companies must file their annual return using Form FC-4 within 60 days from the end of the financial year.

Required details include:

  • Promoters, directors, and KMP details.
  • Remuneration details.
  • Meeting and attendance details.
  • Details of members and debenture holders.
  • Holding, subsidiary, and associate company details.
  • Penalties or compounding details (if any).

Foreign Company Registration Number (FCRN)

While Indian companies are identified by a Corporate Identity Number (CIN), foreign companies are allotted a six-digit FCRN, generated automatically upon approval of Form FC-1.

Setting Up a Liaison Office (LO) or Branch Office (BO) in India

A foreign entity can establish a business presence in India by opening a Liaison Office or Branch Office. Prior approval from RBI is generally required.

Key Differences Between LO and BO

Eligibility:

  • Liaison Office: Minimum 3 years profit track record and USD 50,000 net worth.
  • Branch Office: Minimum 5 years profit track record and USD 100,000 net worth.

Time Required: 3–4 months, subject to RBI approvals.

Validity:

  • LO: 3 years (2 years for NBFCs and construction entities).
  • BO: Generally valid for 2–3 years.

Taxability:

  • LO: Not taxable in India.
  • BO: Taxed at approximately 41.60%–43.68% including surcharge and cess.

Importance of DIN for Foreign Companies

DIN is not mandatory for directors of foreign companies operating in India through branch offices.

How TwinDesk Accounting and Legal Advisors LLP Can Help

At TwinDesk Accounting and Legal Advisors LLP, we assist foreign investors in setting up businesses in India, including Indian subsidiaries, branch offices, liaison offices, and franchise registrations.

For professional assistance in foreign company registration in India, contact us at:
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