Investments in India

If you are an NRI and like to grow your business in India, you should know the rules and regulations

How to establish an
Indian business as a foreign entity

To make a strategic investment in India, NRIs have to take advantage of Foreign Direct Investment. An international organization that needs to run a business in India should incorporate its company according to the Companies Act 2013. A person or an entity outside India has the right to invest in this country. But, it has to abide by the FDI policies set by the Indian Government. 

The FDI has set the percentage limits for investments based on the industry or sector of the business. Furthermore, the policy has revealed the need for having approval by government authorities like RBI. FDI is not allowable for some sectors, including 

Moreover, there should be no collaboration with foreign technology by any means like brand name, trademark, and franchise. Indian organizations issue equity shares, convertible debentures, and convertible preference shares. NRI should also know about the sale proceed remittance. Banks permit the remittance of a security to the sellers of different shares.

Liaison Office

Representative Office or Liaison Office assumes liaison activities. It works like a communication channel between the Indian parties and Head Office in a different country. It should not undertake business operations in India and earn an amount in India. Thus, the main function of the Office is not more than gathering details about potential market opportunities. 

Inward remittances have to meet the cost of this type of Office. The activities that LO can undertake are

Know about the eligibility criteria

A LO should get consent from RBI. The foreign entity has to forward the application through an AD category -1 Bank to the RBI.

There are 2 routes-

Without the RBI’s permission, no one from Bangladesh, Pakistan, Afghanistan, China, Iran, and Sri Lanka can set up LO in India. 

Branch Office

Organizations that have undergone incorporation in a foreign country and deal with manufacturing activities can establish Branch Offices in India. They, however, need to have an approval from the RBI. BOs can also represent group/parent companies. But, they should not do retail trading activities RBI focuses on the track record of the particular company, its trade relations, and activities. BOs earn profits that are remittable from India. They can also deal with other activities like

Limited Liability Partnership

LLP is a partnership developed and registered according to the LLP Act 2008. It is also an alternative business form providing advantages limited liability of an organization. It can restore its existence regardless of the partners. As a separate entity, it is liable to the assets. However, the partner’s liability is limited only to its contribution to the partnership.

FPI/ Foreign Portfolio Investment

SEBI has unified QFIs, sub accounts, and foreign institutional investors into a particular investor class. 

How should you register FPI? 

You need to make an application to the DDP (Designated Depository Participant) as an FPI. According to SEBI, NSDL should provide the certificate and registration number). These details will then be received by DDP that issues a digital version of the registration certificate.

FPI and eligibility criteria

Investment in partnership firm

Eligibility criteria- An NRI has the right to invest by contributing to the firm’s capital. A resident outside the country can also apply for a partnership firm. It has to get approval from RBI.

Inward remittance has to invest the amount. Besides, the firm is not involved in plantation, agricultural or real estate business. Moreover, the amount invested must not be qualified for repatriation outside the country. The Indian Government plays a role in deciding on the approval of the application.