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oreign investors have multiple options available to themwhen
entering India and can choose any of the following business
Incorporating a company in India through a joint venture (“JV”) or
a wholly-owned subsidiary
Establishing a Limited liability partnership (“LLP”)
Opening a Liaison office
Opening a Branch office
Opening a Project office
Generally, foreign companies prefer to commence operations in
India by incorporating a company in India under the Companies
Act 2013, through a joint venture or a wholly-owned subsidiary,
since it is a separate legal entity. Its members have limited liability
and the company is taxed as a domestic company under the Indian
Income Tax Act 1961.
Are there Separate Laws for Joint Ventures?
There are no separate laws for joint ventures.Companies registered
in India with even 100% overseas shareholding are considered as
domestic companies.A JV in the form of an incorporated company
is the most favored type of JV in India although other types of JVs
including contractual JVs are possible.
The company will be required to register itself with the Registrar
of Companies of the relevant State in India where such company
establishes its registered office and will need to submit returns under
various statues including the Companies Act 2013. The company
must have a minimum of two directors with at least one resident
Indian director (i.e.a director that has stayed in India for at least 182
Guide to Setting up Joint Ventures in India
Providing a Vehicle for Foreign Entities to Set Up Operations in India
Adv. Michelle Solomon Le Page
Foreign companies prefer to commence
operations in India by incorporating a company
in India under the Companies Act 2013, through a
joint venture or a wholly-owned subsidiary, since
it is a separate legal entity
Adv. Michelle Solomon Le Page is Associate Partner at Solomon & Co., a
full-service lawfirmand is especially reputed for its Corporate,Finance,Real
Estate,Litigation and Intellectual Property practice group.www.slmnco.in
days in the previous year). A person resident outside India cannot
be the managing director, whole time director or manager of the
FDI and Joint Ventures
Foreign Direct Investment (“FDI”) into the Indian company must
be in accordance with the FDI Policy of the Government of India.
Foreign investment in India is governed by the Foreign Exchange
Management Act 1999 as amended from time to time.FDI is permitted
up to 100% under the automatic route (i.e. without the need for
government approval) in sectors other than restricted sectors which
are indicated in the FDI Policy.
In sectors where 100% FDI is not permitted, a joint venture is a
convenient vehicle to enter into the Indian market. The FDI Policy
indicates the percentage of FDI permitted against various sectors.
Details of the FDI policy are available on the website of the Department
of Industrial Policy & Promotion.At the time of investment into India,the
company will be required to file Form FC-GPR containing information
in connection with the investment,with the authorized dealer bank.