There are many entry modes by which a foreign company can establish an entity in India. The choice of business form entirely depends upon the end goals to be achieved.
In this article we will discuss the following 2 options for foreign companies entering into India:
- Establishing a Branch office (BO);
- Establishing a Subsidiary or Wholly Owned Subsidiary (WOS)
Meaning
Branch Office (BO)
Branches are a part of the parent organization, which are opened to perform the same business operations as performed by the parent company, to increase their reach.
Companies incorporated outside India and engaged in manufacturing or trading activities are allowed to setup Branch Offices with specific approval of the RBI. Normally, the Branch Office should be engaged in the activity of the Parent Company.
Companies incorporated outside India and engaged in manufacturing or trading activities are allowed to setup Branch Offices with specific approval of the RBI. Normally, the Branch Office should be engaged in the activity of the Parent Company.
Subsidiary or Wholly Owned Subsidiary (WOS)
A subsidiary company is a company, whose controlling stake is held by another entity, i.e. the holding company. In India, a Subsidiary is an incorporated entity formed and registered under the Companies Act, 2013. It is a distinct legal entity, apart from its shareholders and Parent Company.
Permitted Activities
Branch Office (BO)
- Export/import of goods.
- Rendering professional or consultancy services.
- Carrying out research work, in areas 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 agent 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.
Subsidiary or Wholly Owned Subsidiary (WOS)
As per its ’main objects’ stipulated in the Memorandum of Association subject to Indian regulations. It can also be same as that of the Parent Company.
Nikita Bhatia is the co-founder of VenturEasy, an online platform for Company registration, book-keeping, accounting, tax consultancy and legal compliances in India. A Chartered Accountant and company secretary by profession, she has wide experience in the fields of audit, accountancy, taxation and corporate governance.
For any queries/ discussions, email at hello@ventureasy.com
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