A company can be registered as private limited or public limited. A private limited company is a closely held company and enjoys the privileges given by the Companies Act, 2013. A public limited company is a company where the public is interested, and it is required to comply with many rules and regulations framed by the Companies Act, 2013. Generally, foreign Companies prefer the Formation of a wholly-owned subsidiary in India.
Conditions required for setting up B.O.
A foreign company must be having a profit-making track record during the immediately preceding five financial years in the home country.
The net worth of a foreign company should not be less than USD 100,000 or its equivalent.
If foreign banks want to open B.O. in India, DBOD, RBI, prior approval is required.
Legal status
Bos are an extended arm of the parent company. Therefore, legal status is a foreign company in India.
Approvals Required
For setting up BO/PO, Prior approval of the Reserve Bank of India and A.D. Banker is required. Also, after incorporation, ROC needs to be intimated.
PROJECT OFFICE (P.O.)
Activities allowed
A Project office (P.O.) is established for a particular purpose and a limited period until that project continues. Normally, when a foreign company secures a project from an Indian company, then to carry out such a project. It is similar to B.O. but for a specific project.
APO cannot carry out any other activity other than incidental to or related to the project.
Legal Status
P.O.s are the extended arm of the parent company. Therefore, legal status is a foreign company in India.
Approvals Required
For setting up P.O., Prior approval of Reserve Bank of India and A.D. Banker is required. Also, after incorporation, ROC needs to be intimated.
However, if the following conditions are fulfilled, no prior approval of RBI is required to establish P.O. in India.
Condition1– Foreign entity has secured a project from an Indian company; AND
Condition 2– An appropriate authority has cleared the project; AND
Condition 3– The project is funded directly by inward remittance from abroad; OR
The project is funded by a bilateral or multilateral International Financing Agency; OR
A company or entity in India awarding the contract has been granted a Term Loan by a Public Financial Institution or a bank in India for the project.
If the above criteria are not met, the foreign entity has to approach the RBI for approval.
In case P.O. need to be set up by foreign Non-Government Organizations/ Non-Profit Organizations/ Foreign Government Bodies/ Departments, then such approval will fall under the government approval route, and such P.O.s are required to apply to the Reserve Bank for prior permission to establish an office in India,
Thus, the above shows that there are many options available for foreign company registration in India. Depending upon the actual need of the foreign enterprise, an entry strategy can be designed and planned.
Created
& Posted by (Ramesh Kumar Gupta)
Senior
Accounts Manager at TAXAJ
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