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India has cheap human labor, land, water, and electricity in abundance, which lures many foreign companies to establish their businesses in India. Like other companies operating in India, foreign companies must comply with specific rules and regulations. This text covers how foreign companies can start a business in India and the requirements they must fulfill according to the Companies Act, 2013.

What is a Foreign Company?

A foreign company is defined as a company or body corporate incorporated outside India that:

1. Has a place of business in India, whether by itself or through an agent, physically or electronically.
2. Conducts any business activity in India in any manner.

This means that even a foreign company's mere visual presence in India qualifies it under this definition.

An Indian subsidiary of a foreign company is any company where 50% or more of its equity shares are owned by a foreign-incorporated company. In such a case, the foreign company is called the holding or parent company.

As per the Companies (Registration Offices and Fees) Rules, 2014, any document foreign companies are required to submit must be delivered to the Registrar of New Delhi, regardless of their place of operation in India.

Procedure for Foreign Company Registration in India

Once a foreign company establishes a place of business in India, it must file Form FC-1 with the registrar within 30 days and submit the following documents:

• Charter documents (translated into English).
• Address of the registered/principal office.
• List of all directors and secretaries.
• Name(s) and address(es) of the person(s) resident in India authorized to receive official notices.
• Address of the business place in India.
• Details of any previous business locations in India.
• Declaration that no director or authorized representative has been convicted or debarred from forming or managing companies in India or abroad.
• Any other relevant details.

Upon successful submission, a Foreign Company Registration Number (FCRN) is generated, and a certificate of registration is issued.

Information Required for Directors and Secretaries

The list of directors and secretaries should include:

• Full name and any previous name or surname.
• Father's/mother's name and spouse's name.
• Date of birth, residential address, and nationality.
• PAN (if available) and passport details.
• Occupation and directorship details in other companies.
• Membership number (for secretaries only).
• Email ID.

Alteration in Foreign Company Documents

If any changes occur in the documents submitted during registration, the company must notify the Registrar within 30 days by filing Form FC-2. The required attachments include:

1. Certified copy of the board resolution.
2. Copy of the resolution passed in the general meeting.
3. Copy of the approval letter (if applicable).
4. Details of changes in the place of business in India.
5. Changes in the details of directors or secretaries.
6. Changes in the authorized representative's details.
7. Any other relevant information (optional attachments).

Financial Statements and Audit Requirements

The financial statements of a foreign company's Indian business must comply with Schedule III and be submitted within six months from the end of the financial year. The Registrar may grant an extension of up to three months. These statements are filed using Form FC-3.

The company’s accounts must be audited by a practicing chartered accountant or a firm/LLP of practicing chartered accountants. Along with the financial statements, the company must provide details of all business locations in India as per the balance sheet in Form FC-3.

Mandatory attachments include:

• Consolidated financial statements.
• Balance sheet and profit & loss account.
• Details of related party transactions, repatriation of profits, and fund transfers.
• Approval letters for establishments in India.
• Any other relevant information (optional).

Annual Return Filing

Foreign companies must file their annual returns within 60 days from the end of the financial year using Form FC-4. Required attachments include:

• Details of promoters, directors, and key managerial personnel.
• Remuneration details of directors and key personnel.
• Meeting details, including attendance records.
• Details of members, debenture holders, and changes during the year.
• Information on holding, subsidiary, and associate companies.
• Details of penalties, punishments, or compounding of offenses (if applicable).
• Any other relevant information (optional attachments).

Foreign Company Registration Number (FCRN)

The Corporate Identity Number (CIN) is a unique identifier for Indian companies. For foreign companies, the Foreign Company Registration Number (FCRN) serves as a unique six-digit identifier. It is generated automatically upon approval of Form FC-1.

Setting Up a Liaison or Branch Office in India

A foreign company or body corporate incorporated outside India, including a firm or other association of individuals, can establish a place of business in India by opening a Liaison Office (LO) or a Branch Office (BO).

A resident outside India must obtain prior approval from the Reserve Bank of India (RBI) to open a BO/LO. However, this approval is exempt for companies.

Key Differences Between a Liaison Office (LO) and Branch Office (BO)

1. Eligibility Criteria

   • Liaison Office: The parent company must have a profit-making track record for the last three financial years and a net worth of at least USD 50,000.
   • Branch Office: The parent company must have a profit-making track record for the last five financial years and a net worth of at least USD 100,000.

2. Time Required for Setup

   • Setting up an LO/BO typically takes 3-4 months, subject to RBI approvals.

3. Validity of Tenure

   • Liaison Office: Valid for three years (two years for NBFCs and construction sector entities).
   • Branch Office: No specific tenure, but generally valid for 2-3 years.

4. Taxability (Income Tax & GST)

   • Liaison Office: Not subject to income tax, as it does not generate income in India. The parent company bears the tax liability.
   • Branch Office: Taxed at a higher rate of 40%, which, with applicable surcharges and cess, results in an effective tax rate of 41.60%, 42.43%, or 43.68%.

Importance of DIN for Foreign Companies

A Director Identification Number (DIN) is not mandatory for directors of foreign companies with branch offices in India.

Many foreign companies have already established businesses in India, setting up liaison and branch offices.

At Naveen Pandey & Associates, we assist clients in forming companies in India, including Indian subsidiaries of foreign companies, foreign subsidiary companies, foreign company franchises, and business registrations for foreign investors. For professional assistance in registering a foreign company in India, contact us at

[email protected].