Foreign Company has to follow certain rules and guidelines as laid down by The Companies Act, 2013, RBI guidelines etc.
Sec 2 (42) of the Companies Act 2013 defines a Foreign company as:
“A foreign company is any company or body corporate incorporated outside India which—
a) Has a place of business in India whether by itself or through an agent, physically or through electronic mode; and
b) Conducts any business activity in India in any other manner.
India has amongst the most 6 liberal and transparent policies on FDI among emerging economies. FDI up to 100% is allowed under almost all activities, except a few.Press Note 7 (2008 Series) further provides that the following sectors are prohibited for FDI:
General permission of the Reserve Bank of India (RBI) is available to Indian companies to issue right/bonus shares, subject to certain conditions. Entitlement of rights shares is not automatically available to investors who have been allotted such shares as Overseas Corporate Bodies (OCBs). OCBs have been derecognized as a class of investors with effect from 16 September 2003. Such issuing companies would have to seek specific permission from RBI, Foreign Exchange Department, Foreign Investment Division, Central Office, Mumbai for issue of shares on right basis to erstwhile OCBs. However bonus shares can be issued to erstwhile OCBs
Where a scheme of merger or amalgamation of two or more india company incorporation has been approved by a court in India, the transferee company may issue shares to the shareholders of the transferor company resident outside India, subject to ensuring that the percentage of shareholding of persons resident outside India in the transferee or new company does not exceed the percentage specified in the approval granted by the Central Government or the RBI.
An individual resident in India may purchase equity shares offered by a foreign company under its ESOP scheme if he/she is an employee or a director of an Indian office, branch or subsidiary of a foreign company.
In the case of the software field, a resident may purchase shares of a Joint Venture Company/Wholly owned Subsidiary (JV/WOS) if he/she is an employee or director of the Indian Promoter Company where the shares so acquired do not exceed 5% of the paid-up capital of the JV/WOS outside India.
Foreign equity in such Indian companies can be up to 100% depending on the requirements of the investor, subject to any equity caps prescribed in respect of activities under the FDI policy.
Such offices can undertake activities permitted under the Foreign Exchange Management (Establishment in India of Branch Office of other place of business) Regulations, 2000.
Establishments set up in Special Economic Zones, Free Trade Zone, Software Technology Park or as Export Oriented Units, are entitled to several fiscal benefits. Please note that the benefits extended to the above cease in 2010, with the exception of Special Economic Zones, which do not have a Sunset Clause.
Registration of non-resident companies:
A foreign company, meaning a body corporate incorporated outside India but having a place of business in India (Companies Act, sec 591), is required, within 30 days of the establishment of a place of business in India, to deliver to the Registrar for registration, a certificate copy of the charter, statutes, memorandum articles, etc, of the company, full address of the registered or principal office of the company, names of the persons in India authorized to accept service of process on the company and the full address of the office of the company in India.
The Registrar, for the purposes of a foreign company, is the Registrar having jurisdiction over New Delhi. The documents referred to must also be delivered to the Registrar of the State in which the principal place of business of the company is situated.
In addition to a wholly owned subsidiary/joint venture in India, a foreign company may establish its presence in India by either setting up:
Establishing a liaison office and a branch office or project office requires prior approval of the Reserve Bank of India (“RBI”). Liaison office in India.
A liaison office means a place of business to act as a channel of communication between the principal place of business or head office and the entity in India but which does not undertake any commercial/trading/industrial activity and maintains itself out of inward remittances received from abroad. A liaison office may be permitted to carry on the following activities:
A foreign company/person resident outside India may be permitted by RBI to undertake the following activities: