India offers overseas entrepreneurs the chance to tap into one of the world’s fastest-growing-markets- and for UK entrepreneurs, India offers numerous opportunities, whether your interests lie in tech, consulting, manufacturing, e-commerce, professional services, etc.
Unfortunately, starting a business in another country is not as simple as setting up a new company. Foreign entrepreneurs have to deal with many things- foreign business structures, foreign direct investment (FDI) regulations, documentation, director requirements, registered office requirements, and compliance.
This guide has simplified the registration of Indian companies for foreigners and outlines the major points of consideration for UK entrepreneurs before starting a company in India.
Can a Foreigner Register a Company in India?
Yes, under the relevant foreign direct investment (FDI) policies and with consideration to the company law and applicable sector-specific stipulations, foreign nationals and international corporates can set up a company in India.
One of the most convenient structures for foreign entrepreneurs is an Indian Private Limited Company. This is because it is a separate legal entity and provides foreign entrepreneurs with the ability to transact business in India.
The Government of India has liberalized its foreign investment policies, and claims that in the majority of the sectors there are no restrictions on foreign investment, and a large number of sectors allow 100% Foreign Direct Investment through the automatic route. However, there are sectors with restrictions and/or foreign investment limits with conditions and approvals.
Thus, a UK entrepreneur should understand the FDI policy applicable to that business before making an investment or incorporating a business in India.
Which Business Structure Is Suitable for a Foreign Entrepreneur?
What option is best depends on your business structure, plans for investment, and what you will do in India.
Here are some options for business structure in India.
1. Private Limited Company
A Private Limited Company is for foreign entrepreneurs who want to have a new Indian company.
It is good for:
- UK companies who are growing into India
- foreign businesses
- Technology Companies
- Consulting Businesses
- E-commerce
- Businesses who will employ staff in India
- Companies who plan to grow and get more investment
The Indian company is separate from the foreign shareholders and will follow the laws that are applicable.
2. Limited Liability Partnership
An LLP can be used when the founders want a partnership type of structure, but also want protection of limited liability.
Its suitability depends on the activity planned and the foreign investment control policies of the sector.
3. Wholly Owned Subsidiary
A UK company may want an Indian company that is fully owned by the UK parent company. This is allowed in the FDI policies.
This is a good option when the UK company wants an Indian Private Limited Company and does not want to operate in India directly.
4. Branch or Liaison Office
A foreign company can also choose a Branch Office or Liaison Office. These are not the same as Indian company incorporation and have their own laws.
For example, a Liaison Office is for communication and representation only, and is not for normal business in India to make a profit. This is also governed by the RBI.
For these reasons, a choice between an Indian subsidiary, Private Limited Company, LLP, Branch Office or Liaison Office should be based on the actual business objective.
Requirements for Company Registration in India for Foreigners
There are several documents needed when starting the incorporation process as a foreign entrepreneur.
The documents needed will depend on the structure and situation.
These documents may include the following:
- Passport of the foreign director or shareholder
- Proof of address
- Residential address details
- Photographs
- Proof of registered office in India
- Corporate documents of the foreign parent company, if needed
- Memorandum and Articles of Association of the foreign company, if needed
- Authorization documents
- Documents needed for foreign investment and regulatory filings
Foreign documents will also need notarization, apostille, or authentication based on where they were issued and the specific filing requirements.
For UK entrepreneurs, this is a good example of not making the assumption that documents accepted in the UK will also be accepted in India.
Do Foreigners Need an Indian Director?
Foreign company registrations in India require consideration of the residency of directors.
For most Indian companies, there is a requirement for a director who is a resident in India. Depending on the proposed company and relevant laws, the situation may vary.
Because of this, the foreign entrepreneur will not have to bring their management team to India. Indian company law only requires that the directors of the company be as per Indian laws.
It is advisable to take professional help in case there is a need to determine the roles of foreign directors, foreign shareholders, and the resident director.
Step-by-Step Company Registration Process
Foreign entrepreneurs can generally expect the following stages when starting a business. Varies based on business structure.
Decide the Business Structure
Foreign entrepreneurs must first decide whether a Private Limited Company, LLP, subsidiary, Branch Office, or any other structure applies to their business.
A foreign entrepreneur’s decision should be based on ownership, investment, liability, taxation, operations, and the future of the business.
Check FDI Eligibility
Foreign entrepreneurs must check whether foreign investments are permitted based on their proposed business activity.
In addition, foreign entrepreneurs will need to check whether the proposed business activity falls under the automatic or government route.
The automatic route does not require government approval of foreign investments. In contrast, the government route requires approval per the prescribed regulations.
Prepare and Authenticate Documents
Foreign entrepreneurs who wish to incorporate a company in India and who wish to be shareholders or directors of the proposed Indian company need to prepare identification and address documents.
Whether foreign documents need authentication, notarization, or an apostille will depend on the requirements of the jurisdiction.
Correctly preparing documents will aid foreign entrepreneurs by decreasing unnecessary delays in the process.
Apply for Incorporation
The Ministry of Corporate Affairs in India has a prescribed electronic process for the incorporation of Indian companies.
The SPICe+ framework is the prescribed framework for company incorporation and related services.
The application will request information on the
- Proposed name of the company,
- Directors, Shareholders,
- Registered office,
- Share capital,
- Business activities, and
- Constitutional documents.
Receive Incorporation Documents
Once the application is approved, a company will receive its incorporation documents.
One of the documents will be the Corporate Identity Number (CIN).
The business may then commence the business activities it intended to incorporate, and will need to complete post-incorporation formalities.
Complete Post-Incorporation Compliance
Even after you’re done registering, you still have a lot to do.
Your company may have to do a lot of different activities, including filing taxes, auditing, providing annual reports, providing financial statements, and filing statutory or regulatory records.
Companies with foreign investments may have to do even more activities.
Understanding FDI Rules for UK Entrepreneurs
You’ll likely find understanding Foreign Direct Investment to be most helpful when you want to enter the Indian market.
There are two broader categories to be familiar with as you examine India’s Foreign Direct Investment framework.
Automatic. Refers to when approval will not be needed for eligible foreign investment that meets the limitations.
Government. Refers to when approval will depend on the sector or where the investment falls.
Due to the limitations on foreign investment, among other things, UK entrepreneurs should not assume foreign investment is unrestricted. The National Single Window System provides an interface for online business permission requests from the government.
How Much Does Company Registration in India Cost for a Foreigner?
Prices for foreign-owned businesses vary across the board. Costs can depend on:
- The structure of the business
- The number of shareholders and directors
- Professional fees
- Filing fees
- Share capital
- Authentication of documents
- Arrangements of the registered office
- Compliance
- Accounting costs
Due to these factors, foreign business owners should consider the total cost for the setup as well as ongoing compliance costs, and not just the base incorporation fee.
How Long Does Registration Take?
The time it takes varies based on how thorough the application is, how long it takes to verify documents, availability of names, and how long the government takes to process requests. Additional approvals may also impact the time.
Foreign founders may also need more time to prepare and authenticate documents from their home countries.
If your business requires government approvals or other regulatory permissions, it will take longer.
Because of this, it is best to prepare all of the documents before starting the incorporation process rather than thinking it is just a simple form to fill out.
Common Mistakes Foreign Entrepreneurs Should Avoid
Not having the necessary tools to complete the planning stages of your UK to India company establishment could cause lots of problems and delays.
Here are a few of the more common problems seen with UK businesses expanding to India:
Yearly Business Structures
Selecting a business structure because it was the easiest to implement is the wrong approach. Business structures should complement long-term business models.
Pushing the Boundaries on Foreign Direct Investment Rules
Just because a company has been set up does not mean any and all foreign direct investments and business activities are permitted.
Overlook Credentials on Documents Foreign to India
When submitting documents to the Government of India in relation to your business, foreign documents may require authentication and certification by a recognized authority.
Overvaluing Incorporation
Incorporation is just the beginning of the journey of running a business in a foreign land. Regular and consistent compliance with tax and other corporate regulations is also a necessity.
Inadequate Preparation for Indian Operations
Foreign business people should keep in mind the practicalities of having a business in a foreign land, like having an Indian registered office, banking, hiring, and local operations.
Why UK Entrepreneurs Choose Professional Assistance
For someone in the UK, there are lots of foreign government regulations, terms, and documentation to learn before incorporating an Indian company.
The best company incorporation services will eliminate a majority of the burden by taking care of the documentation and incorporation filings along with the necessary compliance.
We offer the best company incorporation service in India for foreign entrepreneurs. We break down the incorporation procedures and help with the most advantageous registration requirements for your business.
We aim to reduce the confusion surrounding the incorporation service in India, as opposed to just filling out the necessary forms.
We can help foreign entrepreneurs with the incorporation and compliance process in India.
Is India a Good Choice for a UK Business Expansion?
The appropriate company can find valued professionals, technology, and opportunities in many growing sectors. There’s also a large potential market for consumers in India.
Rapid successful expansion in India looks a little bit different than the rest of the world and requires intensive planning.
Things about the emerging target Indian market that a UK Entrepreneur would need to think about are Indian Business activities, and the following things one by one:
- FDI eligibility
- Business Ownership structure
- Indian Market Entry Investment Requirements
- Indian Taxation
- Labor Market Considerations
- Regulatory Compliance
The entrepreneur should also carefully consider the possibilities for long-term expansion.
The objective must be more than registering a business. The aim should be to create a compliant business model that enables expansion and growth.
Final Thoughts
With proper strategizing, foreign nationals can register their companies in India. For UK entrepreneurs, the vital point is learning the difference between establishing a subsidiary in India and incorporating an Indian company.
As an entrepreneur, you must first analyze the business structure, applicable foreign direct investment route, ownership requirements, documentation, registered office, and compliance obligations.
As a UK entrepreneur entering the Indian market, we, at Ventureasy, can help you understand your options and take you step by step through the process of registration as per your needs.
FAQs About Company Registration in India for Foreigners
Can UK Citizens Start a Business in India?
UK Citizens can join in starting businesses in India after complying with the Indian Company Law, the Foreign Direct Investment (FDI) rules, and the requirements of specific sectors.
Can a foreigner own 100% of an Indian company?
In several sectors, the Foreign Direct Investment (FDI) rules allow automatic Foreign Direct Investment (FDI) up to 100%; this is, however, not true for all sectors.
Can a foreign company open a business presence in India?
Yes, Foreign Companies can operate in India through a subsidiary, Branch Office, Liaison Office, or any other type of business formation allowed by the Indian Companies Act, 2013.
Do foreign documents need authentication?
Sometimes, foreign documents will require authentication in one way or another depending on the nature of the document and filing requirements in India. This could include notarization and Apostille.
Is an Indian registered office required?
Yes, an Indian Company needs to have a Registered Office in India, which should comply with all of the requirements of the Companies Act along with the required documents.
Can Ventureasy help with foreign company registration in India?
Yes, Ventureasy can help you understand the process of business registration in India.