A foreign company that is planning to set up business operations in India has the following few options:
To enter the Indian market, the foreign companies set up a Liaison/ Representative office in India. This office is not allowed to undertake any business activity in the country or earn any income. In fact the role of Liaison/ Representative Office is limited to collecting information about the market opportunities and about the prospects of its company’s products.
Any person residing outside India is permitted by the Reserve Bank of India (RBI) to establish a Liaison office in the country and may carry out the following activities:
Such offices are permitted only for 3 years initially but it may be extended from time to time.
Those foreign companies that are planning to execute specific projects in India are permitted by RBI to set up temporary project/ site offices in the country. Such approval is generally accorded in respect of approved by appropriate authorities or whether the project is financed by the Indian bank/ Financial Institution or else from a multilateral/ bilateral international financial institution.
By site office it means a sub-office of the project office that is established at the site where the project is being implemented. It does not include a Liaison office. No person resident outside India shall, without prior approval of the Reserve Bank, establish in India a branch or a Liaison office or a project office or any other place of business by whatever name called.
Foreign equity in such Indian companies can be up to 100% depending on the requirements of the investor, subject to equity caps in respect of the area of activities under the Foreign Direct Investment (FDI) policy.
India welcomes Foreign Direct Investment (FDI) in almost all industries. Foreign investors can now freely hold majority of stake in most of the sectors, be it manufacturing, telecom, software, services sector, trading, export-import, etc. Companies that are incorporated or are registered in India are governed by the Companies Act 1956.
India after liberalization has not only opened it's doors to foreign investors but also made investing in India easier for them.
In view of various amendments under Foreign Exchange & Management Act and Reserve Bank of INDIA regulations, exit route for the foreign Investor is become quite easy to attain the objective of free flow of foreign exchange.