India as one of the fastest-growing economies in the world attracts plenty of Foreign Direct Investment (FDI) and Private Equity capital. According to a recent report by Nomura, a Japanese Brokerage firm, FDI in India is likely to have hit a high of $34.9 billion in the financial year 2015, a massive 61.6 percent jump from $21.6 billion in the previous fiscal. With the world’s second-largest population and a large talent pool of skilled IT professionals, India continues to be an attractive destination for investment amongst Foreign Companies and Foreign Nationals. In this article, we provide a comprehensive guide to Indian Private Limited Company and India’s entry strategy for foreign nationals and foreign companies.
The following are the available types of entry strategies into India:
Incorporation of a private limited company is the easiest and fastest type of Indian entry strategy for foreign nationals and foreign companies. Foreign direct investment of up to 100% into a private limited company or limited company is under the automatic route, wherein no Central Government permission is required. Hence, incorporation of a private limited company as a wholly owned subsidiary of a foreign company or joint venture is the cheapest, easiest and fastest entry strategy for foreign companies and foreign nationals into India.
Incorporation of a Limited Liability Partnership (LLP) is also an Indian entry strategy for foreign nationals or foreign citizens as 100% FDI in LLP is now allowed. An LLP, however, cannot have shareholders and must be represented by Partners – thereby making it an ideal choice for investment vehicles and professional firms.
Proprietorship firms or Partnership firms are the most basic types of business entities mostly used by very small businesses or unorganized players. Foreign investment into a proprietorship firm or partnership firm requires prior RBI approval. Hence, proprietorship firms or partnership firms are not suitable for foreign companies or foreign national investment in India.
Registration of the Branch Office, Liaison Office, or Project Office requires RBI and/or Government approval. Therefore, the cost and time taken for registration of a branch office, liaison office, or project office for a foreign company are higher than the cost and time associated with the incorporation of a private limited company. Further, foreign nationals cannot open a branch office, liaison office, or project office. Hence, this option is limited to being an India entry strategy only for foreign companies.
Foreign Direct Investment (FDI) into an Indian Private Limited Company or Limited Company is allowed up to 100% in most sectors. Only a very few sectors require prior Central Government approval for investment by a foreign company or foreign national. The following sectors require Government Approval for investment by Foreign Companies or Foreign Nationals:
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