Step-by-Step Guide to Forming a Foreign Company in India

India continues to be one of the fastest-growing major economies in the world, driven by strong macroeconomic fundamentals, a skilled and cost-effective workforce, rapid digitalisation, and a vast consumer market of over 1.4 billion people. Pro-business reforms, ease-of-doing-business initiatives, and a robust startup ecosystem have made India a preferred destination for global investors across technology, manufacturing, fintech, e-commerce, and services.

As a result, Foreign Direct Investment (FDI) inflows into India have shown consistent growth, with multinational corporations, startups, and international entrepreneurs increasingly setting up operations in India. However, foreign entities intending to establish a presence in India must comply with the applicable legal, regulatory, and exchange-control frameworks, including the Companies Act, 2013, Companies (Registration of Foreign Companies) Rules, 2014, RBI regulations, FEMA, and sector-specific FDI policies. A clear understanding of these requirements is essential to ensure smooth incorporation, regulatory compliance, and long-term operational success

Ways in Which Foreign Companies Can Be Registered in India

India has emerged as a preferred destination for foreign entrepreneurs and global businesses looking to expand into Asia. With liberalised FDI policies, a strong regulatory framework, and digitised incorporation processes, setting up a company in India is now faster and more structured than ever.

A foreign national or foreign company can establish its presence in India through multiple business structures, depending on the nature of operations, investment plans, and long-term goals.

The main options are:

• Private Limited Company (Joint Venture or Wholly-Owned Subsidiary)
• Liaison Office
• Project Office
• Branch Office

Among these, a Private Limited company is the most preferred structure for full-fledged operations.

Private Limited Company – The Most Preferred Option

A Private Limited Company is the most popular and efficient way for foreign nationals to set up a business in India. It offers a separate legal entity, limited liability, and scalability, along with the possibility of 100% foreign ownership in most sectors under the automatic route of India’s FDI policy.

A foreign investor can incorporate a private limited company in India in either of the following ways:

• Joint Venture with an Indian Partner
• Wholly-Owned Subsidiary

Both structures allow foreign investors to conduct full-fledged business operations in India, subject to sectoral caps and conditions under FEMA and FDI policy.

Joint Venture Company in India

A Joint Venture (JV) involves a foreign entity partnering with an Indian individual or company to operate a business in India. This route is often preferred where local market knowledge, regulatory support, or industry-specific expertise is required.

Key Features of a Joint Venture

• The foreign entity identifies and selects a suitable Indian partner.
• A Memorandum of Understanding (MoU) or Letter of Intent (LoI) is executed outlining the intent of collaboration.
• A detailed Joint Venture Agreement is negotiated and signed between the parties.

Typical Clauses in a Joint Venture Agreement

The Joint Venture Agreement generally covers, among others:

• Shareholding structure and equity participation
• Management and board composition
• Capital contribution and funding terms
• Transfer of shares and exit mechanisms
• Confidentiality and non-compete obligations
• Dispute resolution, governing law, and jurisdiction

The agreement must comply with Indian laws, FDI regulations, FEMA, and also align with international legal standards wherever applicable.

Wholly-Owned Subsidiary in India

A Wholly-Owned Subsidiary (WOS) allows a foreign company or foreign national to own 100% shareholding in an Indian private limited company, subject to sector-specific FDI conditions. This is the most preferred route for businesses seeking full control, long-term presence, and scalability in India.

Key Requirements for a Wholly-Owned Subsidiary

• Minimum two directors, with at least one director being a resident in India.
• Minimum two shareholders (can be individuals or body corporates).
• Compliance with sectoral caps and conditions under the FDI policy.

Registration Process for a Wholly-Owned Subsidiary

1. Obtain Digital Signature Certificates (DSC) for all proposed directors and authorised signatories.
2. Obtain Director Identification Number (DIN) – now integrated within SPICe+ for up to three directors.
3. Draft Memorandum of Association (MoA) and Articles of Association (AoA) as per Indian company law and FDI conditions.
4. Reserve the company name through SPICe+ (Part A) on the MCA portal.
5. File the incorporation application through SPICe+ (Part B) along with linked forms like AGILE-PRO-S for GST, ESIC, EPFO, and bank account where applicable.
6. Submit required documents, including:
   • Registered office address proof (rent agreement, NOC, utility bill, etc.)
   • PAN and address proof of Indian directors
   • Passport and overseas address proof of foreign directors/shareholders (duly apostilled or consularised)
   • Board resolutions and charter documents of foreign parent, where applicable
7. Pay statutory fees and stamp duty online (state-specific).
8. Receive Certificate of Incorporation (COI) along with PAN and TAN allotment from the Registrar of Companies.
9. Open a company bank account in India.
10. File FDI reporting (Form FC-GPR, etc.) and share allotment compliances within prescribed timelines under FEMA and RBI regulations.

Other Ways for Foreign Companies to Establish Presence in India

Foreign companies that do not wish to incorporate a subsidiary can also operate in India through the following structures, subject to RBI and FEMA regulations.

Liaison Office in India

A Liaison Office (also called a Representative Office) is suitable for foreign companies looking to explore the Indian market and maintain communication channels without undertaking commercial or revenue-generating activities.

Key Conditions

• Parent company should have a profit-making track record of at least three years.
• Minimum net worth of around USD 50,000 (or equivalent), as per latest audited financial statements.
• Prior approval from the Reserve Bank of India (RBI) or Authorised Dealer (AD) Bank, as applicable.

Permitted Activities

• Representing the parent company in India.
• Promoting import/export from/to India.
• Facilitating technical or financial collaborations.
• Acting as a communication channel between head office and Indian parties.

A Liaison Office cannot undertake commercial, trading, or manufacturing activities and cannot generate income in India; all expenses must be met through inward remittances from the head office.

Project Office in India

A Project Office can be set up by a foreign company to execute a specific project awarded by an Indian entity, usually in infrastructure, construction, or engineering.

When RBI Approval Is Not Required

RBI/AD Bank approval is generally not required if:

• The project is funded directly by inward foreign remittance from abroad.
• The project is funded by a bilateral or multilateral international financing agency.
• The project has been cleared by an appropriate authority or ministry.
• The Indian company awarding the contract has obtained a term loan from a public financial institution or scheduled bank in India for the project.

If these conditions are not met, specific permission from RBI/AD Bank is required via Form FNC or applicable route.

Branch Office in India

A Branch Office allows a foreign company to carry out specific and limited business activities in India, often used for trading, service delivery, or technical support.

Eligibility Criteria

• Profit-making track record of at least five years in the home country.
• Net worth of at least USD 100,000 or as prescribed.
• Prior RBI or AD Bank approval under FEMA regulations.

Permitted Activities

• Import and export of goods.
• Professional or consultancy services.
• Research and development activities.
• IT and software services.
• Technical support to Indian customers.
• Acting as a buying/selling agent in India.

Branch offices are generally not permitted to carry out manufacturing activities on their own, though contract manufacturing through third parties may be allowed in certain cases; retail trading is also restricted.

Choosing the Right Structure for Foreign Entry into India

Each entry route—Private Limited Company, Joint Venture, Wholly-Owned Subsidiary, Liaison Office, Branch Office, or Project Office—has distinct legal, tax, operational, and compliance implications.

Key factors to consider include:

• Nature and scale of proposed business.
• Level of operational control and long-term strategy.
• Tax implications and profit repatriation.
• Regulatory approvals and compliance costs.
• Need for local partners or representation only.

Professional guidance from corporate, tax, and FEMA advisors is strongly recommended to ensure correct structure selection, smooth incorporation, and risk-free operations in India.

Step-by-Step Guide: How to Register a Business in India (Private Limited Company Route)

Registering a business in India as a foreign company has become much more streamlined due to the fully digital process managed by the Ministry of Corporate Affairs (MCA) through the SPICe+ web form. The most common and practical structure for foreign investors is a Private Limited Company.

From practical experience of guiding foreign clients, the process can be broken down as follows.

Step 1: Obtain Digital Signature Certificate (DSC)

The first step is obtaining a Digital Signature Certificate (DSC) for all proposed directors and authorised signatories.

• DSC is mandatory for signing and submitting electronic forms on the MCA portal.
• Class 3 DSC is commonly used for company incorporation.
• DSCs are typically issued with a validity of 1–2 years.
• A secure USB token is provided for usage.

Step 2: Apply for Director Identification Number (DIN)

A Director Identification Number (DIN) is a unique identification number allotted to individuals who wish to act as directors in an Indian company.

• Separate DIN-1 filing is no longer required for new companies.
• DIN allotment is integrated with the SPICe+ form.
• Up to three directors can obtain DINs through a single SPICe+ application.

Step 3: Company Name Reservation (SPICe+ Part A)

The applicant must reserve the proposed company name by filing SPICe+ Part A on the MCA portal.

• One or two proposed names can be submitted.
• The main objects and business activity must be clearly mentioned in the application.
• Name approval generally takes about 2–5 working days, subject to MCA workload.
• If rejected, resubmission is permitted within the same application with revised names.
• Once approved, the company name is reserved for 20 days (for new companies).

Step 4: Filing Company Incorporation Application (SPICe+ Part B)

After name approval, SPICe+ Part B must be completed and filed within the name reservation validity.

This includes:

• Company details (registered office, authorised and paid-up capital, main objects).
• Director and shareholder details, including nationality and shareholding pattern.
• Drafted MoA and AoA (either e-MoA/e-AoA or physical, based on subscriber profile).
• Mandatory declarations, affidavits, and statements of compliance.
• Details for allied registrations such as GST, ESIC, EPFO, bank account, if opted via AGILE-PRO-S.
• Digital signatures of directors/subscribers and practising professional (CA/CS/CMA).

Step 5: Submission of Documents and Payment of Government Fees

The applicant must upload all required documents and pay the applicable fees online.

Typical documents include:

• Proof of registered office address (rent agreement, NOC, utility bill).
• Identity and address proof of all directors and shareholders.
• Passport and overseas address proof for foreign nationals (duly apostilled/consularised).
• Charter documents and board resolutions of foreign parent (for subsidiaries).
• PAN, if available, for resident shareholders/directors.

Statutory filing fees and stamp duty vary by authorised capital and state of incorporation.

Step 6: Issue of Certificate of Incorporation (COI), PAN, and TAN

Once the Registrar of Companies (RoC) verifies the application and documents:

• The Certificate of Incorporation (COI) is issued with the Corporate Identification Number (CIN).
• PAN and TAN are allotted automatically and mentioned on the COI or issued electronically.
• COI, PAN, and TAN are sent via email to the registered email address of the company.

This marks the legal existence of the company in India and completion of basic registration.

Post-Incorporation Compliances

After incorporation, the following steps are usually required:

• Opening a current bank account in the company’s name.
• FDI reporting (Form FC-GPR, etc.) for foreign share capital under FEMA.
• GST registration, if applicable based on turnover or nature of supplies.
• Shops and Establishment registration, Professional Tax (where applicable).
• Board meetings, statutory registers, and ROC annual filings.

FAQs

1. How can a foreign company register a business in India?

A foreign company can register a business in India by incorporating a Private Limited Company (subsidiary or JV), or establishing a Liaison, Branch, or Project Office, depending on its business model and FDI eligibility.

2. What is the best business structure for foreign companies in India?

For most foreign investors, a Private Limited Company as a wholly-owned subsidiary is the best structure as it offers limited liability, full operational control, and eligibility for 100% FDI in many sectors.

3. Can foreign nationals own 100% of a company in India?

Yes, foreign nationals and foreign companies can hold 100% shareholding in many sectors under the automatic route, subject to sectoral caps, FDI conditions, and FEMA regulations.

4. What documents are required for foreign directors in Indian company registration?

Foreign directors require a valid passport, overseas address proof, photographs, DSC, and any required KYC documents, all duly apostilled or consularised as per MCA and FEMA requirements.

5. How long does it take to register a foreign-owned company in India?

If documents are in order, name approval and incorporation through SPICe+ can typically be completed in about 7–10 working days, depending on RoC processing time and clarifications, if any.

6. What is the difference between a liaison office and a branch office in India?

A Liaison Office is non-commercial and cannot earn income, whereas a Branch Office can undertake permitted business activities like services, export/import, and technical support, subject to RBI approval and conditions.

7. Do foreign companies need RBI approval to set up a branch or liaison office?

Yes, in most cases RBI or AD Bank approval is required via Form FNC, though certain categories and sectors may fall under automatic route subject to prescribed eligibility and documentation.

8. Is a resident director mandatory for a foreign company’s subsidiary in India?

Yes, at least one director must be a resident in India (staying in India for at least 182 days in the relevant financial year) for every Indian company, including subsidiaries of foreign companies.

9. What are the post-incorporation compliances for a foreign-owned company in India?

Key compliances include opening a bank account, FDI reporting, GST registration (if applicable), ROC annual filings, income tax returns, maintenance of statutory registers, and adherence to FEMA guidelines.

10. Can a foreign company operate in India without incorporating a subsidiary?

Yes, a foreign company can operate through Liaison, Branch, or Project Offices, subject to RBI/FEMA approvals; however, these structures are more restrictive than an incorporated subsidiary in terms of activities and control.