The last decade has seen
India encouraging foreign direct investment (FDI) in almost all sectors
including manufacturing, insurance, telecom, software, trading etc. This
has lead to many international giants setting up operations in India, or
entering into joint ventures with many Indian companies.
It has become easier for international companies to trade in India as
foreign exchange controls have been relaxed. Indian companies have also
been allowed to raise money / funds from international markets and also
invest abroad. Trade tariff levels have also been reduced for
International companies can set up business operations in India by
forming a new company, through wholly owned subsidiaries or joint
Private Limited Company
According to Section 3(1)(iii) a Private Company is one which
Public Limited Company
- Has a minimum paid-up capital of one lakh rupees.
- Restricts the right to transfer its shares (any restriction that
enables the directors to maintain minimum limit of two members and
the maximum limit of 50 members, shall serve the purpose).
- Limits the number of its members to 50. This number does not
include employees of the company and the ex-employees of the company
who are still members of the company.
- Prohibits the subscription of shares or debentures from general
- Prohibits any invitation or acceptance of deposits from any
person except its members, directors or their relatives.
According to Section 3(1)(iv), a Public Limited Company is a one which:
- Is not a private company.
- Has a minimum paid-up capital of Rs five lakhs.
- Is a private company which is a subsidiary of a public company.
- A public company cannot have less than seven members. There is no
restriction with regard to the maximum number of persons who can
acquire the shares or debentures of a public company. The shares and
debentures may be quoted in stock exchange and are freely
- Opening a branch office
Foreign companies engaged in manufacturing and trading activities
abroad are allowed to set up Branch Offices in India after prior
approval from Reserve Bank of India (RBI) for the following
- Export/Import of goods
- Rendering professional or consultancy services
- Carrying out research work, in which the parent company is
- 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 agents in India.
- Rendering services in Information Technology and development
of software in India.
- Rendering technical support to the products supplied by the
- Foreign airline/shipping Company.
Branch Offices established with the approval of RBI, may remit
outside India profit of the branch, net of applicable Indian taxes
and subject to RBI guidelines .
- Opening a project office
Foreign companies planning to execute specific projects in India
can set up a temporary project/site office in India for carrying out
activities only relating to that project. The Government of India
has now granted general permission to foreign entities to establish
project offices subject to specified conditions.
- Opening a liaison/representative office
A Liaison Office could be established with prior approval of
Reserve Bank of India (RBI). The role of Liaison Office is limited
to collection of information, promotion of exports/imports and
facilitate technical/financial collaborations.
Liaison office cannot undertake any commercial activity directly or
There are number of guidelines set for Global companies entering India
for setting up business operations. Accounting firms offer professional
help and guidance for companies planning to enter the Indian markets.
These professional accountants help the companies know:
- Process of company formation
- Extent of investment
- Channel of investments
- Foreign exchange controls
Accounting professionals also provide all the financial, legal help
required for setting up business in India, this helps the companies save
lot of time, money and also to know the domestic country's various
legal, financial systems.