Steps To Incorporate A Foreign Company In India (2023 Guide)

We have discussed the provisions and definition of a foreign company in India as per the Companies Act, 2013. Now let’s look at the process of how to incorporate a foreign company in India and what are the necessary requirements and criteria to be taken into consideration. To understand the process better, we must first look at the ways through which a foreign company can enter the Indian market –

1. As an Indian company (an entity incorporated inside India), having foreign shareholders in either of these ways-

• A wholly-owned subsidiary (the foreign company must invest 100% FDI in the Indian company it wishes to own).
• A joint venture (agreement with a local partner).
• A subsidiary company (the foreign company owns shares up to the limit of 49.99%).

2. As a foreign company, a business entity can register under the Companies Act, 2013 in the following ways-

• A liaison or representative office.
• A private office.
• A branch office.

How to incorporate a company in India?

Follow the steps below to incorporate a company in India.

1. Confirm company name

Company names must comply with the guidelines of the Companies Act 2013 and Companies (Corporations) Regulations 2014.

• The company name should not resemble any existing company name.
• Existing names cannot be pluralized.
• You cannot change the spaces, punctuation, character type, and capitalization of existing names. Combining two or more words from existing names will be rejected.
• Existing company names cannot be translated.
• Names containing terms such as ‘bank’, ‘insurance’, ‘stock exchange’, ‘mutual fund’, etc. must be approved by the relevant authorities such as RBI, IRDA, and SEBI.

2. Get pre-registration form

Before starting the online company registration process in India, you need to prepare the following documents:

DSC: The MCA created a provision in the Information Technology Act of 2000 that allows business owners to authenticate documents sent electronically using Digital Signature Certificates (DSCs).

DIN: A Director Identification Number (DIN) is a unique number assigned to a person who wishes to become a director of a company. You will need to complete a short pro forma form of Electronic Company Incorporation (SPICe).

MOA: A memorandum of understanding (MoA) is required to form a company. It contains information about the company’s shareholders and their goals. As a business owner, you may not engage in activities that are not covered by the MoA.

AoA: The Articles of Incorporation (AoA) under Section 5 of the Companies Act 2013 is another legal document that sets out the rules of a company.

3.  Select your industry

Choose from PVT LTD, LLP, OPC, etc., depending on your company’s legal form.

 Private Limited company: A private limited liability company (PVT LTD) is a company whose shares are owned by individual investors. The company owns all profits and liabilities.

Partnership Firms: A partnership is formed when two or more people start a business and share the profits and losses. These are called partners.

Limited Liability Partnership: A Limited Liability Partnership (LLP) is a business entity with a partnership structure in which the partners enjoy certain legal protections. Partners are not responsible for the actions of the other party.

Sole Proprietorship: An individual who owns a sole proprietorship. No partner exists. 

One Person Company (OPC): OPC is a company founded by one person. Prior to the Companies Act 2013, individuals could not form OPC.

4. Register your company online

• Once your documentation is ready, you can create your MCA Portal User ID.
• Register on the MCA Portal and complete the SPICE+ form. Please note that only directors with a DIN can apply.
• After creating a user ID, you can access the MCA portal as a director.
• Select her SPICE+ at MCA service and submit relevant documents.

5. Receive the Certificate of Incorporation

The Registrar of Companies (RoC) issues a Certificate of Incorporation after the company’s documents have been successfully authenticated.

How to register foreign company?

Steps For Registration Of A Foreign Company

Broadly, the process involves the following 4 major steps-

• Getting the name approved
• Obtaining DIN
• Applying to Ministry of Corporate Affairs
• Obtaining the Certificate of Incorporation

 Step-by-step procedure-

1. Determine a name and ensure its availability by applying for the Reserve Unique Name (RUN) form.
2. Once the name gets approved, obtain DSC and DIN.
3. Draft the Memorandum of Association and Articles of Association (MOA and AOA).
4. File the applications for PAN and TAN.
5. File form SPICE INC-32, which is an e- form used for company registration.
6. The next step involves PF and ESI registration along with company registration.

After the aforementioned applications have been duly filed and approved, the ROC issues a Certificate of Incorporation to the company.

Also read: How can a company register for the Startup India Scheme?

Documents Essential For The Procedure

In incorporating a foreign company whose director/subscribers are foreign nationals, the following documents are essential:

• Address proof
• Passport (notarized in their country and counter attested by the Indian Embassy)
• Copies of utility bills
• No pan declaration
• Form INC -9

For a foreign holding company, the following documents are necessary-

• Incorporation certificate of the foreign holding company
• INC-9 declaration
• Board resolution for investment
• KYC documents of the authorized signatory

An important point to keep in mind is that important documents must be notarized and attested by the Indian embassy.

Documents To Be Submitted To The ROC

• List of directors and secretaries (foreign residency company) along with all KYC documents and proofs.
• Form FC-1 has to be filed within 30 days of establishing a place of business and fee payment has to be made to the ROC.
• Attested copy of approval from RBI (under FEMA and other regulations).
• In case of any change or amendment in the information provided, form FC -2 has to be filed and payment of the relevant fee has to be made within 30 days of the change.

How to incorporate subsidiary of foreign company in India?

Points to learn to incorporate subsidiary of foreign company in India.

Select company type

FEMA guidelines do not allow foreign direct investment (FDI) for ownership, partnerships, and sole proprietorships. Investments in LLPs are permitted but require prior RBI approval. Therefore, the easiest and quickest way for NRIs and foreigners/entities to set up a company in India is to set up a limited liability company.

Minimum requirements-

Capital: There is no minimum capital required to set up a limited liability company in India.

Director: To set up a private company in India, need at least two directors. Both must be individuals and at least one must be a resident of India.

Shareholder: Under the Companies Act 2013, a limited company must have at least two shareholders. A shareholder can be either a natural person or a legal entity, or a combination of both.

How is wholly owned subsidiary in india incorporated?

Steps to incorporate wholly owned subsidiary in Indai:

1.  Choose a name for your wholly-owned subsidiary.

2. Subsidiary creation in a state requires filing articles of incorporation with the secretary of state’s office.

3.  Choose a financial institution for your wholly-owned subsidiary.

 4. Apply to the IRS for an Employer Identification Number (IRS).

 5. Apply for a business license at your local city or town hall.

 6. Join or establish a trade organization to provide specialized services in your field and a wholly-owned subsidiary.

What are compliance for foreign subsidiary in India?

Compliances for Foreign Subsidiary Companies in India.

 Section 380 Form FC-1: Subsidiaries must file this form within 30 days of incorporation in India. The form should be submitted along with all the required documents, certificates, etc. from other Indian regulators such as RBI.

 Audit of accounts: The accounting of the entire overseas subsidiary must be audited by Chartered Accountant.

 Section 381 Form FC-4: This form covers the company’s annual report. Must be submitted within 60 days of the end of the previous fiscal year. 

 Document certification: Documents submitted by the company to her ROC must be signed by a reputable attorney in India.

 Form FC-3: Depending on where the company is incorporated in India, Form FC-3 should be filed with the relevant company registry. The form should include information about the company’s location and financial records.

 Financial statements: Companies are required to file financial documents such as AOC 4 and MGT 7 forms for their operations and operations (excluding OPC and SMEs) in India. This must be submitted within six months of the end of the fiscal year.