Background
Investment climate in India has improved considerably since the opening up of the economy in 1991. With an aim to attract and promote FDI, Government of India has put in place a policy framework on FDI, which is transparent, predictable and easily comprehensible.
While several initiatives are being undertaken to provide adequate physical and social infrastructure such as industrial corridors, cluster, zones, etc. it is encouraging to note that the GoI has embarked on ambitious reforms focused on improving India’s performance in the World Bank’s Doing Business rankings. India has jumped 65 positions from 142nd (2014) to 77th (2018) in ‘World Bank’s Ease of Doing Business Ranking 2018’
Foreign Investor can commence business in India as:
1. Indian Company
a) Joint Venture
b) Wholly Owned Subsidiary-
JV/ Wholly Owned Subsidiary as
(i) Private Limited or
(ii) Public Limited Company, s.t. Companies Act, 2013
2. Foreign Company
A) Liaison Office
To represent the parent company in India
b) Branch Office
To undertake activities such as Export, Import, research, consultancy etc.
c) Project Office
Activities as per contract to execute project
3. Limited Liability Partnership
LLP
Subject to provisions of LLP Act, 2008
FDI permitted under automatic route in LLPs operating in sectors/ activities where 100% FDI is allowed, through the automatic route and there are no FDI-linked performance condition
TYPES OF PERMITTED BUSINESS ESTABLISHMENTS
| PARTICULARS | PRIVATE | PUBLIC | OPC | LLP |
| Min Members | 2 | 7 | 1 | 2 Partners |
| Max Member | 200 | Unlimited | 1 | No Limit |
| Min Directors | 2 | 3 | 1 | 2 Designated Partner |
| Max Directors | 15* | 15* | 15* | NA |
| Resident Director | 1 Mandatory | 1 Mandatory | 1 Mandatory | 1 Designated Partner |
| Transfer of ownership | Ownership can be transferred | Ownership can be transferred | Ownership can be transferred to nominee in the event of death of owner | Ownership can be transferred |
| Subscription of shares | Public subscription not allowed | Public subscription allowed | Public subscription not allowed | Public subscription not allowed |
| Issue of Prospectus | Not Mandatory | **Mandatory | Not Mandatory | Not Mandatory |
| Managerial Remuneration | No limit for managerial personnel | Shareholder approval is required, if remuneration payable is above limits | NA | Remuneration is based on LLP agreement |
| Commencement of Business/ Operations | Declaration to be filed prior to commencement | Declaration to be filed prior to commencement | Declaration to be filed prior to commencement | Immediately after obtaining certificate of incorporation |
| Legal Status | Pvt Co is a separate legal entity registered under Companies Act, 2013. The Directors are liable for defaults made under the act | Public Co is a separate legal entity registered under Companies Act, 2013. The Directors are liable for defaults made under the act | OPC is a separate legal entity registered under Companies Act, 2013. The Directors are liable for defaults made under the act | LLP is a separate legal entity registered under LLP Act, 2008. The Designated partners of LLP are liable for contraventions under the act |
| Governing Act/ Law | Companies Act, 2013 | Companies Act, 2013 | Companies Act, 2013 | LLP Act, 2008 |
| Annual Statutory Filings | Annual statement of accounts & annual return with ROC | Annual statement of accounts & annual return with ROC | Annual statement of accounts & annual return with ROC | Annual statement of solvency & annual return with ROC |
| Annual Filings & AudiT | IT return to be filed. Audit mandatory | IT return to be filed. Audit mandatory | IT return to be filed. Audit mandatory | IT return to be filed. Audit mandatory in case turnover exceeds INR 40 lakhs or contribution exceedS INR 25 LAKHS |
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