ENTRY STRATEGY INTO INDIAN MARKET AS A FOREIGN COMPANY

 

ENTRY STRATEGY INTO INDIAN MARKET

AS A FOREIGN COMPANY

 Foreign Companies can set up their operations in India through:

(A) Liaison Office/Representative Office (LO) or,

(B) Project Office (PO) or,

(C) Branch Office (BO)

A) LIAISON OFFICE (LO):

A Liaison Office (also known as Representative Office) can undertake only liaison activities, i.e. it can act as a channel of communication between Head Office abroad and parties in India.

Expenses of such offices are to be met entirely through inward remittances of foreign exchange from the Head Office outside India.

Role & Responsibilities

·        To collect information about possible market opportunities

·        To provide information about the company and its products to the prospective Indian customers.

Permissible activities for BO:

·        Representing in India the parent company / group companies.

·        Promoting export / import from / to India.

·        Promoting technical/financial collaborations between parent/group companies and companies in India.

·        Acting as a communication channel between the parent company and Indian companies.

Non Permissible Activities for BO:

·        To undertake any business activity in India and cannot earn any income in India.

 Prior Approvals:

Foreign Insurance companies can establish Liaison Offices in India only after obtaining approval from the Insurance Regulatory and Development Authority (IRDA).

Foreign banks can establish Liaison Offices in India only after obtaining approval from the Department of Banking Regulation (DBR), RBI.

Necessary Documentation and Form Filings:

An application for establishing office in India shall be filed in Form FNC (Annex-1) along with the documents mentioned therein to Foreign Investment Division, Reserve Bank of India, Central Office, Fort, Mumbai.

B) PROJECT OFFICE (PO):

Project Office means a place of business representing the interests of the foreign company executing a project in India.

RBI has  granted general permission to foreign companies to establish Project Offices in India, provided they have secured a contract from an Indian company to execute a project in India, and,

·        the project is funded directly by inward remittance from abroad; or

·        the project is funded by a bilateral or multilateral International Financing Agency; or

·        the project has been cleared by an appropriate authority; or

·        a company or entity in India awarding the contract has been granted Term Loan by a Public Financial Institution or a bank in India for the project.

Non-Permissible Activities for PO:

·        Prohibition from undertaking or carrying on any activity other than the activity relating to the execution of the project for which such office is established.

Prior Approval:

Setting up of Project Offices by foreign Non-Government Organizations/Non-Profit Organizations/Foreign Government Bodies/Departments, by whatever name called, are under the Government Route. Accordingly, such entities are required to apply to the Reserve Bank for prior permission to establish an office in India, whether Project Office or otherwise.

Necessary Documentation & Form Filings:

The application for establishing Project Office in India may be submitted by the non-resident entity in Form FNC (Annex B) to a designated AD Category – I bank along with the prescribed documents mentioned in the Form.

 C) BRANCH OFFICE (BO):

Companies incorporated outside India and engaged in manufacturing or trading activities are allowed to set up Branch Offices in India with specific approval of the Reserve Bank.

Permissible Activities for BO:

·        Export / Import of goods.

·        Rendering professional or consultancy services

·         Carrying out research work, in areas in which the parent company is engaged.

·        Promoting technical or financial collaborations between Indian companies and parent or overseas group company.

·        Representing the parent company in India and acting as buying / selling agent in India.

·        Rendering services in information technology and development of software in India.

·        Rendering technical support to the products supplied by parent/group companies.

·        Foreign airline/shipping company.

Non Permissible Activities for BO:

·        To carry out retail trading activities of any nature.

·        To carry out manufacturing or processing activities in India, directly or indirectly.

 

Necessary Documentation & Form Filings:

Application for opening a new branch office in India shall be filed in Form FNC (Annex-1) and will be considered directly by the RBI if it falls under one of the sectors where 100% FDI investment is allowed.

Prior Approval

For sectors other than the allowed sectors an application must be approved by the Ministry of Finance as well as RBI.

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