India Entry Strategies

India is one of the most ideal destinations for foreign investors looking to set up their businesses in India. The country not only provides a conducive environment for business but also offers tremendous opportunities for investors. There has been a continuous surge in foreign direct investment (“FDI”) in the country. However, there are many risks associated with venturing into a new geography with a complex accounting, tax, and regulatory environment.

Therefore, for starting business operations in India, it is important to understand the process and the governing laws of the country. Depending on the nature of the business, there are numbers of approvals a company requires from the government before starting operations. The mode of entry also plays an important role in achieving the strategic objective.

• India Entry Strategies for Foreign Companies / Foreign Nationals

1. Incorporation of a private limited company is the easiest and fastest type of Indian entry strategy for foreign nationals and foreign companies. Foreign direct investment of up to 100% into a private limited company or limited company is under the automatic route, wherein no Central Government permission is required. Hence, incorporation of a private limited company as a wholly owned subsidiary of a foreign company or joint venture is the cheapest, easiest and fastest entry strategy for foreign companies and foreign nationals into India.
2. Incorporation of a Limited Liability Partnership (LLP) is also an India entry strategy for foreign nationals or foreign citizens as 100% FDI in LLP is now allowed. An LLP, however, cannot have shareholders and must be represented by Partners – thereby making it an ideal choice for investment vehicles and professional firms.
3. Proprietorship firms or Partnership firms are the most basic types of business entities mostly used by very small businesses or unorganised players. Foreign investment into a proprietorship firm or partnership firm requires prior RBI approval. Hence, proprietorship firms or partnership firms are not suitable for foreign companies or foreign national investment in India.
4. Registration of the Branch Office, Liaison Office, or Project Office requires RBI and/or Government approval. Therefore, the cost and time taken for registration of a branch office, liaison office, or project office for a foreign company is higher than the cost and time associated with the incorporation of a private limited company. Further, foreign nationals cannot open branch offices, liaison offices, or project offices. Hence, this option is limited to being an India entry strategy only for foreign companies.

A foreign Company can commence operations in India through the following routes:

• As an Indian Company
• As a foreign company

As an Indian Company

Wholly Owned Subsidiary in India

Joint Venture in India

A foreign company, setting up an eligible business activity, may register a wholly owned subsidiary (“WOS”) in India. WOS is a preferred business vehicle for those who wish to have limited liability and prefer to keep total control over the business. A WOS can be set up as a private limited or a public limited company. Most Small and Medium enterprises prefer to set up as a Private Limited Company which is a closely held company. We help in opening and incorporating a company in India.

Joint Venture (JV) refers to the formation of a new company by 2 or more partners who join hands for a common objective. Joint Ventures can be of two types

• Unincorporated Joint Ventures – these are typically formed in consortiums when executing projects and the partners are reluctant to incorporate a company
• Incorporated Joint Venture – These are more common and as in the case of a wholly owned subsidiary (WOS), a JV can be set up either as a private limited or a public limited company.

Setting up operations through a Joint Venture may provide the following advantages to a foreign investor:

• Already established distribution/marketing set up of the Indian partner.
• Available financial resources of the Indian partner.
• Already established contacts of the Indian partners that help ease the process of setting up operations.
• Getting entry into sectors that don’t allow exclusive ownership by foreign investors
• Limited Liability Partnership in India

Limited Liability Partnership in India

Limited Liability Partnership (“LLP”) is a partnership having a separate legal entity and limited liability. It’s basically a hybrid of a traditional partnership and a private limited company. With the intent and objective to promote LLPs as a structure for foreign investors, the Indian government has recently permitted FDI in LLPs in a calibrated manner. LLP enjoys tax advantages over a company and is comparatively easier to manage with fewer compliance levels as compared to a company form of organization.

As a Foreign Company

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. We help in setting up liaison offices of Foreign Entities in India.

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 subcontract these services to an Indian manufacturer. We help in opening a Branch Office for Foreign Entities in India.

Project Office in India

Foreign Companies having obtained specific project contracts in India can set up temporary project offices (“PO”). If certain conditions are satisfied, the PO can be even set up without any prior approval from the RBI. These offices can only undertake an activity related and incidental to the execution of the specified project. After the completion of the project, the surplus funds can be repatriated back to the parent company. We help in setting up a Project Office for Foreign Entities in India.

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