• US company starting operation in India

I run a company in USA. I want to start operations in India. So wondering what is the best structure for this.

Should we form a subsidiary company in India, or hire another company in India and operate through them? What are the advantages and disadvantages?

Also, if we form a subsidiary, is it possible to have the US corporation be one of directors of Indian company vs an individual from the US corporation? What the advantages and disadvantages of that?
Asked 18 days ago in Business Law from United States

1. Yes forming a subsidiary company in India is an option.

Another option is to form  new company with similar name of company in USA.

If majority number of Directors in company in India is Indians then you can include minority number of Directors from USA as well. 

Devajyoti Barman
Advocate, Kolkata
18224 Answers
260 Consultations

5.0 on 5.0

A foreign company can commence operations in India by incorporating the subsidiary company most preferably as a Private limited company under the Companies Act, 2013.

 

2) It is treated as a domestic company under Indian taxation laws and is eligible for all exemptions, deduction benefits as applicable to any other Indian Company 

 

3) The automatic route under FDI policy does not mandate any prior regulatory approval for investment in equity shares of a subsidiary and only post incorporation intimation with Reserve Bank of India (RBI) within 30 days of receipt of investment money in India and filling of prescribed documents and particulars of allotment of shares within 30 days of allotment of shares to foreign investors.

 

4) A subsidiary of a foreign company can undertake any activity mentioned in the ‘Object Clause’ of the Memorandum of Association of the Indian Company subject to FDI regulations on different sectors.

 

5) The assets of the parent/foreign company are not subject to any attachments against the debts incurred by the subsidiary.

Ajay Sethi
Advocate, Mumbai
69581 Answers
4180 Consultations

5.0 on 5.0

See in my view forming a Indian subsidiary is better option then hiring some company in India. Though you can enter into agreement with Indian company and can start work in India. Though with own subsidiary it would offer better control over working but responsibilities shall increase. 

Yes a foreign national can be director in the Indian company. The individual from US corporation can be director in the subsidiary. 

Shubham Jhajharia
Advocate, Ahmedabad
21308 Answers
83 Consultations

5.0 on 5.0

1. A subsidiary co. with a foreign director on BOD, is a safe, independent and better option, in India, due to various taxation modalities and permits /permission and other statutory compliance's, that may be required for business.

2. The subsidiary co., can be dissolved /wind-up at the drop of hat, by following due procedures of law.

3. Hiring another co. or tie-up, would give a crippling affect to business at times of dispute and would not be financially viable, in the long run.

 

Hemant Agarwal
Advocate, Mumbai
3004 Answers
17 Consultations

5.0 on 5.0

By forming a subsidiary company and having the US directors in the company as a director is a possibility and you can go that way you can register the company as a private limited company in India and the complete holding of the equity should be with us company and you can put your director on the board along with other directors of Indian Origin

Vimlesh Prasad Mishra
Advocate, Lucknow
5792 Answers
19 Consultations

4.9 on 5.0

The subsidiary company incorporated as a private limited company requires minimum two shareholders and paid up capital of ₹1,00,000 There is no requirement of previous profit-making track record of parent/foreign company as is required for set-up of a Branch office

2) As per DTAA (Double Tax Avoidance Agreement), the subsidiary company should have a permanent establishment (PE) in India, then only income generated in India by the subsidiary company can be taxed by Indian governmen

Ajay Sethi
Advocate, Mumbai
69581 Answers
4180 Consultations

5.0 on 5.0

1. AS history of Indian Business methods, a sole Indian Co., would back out (renegotiate) or be sold off or dissolved or bankrupt or ....   This starts a long drawn process of legal disputes, more specifically so when you would apprehensively be having only a business tie-up or arrangement.

2. Opening a subsidiary co. (for foreign co.) is an extensive job, with permissions from RBI & other statutory authorities and exhaustive paper work. An Indian "company secretary (CS)" in conjunction with a "Chartered Accountant (CA)" and a "Corporate Lawyer" would be required for your purposes.

 

 

 

Hemant Agarwal
Advocate, Mumbai
3004 Answers
17 Consultations

5.0 on 5.0

In case you do not invest in USD you will not be able to run a holding company. The domestic deposit accounts are ment for residents not for the non residents.

The disputes in the tie-ups will be difficult as you will have no control over the business and any dispute will be dealt as per the companies act.

Vimlesh Prasad Mishra
Advocate, Lucknow
5792 Answers
19 Consultations

4.9 on 5.0

1. you can form a LLP [limited liability partnership]

2. in this LLP, the US company [through its authorised director] can be one of the designated partners

3. legal compliance with LLP is much less as compared to a company

Yusuf Rampurawala
Advocate, Mumbai
4737 Answers
29 Consultations

5.0 on 5.0

No, there shouldn't be a restriction to your starting a business in India in general. There are some restricted sectors such as atomic energy, railways etc. where foreign direct investment is restricted or subject to strict rules.

Foreign citizens or companies can make investments in shares or debentures of an Indian company, through either the Automatic Route or the Government Route. Under the Automatic Route, the non-resident investor or the Indian company does not require any approval from Government of India for the investment.

A shareholder can be a person or a corporate entity. However, a Director has to be a person. Foreign nationals are allowed to become Directors of an Indian Private Limited Company. The Board of Directors of the Indian Private Limited Company must have one Director who is both an Indian Citizen and Indian Resident.

T Kalaiselvan
Advocate, Vellore
59440 Answers
756 Consultations

5.0 on 5.0

NRIs and Foreign Nationals must always choose to invest or start a Private Limited Company or Limited Company in India. Business entities like Private Limited Company and Limited Company only allow for Foreign Direct Investment (FDI) into India under the automatic route.

Shareholders are owner of the company and enjoy rights based on their shareholding percentage. ‘Director is a legal position who takes care of operational activities and also represents to various legal authorities governing the business.

Generally, owner/shareholders of business retain the position of Director as well to take important decision of the business. One can however also appoint any other person to work as a Director on their behalf.

T Kalaiselvan
Advocate, Vellore
59440 Answers
756 Consultations

5.0 on 5.0

Can register a company in India, no special permission is required or can project office or liaison office which necessarily requires RBI and/or Government approval.

Yogendra Singh Rajawat
Advocate, Jaipur
14984 Answers
19 Consultations

4.6 on 5.0

1. You should form a subsidiary company in India to run your business in India.

 

2. In the subsidiary company formed by you, the operational, control will entirely be with you  making the operation smoother and faster than the operation you might want to carry out through a hired Indian Company. 

Krishna Kishore Ganguly
Advocate, Kolkata
22911 Answers
618 Consultations

5.0 on 5.0

1. If it is a subsidiary of the US Company, then you may or may not induct any director from your US Company.

 

2. In the above case, you shall have to appoint Indian Directors to manage your subsidiary company.

Krishna Kishore Ganguly
Advocate, Kolkata
22911 Answers
618 Consultations

5.0 on 5.0

- You need to assess whether your company is eligible through FDI as it will give your whole ownership of company if not then no other option then to collaborate with Indian Firm.

- There is no harm in collaboration with other firm of it gives you any base in India.

- Do feel free to connect if needed any support.

 

Regards

 

Vivek Arya

Vivek Arya
Advocate, Gurgaon
616 Answers
4 Consultations

5.0 on 5.0

1) you need not be director of subsidiary company . 2 Indian directors can be the directors of subsidiary company 

 

2) 

According to FEMA guidelines, Foreign Direct Investment (FDI) is not allowed in case of Proprietorship, Partnership Firm and One Person Company. Though investment in LLP’s is allowed, but it requires prior approval of the RBI.

 

3)Whenever the holding company invests funds in the share capital of the Indian subsidiary, it has to follow RBI guidelines along with compliances under Companies Act 2013.

two-stage reporting procedure is to be followed when a company is raising funds from a foreign investor:

  • On receipt of funds: The Company has to provide details in an “Advance Reporting Form” to the RBI within 30 days of receiving funds from foreign investor(s).
  • The company has to issue shares within 180 days from the date of receiving funds.
  • On allotment of shares: The company has to report in specified form (FC-GPR) to the RBI, within 30 days from the date of issue of shares along with:

– A Certificate from the Company Secretary certifying that the company has complied with the procedure for issue of shares as laid down under the Foreign Direct Investment (FDI) Scheme, and,

– A certificate from a Chartered Accountant indicating the manner of arriving at the price of the shares issued to the foreign investors.

 

Ajay Sethi
Advocate, Mumbai
69581 Answers
4180 Consultations

5.0 on 5.0

Yes it is possible by providing power of attorney to update the Indian subsidiary as designated directors from the holding company

Vimlesh Prasad Mishra
Advocate, Lucknow
5792 Answers
19 Consultations

4.9 on 5.0

If there is no FDI , no receipt of US funds then it would not require RBI approvals 

 

An LLP does not have directors. One requires: At least 2  partners to form an LLP.

Ajay Sethi
Advocate, Mumbai
69581 Answers
4180 Consultations

5.0 on 5.0

Foreign parent or holding Companies, including USA parent companies, can incorporate a subsidiary, as a 100% owned Private Limited Company in India subject to Foreign Direct Investment (FDI) Guidelines. Please see the FDI Guidelines for various sectors.

The Director needs to be over 18 years of age and must be a natural person. There are no limitations in terms of citizenship or residency. Therefore, foreign nationals can be directors in a Indian Private Limited Company.

 a Foreign National or an NRI can be a Director in a Private Limited Company in India after obtaining Director Identification Number. However, at least one Director on the Board of Directors must be a Resident India.

LLP is a separate legal entity registered under the LLP Act, 2008. The partners of a LLP are not personally liable for the liabilities of the LLP. Partners have limited liability and is liable only to the extent of their contribution to the LLP.

Private Limited Company is a separate legal entity registered under the Companies Act, 2013. The Directors and Shareholders of a Private Limited Company are not personally liable for the liabilities of the Company. Shareholders have limited liability and is liable only to the extent of their share capital.

Private Limited Company offers more flexibility for the promoters when it comes to ownership and ownership sharing.

In a LLP, there is not a clear distinction between the owners and management. In a LLP, the LLP Partners hold ownership of the LLP and also hold powers to manage the LLP. 

T Kalaiselvan
Advocate, Vellore
59440 Answers
756 Consultations

5.0 on 5.0

Foreigners are allowed to invest in a LLP only with prior approval of Reserve Bank of India and Foreign Investment Promotion Board (FIPB) approval.

There is the Automatic Route, where no approval or authority is required by the private foreign investor. He can invest in any company it wishes with no need for government approval. And then there is the Government Route.

One can invest in India - either under Automatic Route which does not require approval from RBI or under Government Route, which requires prior approval from the concerned Ministries/Departments via a single window - Foreign Investment Facilitation Portal (FIFB) administered by the Department of Industrial Policy & Promotion (DIPP), Ministry of Commerce and Industry,Government of India.

 

T Kalaiselvan
Advocate, Vellore
59440 Answers
756 Consultations

5.0 on 5.0

1. See paper work as per registration and agreement are considered as per option you choose are required.

 

Shubham Jhajharia
Advocate, Ahmedabad
21308 Answers
83 Consultations

5.0 on 5.0

1. Yes without you being director can have control over the Indian subsidiary. You can be investor member in same.

2. You can form LLP as in LLP liability is limited by shares. 

3. No.FDI doesn't create issue you get some benefits too in that case.

 

Shubham Jhajharia
Advocate, Ahmedabad
21308 Answers
83 Consultations

5.0 on 5.0

If no foreign investment then RBI approvals are not required. Minimum 2 directors are required.

Shubham Jhajharia
Advocate, Ahmedabad
21308 Answers
83 Consultations

5.0 on 5.0

There are no directors in llp. You require minimum 2 partners and one can become managing partner

Prashant Nayak
Advocate, Mumbai
14897 Answers
25 Consultations

4.6 on 5.0

1. A subsidiary Co. IF in anyway is related to a Foreign Co., would have to be registered and permission taken from RBI. There is nothing that can circumvent this criteria.

2. Minimum of TWO persons are required to form a LLP.

Hemant Agarwal
Advocate, Mumbai
3004 Answers
17 Consultations

5.0 on 5.0

How can it be subsidiary ? You want to open your company nor as subsidiary is a company with voting stock controlled by another company.

Subsidiary is possible by way of investment under automatic route.

Two Indian directors (resident in India) can be on the Board but I can still maintain full ownership of the subsidiary. ---- NO, either you will maximum investment in company or external foreign borrowing. In later case, Indian directors will have hold and only on default in repayment, you can claim stake on company.

this revenue can be used to capitalize the subsidiary company, ---- It shall be same thing i.e. investiture by foreign company and in this case you can be looted. 

What is the minimum # of Directors required to be on Board of LLP? --- 2 

Yogendra Singh Rajawat
Advocate, Jaipur
14984 Answers
19 Consultations

4.6 on 5.0

You should open a subsidiary company in India you can own 51% of share in company and rest can be owned by Indian directors. 

You cannot maintain ownership of firm until you have maximum share in the company.

you can hire employees in India without opening a subsidiary company.

Mohit Kapoor
Advocate, Rohtak
5151 Answers
1 Consultation

5.0 on 5.0

1. You can float your subsidiary Company in India holding controlling share without staying in the Board and appointing your trusted persons as directors thereat.

 

2. For higher turnover company, Pvt. Ltd. is recommended.

 

3. Even if you will not have any brick and mortar store in India, you shall deal with products stored in India by Indian Companies. So, for having financial transactions with the buyers and sellers of the products, you are required to have commercial presence in India.

Krishna Kishore Ganguly
Advocate, Kolkata
22911 Answers
618 Consultations

5.0 on 5.0

1. If you do not take away INR from India to USA and make transaction in India through an Indian Company without calling it subsidiary of your USA Company, then you can do that without the approval of RBI.

 

2. When it becomes your subsidiary and money is transacted between India and foreign Country, you are required to take RBI approval.

Krishna Kishore Ganguly
Advocate, Kolkata
22911 Answers
618 Consultations

5.0 on 5.0

Incorporation of a private limited company as a wholly owned subsidiary of foreign company is the easiest and cheapest route to do business in India. 

Kallol Majumdar
Advocate, Kolkata
1977 Answers
2 Consultations

5.0 on 5.0

1. IF any type of Indian Money is to be repatriated to any foreign country, in relation to any type of Business, THEN it attracts FERA and due prior permission from RBI is required.

Hemant Agarwal
Advocate, Mumbai
3004 Answers
17 Consultations

5.0 on 5.0

1. Yes it would require approval from RBI.

2 In LLP the liability of the directors are limited to there holding they are not liable beyond it.

Shubham Jhajharia
Advocate, Ahmedabad
21308 Answers
83 Consultations

5.0 on 5.0

subsidiary company can repatriate funds to the parent/foreign company by way of dividend on payment of Dividend Distribution Tax (DDT) of around 16.995% or by payment of royalty/fees for technical services or by way of management fees.

 

2) However, the subsidiary company should have a Permanent Establishment (PE) in India under the DTAA treaty so that the subsidiary is considered as an Indian company and the taxation rate applicable for repatriation of profits to foreign/parent company is less than the rate applicable for a foreign company (branch office).

Ajay Sethi
Advocate, Mumbai
69581 Answers
4180 Consultations

5.0 on 5.0

$1 million per calendar year - no approval.

 

Yogendra Singh Rajawat
Advocate, Jaipur
14984 Answers
19 Consultations

4.6 on 5.0

1.  Foreign Investment in India is regulated in terms of clause (b) sub-section 3 of section 6 and section 47 of the Foreign Exchange Management Act, 1999 (FEMA) read with Foreign Exchange Management (Transfer or Issue of a Security by a Person resident Outside India) Regulations, 2017 issued vide Notification No. FEMA 20(R)/2017-RB dated November 7, 2017.

Within the contours of the Regulations, Reserve Bank of India also issues directions to Authorised Persons under Section 11 of the Foreign Exchange Management Act (FEMA), 1999. This Master Direction lays down the modalities as to how the foreign exchange business has to be conducted by the Authorised Persons with their customers/ constituents with a view to implementing the regulations framed.

 The disinvestment proceeds should be credited only to the NRO account of the person concerned, irrespective of the type of account from which the consideration was paid

 

 

 

2. In a LLP, the LLP Partners hold ownership of the LLP and also hold powers to manage the LLP. Therefore, a Partner in a LLP will be both a owner and a manager, whereas in a Private Limited Company, the shareholders (owners) do not necessarily have to have management powers.

Private Limited Company offers more flexibility for the promoters when it comes to ownership and ownership sharing. The ownership of a Private Limited Company is determined by its shareholding and a private limited company can have upto 200 shareholders. Further, since the shareholders do not directly participate in the management of the company, there is a clear distinction in a private limited company between the owners of share and the management. Hence, private limited company is advantageous when it comes to ownership and management features.

In a LLP, there is not a clear distinction between the owners and management. In a LLP, the LLP Partners hold ownership of the LLP and also hold powers to manage the LLP. Therefore, a Partner in a LLP will be both a owner and a manager, whereas in a Private Limited Company, the shareholders (owners) do not necessarily have to have management powers. A private limited company is recommended for any business that is considering FDI or Employee Stock Options or Equity funding or Venture Capital funding.

 

 

 

 

 

 

 

T Kalaiselvan
Advocate, Vellore
59440 Answers
756 Consultations

5.0 on 5.0

Yes,

Work contract.

No.

Yogendra Singh Rajawat
Advocate, Jaipur
14984 Answers
19 Consultations

4.6 on 5.0

1. Any foreign company can incorporate a wholly owned subsidiary company in India. In India, private limited companies are most popular form of business structure and therefore most obvious choice of foreign companies. In an Indian private limited company, there can two shareholders and two directors and at least one Director should be resident in India. 100% shareholding of an Indian private limited company can be owned by its foreign holding company and the requirement of having at least two shareholders can be fulfilled by giving one share to the nominee of foreign company. 

 

2. A company having foreign investment, engaged in a sector where foreign investment up to 100 percent is permitted under the automatic route and there are no FDI linked performance conditions, can be converted into an LLP under the automatic route.

The disinvestment proceeds can be remitted outside India or may be credited to NRE or FCNR(B) account of the person concerned.

3. The above answer  is applicable for this too

T Kalaiselvan
Advocate, Vellore
59440 Answers
756 Consultations

5.0 on 5.0

For taking back profit from India to USA in dollars, you shall have to take approval from the RBI.

Krishna Kishore Ganguly
Advocate, Kolkata
22911 Answers
618 Consultations

5.0 on 5.0

1. For.company separate PAN card shall be issued.

2. Investment and purchasing there share.

3. No US person PAN is not required.

Shubham Jhajharia
Advocate, Ahmedabad
21308 Answers
83 Consultations

5.0 on 5.0

1. See firstly director shall be person ,secondly PAN to the new company shall be issued directors pan is not required.

2. See based on investment in new company and project.

3. No

Shubham Jhajharia
Advocate, Ahmedabad
21308 Answers
83 Consultations

5.0 on 5.0

US person will be one among the director for the subsidiary company to be started in India, hence he will be having his own DIN.

Every Director of a Company has to apply for a Director Identification Number (DIN). 

The applicant shall scan and attach copies of the following documents, namely:

  • Photograph;

  • Proof of identity;

  • Proof of residence; and

  • Verification by the applicant for applying for allotment of DIN in the format specified.Please note that Income Tax PAN is mandatory in case of Indian applicants so the applicant details (name, father's
    name, date of birth) should be as per the PAN details.

Any person intending to become a director in an existing company shall have to make an application in eForm DIR3 for allotment of DIN.

the scanned documents required to be attached with DIR-3?
 High resolution photograph of the applicant
 PAN is mandatory now. So copy of pan is mandatory for identity, name, father's name and date
of birth.
 Proof of father's name is not required in the case of foreign nationals
 Copy of passport is mandatory as an id proof in the case of foreign nationals.
 Present Address proof which should not be older than 2 months.

T Kalaiselvan
Advocate, Vellore
59440 Answers
756 Consultations

5.0 on 5.0

1. Yes. 

2. It will follow regulations of rbi in the same

3. Yes

Prashant Nayak
Advocate, Mumbai
14897 Answers
25 Consultations

4.6 on 5.0

1. Identification and DIN is required for company PAN as such US directors PAN card is not compulsory.

Shubham Jhajharia
Advocate, Ahmedabad
21308 Answers
83 Consultations

5.0 on 5.0

Yes, PAN is required for entities entering into financial transactions with persons or entities of Indian origin

Yogendra Singh Rajawat
Advocate, Jaipur
14984 Answers
19 Consultations

4.6 on 5.0

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