Setup Business In India

Broadly, there are three ways of setting up business in India which are as follows:

India Company

India Company as (i) Private Limited or (ii) Public Limited Company under the provisions of Companies Act, 2013
a. Joint Venture,
b. wholly Owned Subsidiary

Foreign Company

Foreign Company as per RBI guidelines and provisions of Companies Act, 2013
a. Liaison Office: To represent the parent company in India
b. Branch Office: To undertake activities such as Export, Import, research, consultancy etc.
c. Project office: Activities as per contract to execute project

Limited Liability Partnership

under the provisions of Limited Liability Partnership Act, 2008

Overview of different business establishments permitted in India

PARTICULARS	PRIVATE	PUBLIC	OPC	LLP
Min Members	2	7	1	2 Partners
Max Member	200	Unlimited	1	No Limit
Min Directors	2	3	1	2 Designated Partner
Max Directors	15*	15*	15*	NA
Resident Director	1 Mandatory	1 Mandatory	1 Mandatory	1 Designated Partner
Transfer of ownership	Ownership can be transferred	Ownership can be transferred	Ownership can be transferred to nominee in the event of death of owner	Ownership can be transferred
Subscription of shares	Public subscription not allowed	Public subscription allowed	Public subscription not allowed	Public subscription not allowed
Issue of Prospectus	Not Mandatory	**Mandatory	Not Mandatory	Not Mandatory
Managerial Remuneration	No limit for managerial personnel	Shareholder approval is required, if remuneration payable is above limits	NA	Remuneration is based on LLP agreement
Commencement of Business/ Operations	Declaration to be filed prior to commencement	Declaration to be filed prior to commencement	Declaration to be filed prior to commencement	Immediately after obtaining certificate of

PARTICULARS

PRIVATE

PUBLIC

OPC

LLP

Min Members

2 Partners

Max Member

200

Unlimited

No Limit

Min Directors

2 Designated Partner

Max Directors

15*

Resident Director

1 Mandatory

1 Designated Partner

Transfer of ownership

Ownership can be transferred

Ownership can be transferred to nominee in the event of death of owner

Ownership can be transferred

Subscription of shares

Public subscription not allowed

Public subscription allowed

Public subscription not allowed

Issue of Prospectus

Not Mandatory

**Mandatory

Not Mandatory

Managerial Remuneration

No limit for managerial personnel

Shareholder approval is required, if remuneration payable is above limits

Remuneration is based on LLP agreement

Commencement of Business/ Operations

Declaration to be filed prior to commencement

Immediately after obtaining certificate of

Resident Director: Sec 149(3) - Every company should have at least one director who has stayed in India for a total period of not less than 182 days in the financial year. He/She can be foreign National.

Foreign nationals can incorporate company in India and hold foreign equity to the extent of 100%, which is dependent upon sector in which company will operate and is subject to approval from either Reserve Bank of India (RBI) or Foreign Investment Promotion Board (FIPB)

*Company may appoint more than fifteen directors after passing a special resolution, further provided that such class or classes of companies as may be prescribed, shall have at least one woman director (Rule 3 of The Companies (Appointment and Qualification of Directors) Rules, 2014)

**In case of public issue

Liaison Office in India

Setting up a liaison or representative office (“LO”) is a common practice for foreign companies seeking to enter the Indian market. The role of such offices is limited to collecting information about the possible market and to providing information about the company and its products to prospective Indian customers. It cannot undertake any commercial activities and must only use remittances received from its parent foreign company to maintain itself.

Branch Office in India

As a Branch Office (“BO”) in India, foreign companies can conduct full-fledged business in India. BO can carry the same or substantially the same trading activities as carried out by their parent or group companies. However, BO is not allowed to directly carry out manufacturing activities though it is permitted to sub-contract these services to an Indian manufacturer.

Eligibility Criteria:

Requirements	For Branch Office	For Liaison Office
Profit making track record	immediately preceding 5 financial years	immediately preceding 3 financial years
Net Worth*	> USD 100,000 or equivalent	> USD 50,000 or equivalent

*Net Worth is total of paid-up capital and free reserves, less intangible assets as per the latest Audited Balance Sheet or Account Statement certified by a Certified Public Accountant or any Registered Accounts Practitioner by whatever name called.

Time Period:

It generally takes 45 days to register an LO / BO. Validity for setting up of Liaison Office for companies in the business of construction & development and Non-Banking Finance Companies (NBFCs) has been set for two years. The validity of setting up of LO in rest all of the cases is for 3 years. Renewal is required after 3 years. However, in case of BO, renewal of registration is generally not required but in some cases RBI gives approval for 2-3 years and renewal is required post that.

Validity of Approval:

After the approval, LO/BO shall establish the office within six months. The approval shall elapse, in case the office is not set up in six months. Companies looking for any further extension of time shall require prior approval of RBI.

Shifting of Office:

AD banks are now authorized to grant approval to shift office to another city in India. In case the office change is within the same city, no such approval shall be required. Only filing of an intimation of the new address with the AD bank would be required.

Name Change:

AD bank may permit change in name of LO/BO if there is no change in the ownership of foreign company. However if the change in name is due to merger/acquisition/change in ownership of the parent company, then the closing of existing LO/BO shall be required. Also, fresh approval would be required for the same.