Several options are available to Foreign Entrepreneurs and they may choose the best option according to their need and requirements:

Project/Site Office
Foreign companies planning to execute specific projects in India can set up temporary Project/Site offices in India. Project office means a place of business to represent the interests of the foreign company executing a project in India, but excludes a liaison office. A site office means a sub-office of the project office established at the site of a project, but does not include a liaison office. Specific approval from the RBI is required for setting up a project office. Such approval is generally accorded with respect to projects approved by appropriate authorities or where the projects are financed by the Indian bank/Financial Institution or multilateral/ bilateral international financial institutions.

Liaison Office / Representative Office
A person resident outside India (including companies) may open a Liaison Office only with the prior approval of the Reserve Bank of India. Liaison office means a place of business to act as a channel of communication between the principal place of business or head office by whatever name called & entities in India, but which does not undertake any commercial/trading/industrial activity, directly or indirectly, and maintains itself out of inward remittances received from abroad through normal banking channels.
The list of permitted activities with respect to which a Liaison Office may be opened include: -

• Representing in India the parent company/ group companies.
• Promoting export/ import from/ to India
• Promoting technical/ financial collaboration between parent/ group companies and companies in India.
• Acting as a communication channel between the parent company and Indian companies.

Branch Office
A person resident outside India (which includes companies) may open a Branch Office with the prior approval of the Reserve Bank of India.
“Branch office” in relation to a company means-

• Any establishment described as a branch by the company ;or
• Any establishment carrying on either the same or substantially the same activity as that carried on  by the head office of the company ;or
• Any establishment engaged in any production , processing or manufacture,

• Export/ Import of goods
• Rendering Professional or Consultancy services
• Carrying out research work, in which the parent company is engaged
• Promoting technical or financial collaborations between Indian companies and parent or overseas group company
• Representing the parent company in India and acting as buying / selling agents in India
• Rendering services in Information Technology and development of Software in India
• Rendering technical support to the products supplied by parent/ group companies
• Foreign Airline/ Shipping Company

Wholly Owned Subsidiary
A Foreign company can commence operations in India through incorporation of a company under the provisions of the Indian Companies Act, 1956.

Wholly owned subsidiary means a foreign entity formed, registered or incorporated in accordance with the laws and regulations of the host country, whose entire capital is held by the Indian party.

Foreign equity in such Indian companies can be up to 100% depending on the foreign investor’s business plan, prevailing investment policies of the Government and receipt of requisite approvals (ante).

For registration as an Indian company and its incorporation, an Application has to be filed with the Registrar of Companies. Once a company has been duly registered and incorporated as an Indian company, it will be subject to the same Indian laws and regulations as are applicable to other domestic Indian Companies.

The Companies Act, 1956, provides for incorporating both Private and Public Companies with or without limited liability. The liability may be limited by shares or by guarantee.

In the case of a company limited by shares, the personal liability of the members is limited up to the amount unpaid on their shares. In a company limited by guarantee the members undertake to meet their liabilities up to an amount already agreed upon at the time of winding up of the company.

A private limited company is required to have a minimum paid up share capital of Rs.100,000 and a public company has a minimum paid up share capital of Rs.500,000.

Joint Venture with Indian Partner
Foreign companies can set up the operations in India by forging strategic alliances with Indian partners.
A joint venture means a foreign entity formed, registered and incorporated in accordance with the laws and regulations of the host country in which the Indian party makes a direct investment.
Setting up of operations through a joint venture may entail the following advantages for foreign investors.

• Established distribution/marketing set up of the Indian partner.
• Available financial resource of the Indian partner.
• Established contracts of the Indian partner, which help smoothen the process of setting up of operations.

Existing Companies
Besides new companies, an automatic route for FDI/NRI/OCB investment is also available to the existing companies to induct foreign equity.
For existing companies with an expansion programme, the additional requirements are that

• The increase in equity level must result from the expansion of the equity base of the existing company without the acquisition of existing shares by NRI/OCB/Foreign Investors,
• The money to be remitted should be in foreign currency and
• The proposed expansion programme should be in the sector(s) under the automatic route. Otherwise, the proposal would need prior Government approval through the FIPB

• That they are engaged in the industries under the automatic route (including additional activities covered under the automatic route regardless of whether the original activities were undertaken with Government approval or by accessing the automatic route),
• The increase in equity level must be from expansion of the equity base and
• The foreign equity must be in foreign currency.

Technology Transfer
With a view of injecting the desired level of technological dynamism in the Indian Industry and for promoting an industrial environment where the acquisition of technological capability receives priority, foreign technology induction is encouraged both through FDI and through Foreign Technology Collaboration Agreements.
The Reserve Bank of India through its regional offices accords automatic approval to all industries for foreign technology collaboration agreements subject to: -

Furthermore, the payment of royalty upto 8% on exports and 5% on domestic sales by wholly owned subsidiaries to offshore parent companies is allowed under the automatic route without any restriction on the duration of royalty payments.