FAQs on Registration of Foreign Companies in India

Foreign Companies seeking to conduct business in India must register with the Registrar of Companies (RoC) under the Ministry of Corporate Affairs (MCA). The process of registering a Foreign Company in India can be complex, and there may be a variety of questions that arise during the process. In this article, we will address some of the FAQs on Registration of Foreign Companies in India.

FAQs on Registration of Foreign Company in India

Some of the FAQs on Registration of Foreign Companies in India are:

Q.1. What is a Foreign Company?

A Foreign Company is a company that is incorporated outside India but intends to conduct business in India. A Foreign Company can be a wholly-owned subsidiary or a branch office of the parent company. It includes a company that conducts business through an agent, physically or electronically, or establishes a branch office or project office in India.

Section 2(42) of the Companies Act 2013 (hereinafter referred to as “the Act”) defines a Foreign Company as a body company or company registered outside India which carries on business in India in any other manner.

Q.2. What are the different types of entities through which a Foreign Company can operate in India?

A Foreign Company can choose to operate in India through various entities, including:

• Liaison Office: A liaison office acts as a communication channel between the Foreign Company and potential Indian customers. However, it is not allowed to undertake any commercial activities.
• Branch Office: A branch office can undertake commercial activities on behalf of the Foreign Company, subject to certain restrictions.
• Project Office: A project office is set up for a specific project and can only undertake activities related to that particular project.
• Wholly Owned Subsidiary: A Foreign Company can also establish a wholly owned subsidiary in India, which is a separate legal entity with limited liability.

Q.3: What are the key requirements for registering a Foreign Company in India?

To register a Foreign Company in India, certain prerequisites must be fulfilled, such as:

• Minimum number of Directors: At least two individuals are required to act as directors of the company in India. One of the directors must be an Indian resident.
• Authorized Representative: A person who can act on behalf of the Foreign Company and represent it in India must be appointed.
• Registered Office Address: A registered office address in India is mandatory to receive official communications.
• Compliance with Indian Laws: Foreign Companies must comply with various Indian laws, such as the Foreign Exchange Management Act (FEMA) and other sector-specific regulations.

Q4. What is the process for registering a Foreign Company in India?

The process for registering a Foreign Company in India involves several steps, including:

• Obtaining a Digital Signature Certificate (DSC): The authorized representative of the Foreign Company must obtain a DSC, which is required for online filing of documents.
• Obtaining Director Identification Number (DIN): The authorized representative must also obtain a DIN from the Ministry of Corporate Affairs.
• Name Approval: The proposed name for the company must be approved by the Registrar of Companies (ROC).
• Document Submission: Various documents, such as the Memorandum of Association, Articles of Association, and other statutory documents, need to be submitted to the ROC.
• Payment of Fees: The requisite registration fees must be paid to the ROC.
• Certificate of Incorporation: Upon successful submission of documents and payment of fees, the ROC will issue a Certificate of Incorporation.

Q5. Are there any restrictions on the activities that a Foreign Company can undertake in India?

Foreign Companies operating in India must comply with certain restrictions and regulations. The activities that a Foreign Company can undertake are determined by the type of entity chosen (liaison office, branch office, project office, or wholly owned subsidiary). It is important to understand and adhere to the guidelines specified by the Reserve Bank of India (RBI) and other relevant authorities.

Q6. Are there any tax implications for Foreign Companies operating in India?

Foreign Companies operating in India are subject to Indian tax laws. The tax liabilities and obligations may vary depending on the nature of business activities, profits earned, and the applicable double taxation avoidance agreements, if any, between India and the home country of the Foreign Company. It is advisable to seek professional advice to understand the tax implications and ensure compliance with Indian tax laws.

Q7. Can a Foreign Company repatriate profits earned in India?

Yes, Foreign Companies can repatriate their profits earned in India, subject to compliance with the foreign exchange regulations of the RBI. The repatriation of funds should be done through authorized banking channels and with the necessary documentation.

Q8. Can a Foreign Company transfer its shares or ownership in an Indian company?

Yes, subject to the regulations prescribed by the Foreign Exchange Management Act (FEMA) and the RBI, a Foreign Company can transfer its shares or ownership in an Indian company to another eligible entity, either resident or non-resident.

Q.9. What are the mandatory particulars for filing returns by Foreign Companies in India?

The following are some mandatory particulars for filing returns by Foreign Company in India:

• Details of promoters, directors, and key management, as well as any changes
  since the end of the previous financial year (all)
• Details of the remuneration of directors and key managers (both)
• Membership Meeting Details + Membership Class + Board + 100%
  Committees, as well as participation details (all).
• Details of members, bondholders, and other changes (if any) since the end of the year
  previous financial year (all).
• Details of the holding company, its subsidiaries, its affiliates, its LLP, etc. (all).

Q.10. How Annual Returns of Foreign Companies is filled in India?

Foreign Companies are required to prepare and file (both) annual returns of the Indian business operations in form FC-4 within 60 days from the date of the end of the financial year, for example, May 30 each year.

Q.11. Can a Foreign Company register multiple entities in India?

Yes, a Foreign Company can register multiple entities in India, subject to the rules and regulations applicable to foreign investment in India. Foreign Companies can establish their presence in India through various modes of entry, such as the establishment of subsidiaries, branches, contact offices, or project offices. Each of these modes of entry has its own set of rules and regulations that the Foreign Company must follow.

For example, a Foreign Company can set up multiple branches in India by incorporating each branch in the Register of Companies (ROC) as a separate legal entity. However, the Foreign Company must comply with the FDI limits applicable to the specific sector in which it invests.

Similarly, a Foreign Company can set up multiple branches in India by obtaining approval from the Reserve Bank of India (RBI) and registering with the ROC. However, each branch can only carry-on activities related to the parent company’s business and cannot carry on any trade or business activity.

Q.12. What are the compliance requirements for Foreign Companies registering in India?

Foreign Companies incorporated in India must meet various legal and regulatory requirements, including the following:

• Filing of Annual Return: Foreign Companies are required to file an annual return with the Registrar of Companies (ROC) within 60 days of the close of the financial year.
• Filing of Financial Statements: Foreign Companies are required to file their financial statements, including the balance sheet, profit and loss statement, and auditor’s report, with the ROC.
• Foreign Exchange Management Act (FEMA) Compliance: Foreign Companies are required to comply with FEMA regulations, including foreign investment reporting, repatriation of funds, and compliance with transfer pricing regulations.
• Tax Compliance: Foreign Companies must comply with Indian tax laws, including filing tax returns, paying taxes, and complying with transfer pricing regulations.
• Maintenance of Books and Records: Foreign Companies are required to maintain proper books and records as per Indian accounting standards.
• Compliance with other laws: Foreign Companies are also required to comply with various other laws applicable in India, such as labor laws, environmental protection laws, and intellectual property laws.

Note: Failure to comply with these requirements may result in sanctions, fines, and legal liability for the Foreign Company. Therefore, it is important for Foreign Companies to ensure timely compliance with all legal and regulatory requirements. It is advisable to seek the assistance of a legal and financial professional to ensure proper compliance with all applicable laws and regulations.

Q.13: Can a registered Foreign Company open bank accounts in India?

Yes, once registered, a Foreign Company can open bank accounts in India for conducting its business operations. The Reserve Bank of India (RBI) has prescribed certain guidelines for opening and operating such bank accounts.

In conclusion, registering a Foreign Company in India involves a comprehensive process to ensure compliance with Indian laws. Understanding the FAQs on Registration of Foreign Companies in India can help Foreign Companies navigate through the requirements and establish a successful presence in India’s thriving business landscape.

It is advised that you speak with our legal advisor at Legal Window for Foreign Company Registration in India if you have any further concerns or queries. You may connect with them at 072407-51000 or email admin@legalwindow.in.