Entry requirements for doing business in India
Public Limited Company
A company that can offer shares to the public is termed as a public limited company. The Companies Act 1956 mandates a list of criteria that have to be met by the public limited companies before they start their business operations in India. A few of these criteria are listed below:
• It should have at least seven shareholders.
• A public company is allowed to start its activities only after procuring the ‘Certificate of Commencement of Business’. The ‘Certificate of Incorporation’ alone will not suffice the purpose.
• The company should release a prospectus or issue a statement to sell its securities.
• It must have at least three directors in its board.
• The company should conduct statutory meeting from time to time.
Private Limited Company
A private limited company is not owned by any governmental body, and it does not offer public shares. The number of shareholders for a private limited company is restricted to a maximum 50, whereas the minimum required is 2. The shareholders, however, do not have the power to transfer or trade their shares publicly.
All foreign companies are allowed to set up a project office or a site office in India. This facility is allowed as a temporary arrangement, exclusively for the project mentioned in the application, and its activities have to be terminated as soon as the project is over. There are certain conditions mentioned as general permission policy which have to be met before establishing the project offices.
The activities of a liaison office in India are restricted to collecting information, promoting export and import activities and assisting in both technical and financial collaboration with other groups or companies.
The following are the requirements to set up a Liaison Office/ Representative Office in India
• Prior approval from Reserve Bank of India (RBI) is required.
• An agreement has to be signed stating that the office would not involve in any type of commercial activity in India.
Branch offices are allowed for companies that are involved in manufacturing as well as trading businesses in foreign countries. They need to get prior approval from the RBI. The activities of the branch offices in India are restricted to the following activities alone.
Manage the export/import activities
• Conduct research activities in the same field as the parent company is involved.
• Offer consultancy services to the customers
• Facilitate collaboration with Indian companies.
• Function as the representative/agent of the parent company in India for facilitating the buying/selling activities.
• Offer technical support/solutions to various products supplied in India by the foreign parent company.
• Offer necessary Information Technology (IT) services and develop necessary software.
The profit acquired by the approved branch offices can be remitted outside India, after paying the net applicable taxes and meeting other formalities as per the RBI guidelines.