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Entry Options for Foreign Investors

A foreign company that is planning to set up business operations in India has the following few options:

Branch Office
Liaison / Representative Office
Project Office
By Forming a Company in India

Branch Office Facilities:

Government of India has allowed foreign companies that are engaged in manufacturing and trading activities abroad to set up Branch Offices in India for the following purposes:
To represent its parent company/ other foreign companies in various matters in India such as acting as buying/selling agents over here.
To conduct research work in those areas where the parent company is engaged.
To undertake export and import trading activities
To promote all possible technical and financial collaborations between the Indian and overseas companies.
Rendering professional or consultancy services.
Rendering services in IT and development of software the country.
Rendering all sort of technical supports to the products supplied by the parent/ Group companies.
Foreign airlines or shipping companies.

Liaison Office Facilities:

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:

May represent in India the parent company or group companies.
May conduct research work in those areas in which the parent company or the group companies are engaged.
May promote export and/or from/ to India.
May promote technical or financial collaborations between the parent or group companies in the country.
May act as a communication channel between the parent company and the Indian companies.

Such offices are permitted only for 3 years initially but it may be extended from time to time.

Project Office:

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.

Site Office Facilities:

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.

By Incorporating a Company in India through:

Joint Venture (JV), or
A Wholly Owned Subsidiary

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.

Foreign exchange controls have been made easier on the account of trade.
Companies now can raise funds from overseas securities markets and can enjoy considerable freedom to invest abroad for expanding their global operations.
Foreign investors can remit earnings from their Indian operations.
Foreign trade is by large free from regulations, and tariff levels have come down steeply in the last couple of years.

Exit Option for Foreign Investors:

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.