A foreign company planning to set up business operations in India has the following options:
As an incorporated entity by incorporating a company under the Companies Act, 1956 through Joint Ventures; or Wholly Owned Subsidiaries.
As an unincorporated entity through:
- Liaison Office/Representative Office, or
- Project Office, or
- Branch Office
A) Automatic Route
FDI up to 100% is allowed under the automatic route in all activities/sectors except the following which require prior approval of the Government:
Ø Activities/items that require an Industrial License;
Ø Proposals in which the foreign collaborator has an existing financial / technical collaboration in India in the 'same' field,
Ø Proposals for acquisition of shares in an existing Indian company in: Financial services sector and where Securities & Exchange Board of India (Substantial Acquisition of Shares and Takeovers ) Regulations, 1997 is attracted;
Ø All proposals falling outside notified sectoral policy/caps or under sectors in which FDI is not permitted.
FDI in sectors/activities to the extent permitted under automatic route does not require any prior approval either by the Government or RBI. The investors are only required to notify the Regional office concerned of RBI within 30 days of receipt of inward remittances and file the required documents with that office within 30 days of issue of shares to foreign investors.
B) Government Route
FDI in activities not covered under the automatic route requires prior Government approval and are considered by the Foreign Investment Promotion Board (FIPB), Ministry of Finance. Application can be made in Form FC-IL; Plain paper applications carrying all relevant details are also accepted. No fee is payable.
For further details you may consult a local consultant who will be able to draft a proper agreement and will help you comply with necessary formalities in this regard.