5 Steps to Establishing a Foreign Company Subsidiary in India

A Guide for FDI

In today's globalised economy, expanding business operations into foreign markets has become a strategic imperative for companies seeking growth and diversification. One option to leverage India's huge market potential is to incorporate a foreign subsidiary.

This blog explores the process of setting up a subsidiary in India, emphasising the significance of Foreign Direct Investment (FDI) and highlighting the benefits of this approach. By forming a subsidiary, companies can tap into India's fast-growing market and friendly business environment.

Benefits of Setting Up a Subsidiary

Setting up a subsidiary in India brings many advantages, driven by the country's robust economic growth and business-friendly policies. Among the key benefits are:

1. Access to a Growing Market:

A potential customer growth market coupled with a large pool of highly skills experts and entrepreneurs in the technological make India an attractive destination for businesses looking to expand their customer base.

2. Favourable Business Environment:

India's economic reforms, simplified tax regime, and efforts to improve the ease of doing business have created an environment conducive to foreign investment. The Indian government's commitment to promoting FDI has led to easing restrictions and introducing investor-friendly policies.

Step 1: Market Research and Feasibility Study

Before venturing into a new market, thorough market research and feasibility studies are imperative. Understanding the local demand, competition, cultural nuances, and regulatory landscape helps companies make informed decisions about their entry strategy.

Step 2: Legal and Regulatory Compliance

Compliance with the Foreign Exchange Management Act (FEMA), Reserve Bank of India (RBI) regulations, and other applicable laws is crucial. Engaging legal experts who specialise in foreign investment can ensure a smooth compliance process.

Step 3: Choose the Right Business Structure

Companies can establish a private limited company, a wholly-owned subsidiary, an LLP, or a joint venture. Each structure has its merits, and the choice depends on control, liability, and taxation.

Step 4: Obtain the Necessary Approvals and Permissions

Specific sectors require government approval for Foreign Direct Investment (FDI), while others are subject to automatic routes. Businesses need to determine the type of approval required and proceed accordingly. Here are some references and sources related to this step:

• Foreign Exchange Management Act (FEMA)
• Consolidated FDI Policy
• Department for Promotion of Industry and Internal Trade (DPIIT)
• Reserve Bank of India (RBI)
• Invest India

Step 5: Documentation and Registration

The process of documentation and registration for a business entity in India involves several steps and requires the submission of specific documents to the Registrar of Companies (RoC):

These following points are missing in This
a. Filing FCGPR in case of private limited and FDI LLP in case of LLP with RBI for reporting foreign direct investment withing 60 days of receipt.
b. Obtaining STPI or non STPI registration in case of software company.

Conclusion

Incorporating a foreign company subsidiary in India through Foreign Direct Investment (FDI) is a strategic move with tremendous potential for businesses seeking growth and expansion. To seek deeper advisory in business setups and FDIs, contact us and we will make you aware of the benefits, challenges, and processes of setting up your business in one of the world's most dynamic economies.