An investor (Including a foreign entity1) can start operations in India by incorporating a company under the provisions of Companies Act, 2013 including related Rules, Circulars, Notifications, Orders and subsequent Amendments (http://www.mca.gov.in/MinistryV2/companiesact.html).
This Act regulates incorporation of a company, manner of conducting the affairs of a company, responsibilities of its directors and dissolution of a company. Ministry of Corporate Affairs (MCA) is responsible for ensuring compliance with provisions of the Companies Act, 2013 through the offices of Registrar of Companies (ROC) and the Regional Directors (RD).
As company set-up in India can either be private limited or public limited:
- Private limited company: The key features of a private limited company in India are as follows:
- It requires a minimum of two shareholders and two directors (both of them can be foreigners). One of the directors has to be resident in India.
- The number of shareholders cannot exceed 200.
- It cannot invite the public to subscribe for any securities of the company and which by articles restricts the right to transfer its shares.
- It can raise debt in foreign currency in the form of external commercial borrowings.
- Public limited company: A public company is defined as one that is not a private company.
- A subsidiary of Indian public company is also treated as a public company.
- A public company is required to have a minimum of 7 shareholders and 3 directors. One of the directors has to be resident in India.
- There are limits placed on remuneration paid to the directors.
In order to facilitate the investors for setting up companies in India, Government of India has developed an e-Filing portal called MCA21 (http://www.mca21.gov.in/). Applicant is required to do e-Filing for Companies/ Limited Liability Partnerships (LLPs) registration on MCA21 portal, where he/ she has the facility to download the e-Form and fill it in an offline mode (http://www.mca.gov.in/MinistryV2/AboutFiling.html).
Applicant would need to be connected to the internet to carry out the pre-fill and pre-scrutiny functions for e-filing. The filled up e-Form as per relevant instruction kit needs to be uploaded on the MCA21 portal. On successful upload, the Service Request Number (SRN) would be generated and Applicant would be directed to make payment of the statutory fees. Once the payment has been made the status of payment and filing status can be tracked on the MCA portal by using the ‘Track Your Payment Status’ and ‘Track Your Transaction Status’ link respectively.
To know the major steps required for setting up a company, click here.
1 - with exceptions as mentioned in section 3.1 of FDI Circular 2016 by Department of Industrial Policy & Promotion (DIPP)
Investors who are eligible to make investment in India are as follows:
- A non-resident entity can invest in India, subject to the FDI policy except in those sectors/activities which are prohibited as per the policy. A citizen of Bangladesh or an entity incorporated in Bangladesh can invest only under the Government route. Further, a citizen of Pakistan or an entity incorporated in Pakistan can invest, only under the Government route, in sectors/activities other than defense, space and atomic energy and sectors/activities prohibited for foreign investment.
- NRIs residing in Nepal and Bhutan as well as citizens of Nepal and Bhuta1n are permitted to invest in the capital of Indian companies on repatriation basis, which is subject to conditions as outlined in section 3.1.2 of consolidated FDI policy, 20161.
- Overseas corporate bodies (OCBs) have been derecognized as a class of investors in India with effect from September 16, 2003. Erstwhile OCBs which are incorporated outside India and are not under the adverse notice of RBI can make fresh investments under the FDI Policy as non-resident entities, with the prior approval of Government of India.
- A company, trust and partnership firm incorporated outside India, which is owned and controlled by NRIs can invest in India with the special dispensation as available to NRIs under the FDI Policy.
- Foreign Institutional Investors (FIIs) and Foreign Portfolio Investors (FPIs) can invest in the capital of an Indian company under the Portfolio Investment Scheme, which is subject to conditions as outlined in section 3.1.2 of the consolidated FDI policy, 20162.
- Only registered FIIs/FPIs and NRIs as per Schedules 2, 2A and 3 respectively of Foreign Exchange Management (Transfer or Issue of Security by a Person Resident Outside India) Regulations, 2000, can invest/trade through a registered broker in the capital of Indian Companies in recognized Indian Stock Exchanges.
- A SEBI registered Foreign Venture Capital Investor (FVCI) may contribute up to 100% of the capital of an Indian company engaged in any activity mentioned in Schedule 6 of Notification No. FEMA 20/2000, including start-ups irrespective of the sector in which it is engaged, under the automatic route.
- A Non- Resident Indian may subscribe to National Pension System governed and administered by Pension Fund Regulatory and Development Authority (PFRDA), which is subject to conditions as outlined in section 3.1.2 of the consolidated FDI policy, 20163.
Eligible Investee Entities
As per the consolidated FDI Policy, 2016 eligible investors can make investment into the following entities:
- Investment in an Indian Company – A company registered in India can issue capital against FDI.
- Investment in Partnership Firm/ Proprietary Concern – Investment into such firm can be undertaken by following two categories of investors:
- Non-Resident Indian (NRI) or a Person of Indian Origin (PIO) can invest in the capital of a firm or a proprietary concern in India on non-repatriation basis on a condition that the amount is invested by inward remittance or out of NRE/FCNR(B)/NRO account maintained with Authorized Dealers/Authorized banks. The firm or proprietary concern cannot be engaged in any agricultural/plantation or real estate business or print media sector and the amount invested is not eligible for repatriation outside India.
- Investment by non-residents other than NRIs/PIO: These investors can invest with prior approval of Reserve Bank for making investment in the capital of a firm or a proprietary concern or any association of persons in India. The application will be decided in consultation with the Government of India.
- Investment in Trust- FDI is not permitted in Trusts other than in Venture Capital Funds (VCFs) registered and regulated by SEBI and in Investment Vehicles.
- Investment in Limited Liability Partnerships (LLPs) - Such investments are permitted, which is subject to a condition that FDI is permitted through automatic route (in sectors wherein 100% FDI is available).
- Investment in Investment Vehicle - An entity being ‘investment vehicle’ registered and regulated under relevant regulations framed by SEBI or any other authority designated for the purpose including Real Estate Investment Trusts (REITs) governed by the SEBI (REITs) Regulations, 2014, Infrastructure Investment Trusts (INVLTS) governed by the SEBI (INVLTS) Regulations, 2014, Alternative Investment Funds (AIFs) governed by the SEBI (AIFs) Regulations, 2012 and notified under Schedule 11 of Foreign Exchange Management (Transfer or Issue of Security by a Person Resident outside India) Regulations, 2000 is permitted to receive foreign investment from a person resident outside India (other than an individual who is a citizen of or any other entity which is registered / incorporated in Pakistan or Bangladesh), including a Registered Foreign Portfolio Investor (RFPI) or a Non-Resident Indian (NRI).
- FDI in other Entities - FDI in resident entities other than those mentioned above is not permitted.
1 - Source: http://www.dipp.nic.in/English/Policies/FDI_Circular_2016.pdf (Accessed: 15 June 2016)
2 - Source: http://www.dipp.nic.in/English/Policies/FDI_Circular_2016.pdf (Accessed: 15 June 2016)
3 - Source: http://www.dipp.nic.in/English/Policies/FDI_Circular_2016.pdf (Accessed: 15 June 2016)
Foreign investors can invest directly in India, either on their own or through Joint Ventures in all the sectors except in a very small list of activities where foreign investment is prohibited. FDI in majority of the sectors is under automatic route, i.e., allowed without any requirement of seeking regulatory approval prior to such investment.
In addition to direct investment in India, eligible non-residents can also make portfolio investments. The Reserve Bank of India has simplified the foreign portfolio norms by putting in place an easier registration process and operational framework. With this simplification, the existing Portfolio investor class, namely Foreign Institutional Investors (FIIs) and Qualified Foreign Investors (QFIs) registered with Securities and Exchange Board of India (SEBI) have been subsumed under Registered Foreign Portfolio Investors (RFPIs)1. RFPI registered with SEBI are allowed to invest in the primary and secondary capital markets in India under the Foreign Portfolio Investment Scheme. It was also notified that QFI/ FII (including SEBI approved sub-accounts of FII) after registering as an RFPI will not be eligible to invest as QFI/ FII. RFPIs are allowed to purchase on repatriation basis following securities subject to terms and conditions specified by the SEBI and RBI2:
- Dated government securities/ treasury bills.
- Listed non-convertible debentures/bonds issued by an Indian company.
- Listed and unlisted non-convertible debentures/bonds issued by an Indian company in the infrastructure sector.
- Non-convertible debentures/ bonds issued by a Non-Banking Financial Company (NBFC) categorized as ‘Infrastructure Finance Companies’.
- Primary issues of non-convertible debentures/bonds provided, such non-convertible debentures/ bonds are committed to be listed within 15 days of such investment etc.
- Rupee denominated bonds/ units issued by Infrastructure Debt Funds.
- Credit enhanced bonds.
- Perpetual Debt instruments.
- Security Receipts issued by Asset Reconstruction Companies.
- Units of domestic mutual funds
- Commercial papers issued by an Indian company
In addition to above, Non Resident Indians (NRIs) can invest in the shares or convertible debentures of Indian companies on non-repatriable basis, apart from investing in the form of FDI. These investments are treated at par with domestic investment and are not construed as FDI. However, even under this scheme, NRIs cannot invest in companies that are engaged in chit fund business or is a Nidhi company or is engaged in agricultural/ plantation activities or real estate business or construction of a farm house or dealing in Transferable Development Rights (TDRs). Investments by companies, trusts and partnership firms, incorporated outside India, which are owned and controlled by NRIs, will be deemed to be treated as domestic investments at par with the investments made by residents subject to the condition that investment is under non-repatriation route. For details refer to Section 5.1 of FDI Circular 2016 link:
1 - Source:FEMA Notification No.. 297/2014-RB March 13, 2014
2 - Source:FEMA Notification No.. 297/2014-RB March 13, 2014 (Amendment of Schedule 5)
The key instruments allowed for receiving FDI in India, as per FDI policy Circular 2016, are as follows:
- The instruments for receiving Foreign Direct Investment (FDI) include equity shares, fully and mandatorily convertible debentures, fully and mandatorily convertible preference shares and warrants subject to the pricing guidelines / valuation norms and reporting requirements amongst other requirements as prescribed under FEMA Regulations. The optionality clauses are allowed in equity shares and compulsorily and mandatorily convertible debentures and fully, compulsorily and mandatorily convertible preference shares under FDI Scheme, subject to the following conditions:
- A minimum lock-in period of one year which is effective from the date of allotment of such capital instruments.
- After the lock-in period and subject to FDI Policy provisions, if any, the non-resident investor exercising option/right shall be eligible to exit without any assured return, as per pricing/valuation guidelines issued by RBI from time to time.
- Other types of preference shares/debentures i.e., non-convertible, optionally convertible or partially convertible for issue of which funds have been received on or after May 1, 2007 are considered as debt. Accordingly all norms applicable for ECBs relating to eligible borrowers, recognized lenders, amount and maturity, end-use stipulations, etc. shall apply. Since these instruments would be denominated in rupee, interest rate will be based on swap equivalent of London Interbank Offered Rate (LIBOR) plus the spread as permissible for ECBs of corresponding maturity.
- The inward remittances received by the Indian company vide issuance of DRs and FCCBs are treated as FDI and counted towards FDI.
- Acquisition of warrants and partly paid shares – An Indian company may issue warrants and partly paid shares to a person residing outside India subject to terms and conditions as stipulated by the Reserve Bank of India in this behalf, from time to time.
- Foreign Currency Convertible Bonds (FCCBs) and Depository Receipts (DRs) may be issued in accordance with the scheme for issue of Foreign Currency Convertible Bonds and Ordinary Shares (Through Depository Receipt Mechanism) Scheme, 1993 and DR Scheme 2014 respectively, as per the guidelines issued by the Government of India there under from time to time. Further details on FCCBs and DRs can be referred from Annexure 2 of the FDI Circular 2016 (link: http://www.dipp.nic.in/English/Policies/FDI_Circular_2016.pdf ).
- Issue of American Depository Receipts (ADRs) and Global Depository Receipts (GDRs ):
- Two-way Fungibility Scheme: A limited two-way Fungibility scheme has been put in place by the Government of India for ADRs/GDRs. Under this Scheme, a stock broker in India, registered with SEBI, can purchase shares of an Indian company from the market for conversion into ADRs/GDRs based on instructions received from overseas investors. Re-issuance of ADRs/GDRs would be permitted to the extent of ADRs/GDRs which have been redeemed into underlying shares and sold in the Indian market.
- Sponsored ADR/GDR issue: An Indian Company can also sponsor an issue of ADR/GDR. Under this mechanism, the company offers its resident shareholders a choice to submit their shares back to the company so that on the basis of such shares, ADRs/GDRs can be issued abroad. The proceeds of the ADR/GDR issue are remitted back to India and distributed among the resident investors who had offered their Rupee denominated shares for conversion. These proceeds can be kept in Resident Foreign Currency (Domestic) accounts in India by the resident shareholders who have tendered such shares for conversion into ADRs/GDRs.
The various modes of transfer of funds by foreign investors into an Indian company are:
- Inward remittance through normal banking channels.
- Debit to Non-Resident External (NRE)/ Foreign Currency Non-Resident (FCNR) account of a person concerned and maintained with an Authorized Dealer (AD) category-I bank.1
- Conversion of royalty/ lump sum/technical knowhow fee due for payment/import of capital goods by units in SEZ, or conversion of External Commercial Borrowings (ECB), shall be treated as consideration for issue of shares.
- Conversion of import payables/ pre incorporation expenses/ share swap can be treated as consideration for issue of shares with the approval of Foreign Investment Promotion Board (FIPB).
- Debit to non-interest bearing Escrow account in Indian Rupees in India which is opened with the approval from AD category-I bank and is maintained with the AD category-I bank on behalf of residents and non-residents towards payment of share purchase consideration.
If the shares or convertible debentures are not issued within 180 days from the date of receipt of the inward remittance or date of debit to NRE/ FCNR (B)/ Escrow account, the amount shall be refunded. Further, Reserve Bank may on an application made to it and for sufficient reasons permit an Indian Company to refund / allot shares for the amount of consideration received towards issue of security if such amount is outstanding beyond the period of 180 days from the date of receipt.
1 - Master Circular on Foreign Investment in India; RBI/2015-16/96/MC No. 15 Dated October 30, 2015. As accessed from link https://www.rbi.org.in/Scripts/BS_ViewMasCirculardetails.aspx?id=9903
The key FDI reporting requirements of the Reserve Bank of India are as follows:
- Reporting of Inflow -
- An Indian company receiving investment under the FDI Scheme should report the details of the amount of consideration not later than 30 days from the date of receipt in the Advance Reporting Form.1
- Indian companies are required to report the details of the receipt of the amount of consideration for issue of shares/convertible debentures, through an AD Category-I bank, together with a copy/copies of the FIRC/s evidencing the receipt of the remittance along with the KYC report (Section-2 of Annexure 6; Consolidated FDI policy Circular of 2016) on the non-resident investor from the overseas bank remitting the amount.
- Reporting of issue of shares
The Indian company has to file Form FC-GPR, not later than 30 days from the date of issue of shares. For further details on the guidelines to fill up the form please refer to clause on 2.2 in annexure-6 of Consolidated FDI policy Circular of 2016.2
- Reporting of transfer of shares
Reporting of transfer of shares between residents and non-residents and vice-versa is to be done in Form FC-TRS3, submitted to the AD Category-I bank, within 60 days from the date of receipt of the amount of consideration. For further details refer to clause 2.3 in annexure-6 of Consolidated FDI policy Circular of 20164
- Reporting of Non-Cash
- In case of full conversion of ECB into equity, the company shall report the conversion in Form FC-GPR to the Regional Office concerned of the Reserve Bank as well as in Form ECB-2 to the Department of Statistics and Information Management (DSIM), Reserve Bank of India within seven working days from the close of month to which it relates.
- In case of partial conversion of ECB, the company shall report the converted portion in Form FC-GPR to the Regional Office concerned as well as in Form ECB-2, clearly differentiating the converted portion from the non-converted portion.
- Reporting of FCCB/DR Issues
The domestic custodian shall report the issue/transfer of sponsored/unsponsored depository receipts as per DR Scheme 2014 in ‘Form DRR’ as given in Section-5 within 30 days of close of the issue/ program.
1 - As per the Advance Reporting Form in Section-1, Annexure-6 of the Consolidated FDI policy effective from June 07, 2016, accessed from http://dipp.nic.in/English/Policies/FDI_Circular_2016.pdf
2 - As per Consolidated FDI policy effective from June 07, 2016, accessed from http://dipp.nic.in/English/Policies/FDI_Circular_2016.pdf
3 - As per the FC-TRS Form in Section-4, Annexure-6 of the Consolidated FDI policy effective from June 07, 2016, accessed from http://dipp.nic.in/English/Policies/FDI_Circular_2016.pdf
4 - As per Consolidated FDI policy effective from June 07, 2016, accessed from http://dipp.nic.in/English/Policies/FDI_Circular_2016.pdf
Foreign capital invested in India is generally allowed to be repatriated along with capital appreciation, if any, after payment of taxes due, provided the investment was made on a repatriation basis
- Remittance of sale proceeds/Remittance on winding up/Liquidation of Companies:
- Sale proceeds of shares and securities and their remittance is ‘remittance of asset’ governed by The Foreign Exchange Management (Remittance of Assets) Regulations, 2000 under FEMA.
- AD Category-I bank can allow the remittance of sale proceeds of a security (net of applicable taxes) to the seller of shares residing outside India, provided the security has been held on repatriation basis, the sale of security has been made in accordance with the prescribed guidelines and NOC/tax clearance certificate from the Income Tax Department has been produced.
- Remittance on winding up/liquidation of Companies:
AD Category-I banks remit winding up proceeds of companies in India, which are under liquidation, subject to payment of applicable taxes. Liquidation may be subject to any order issued by the court winding up the company or the official liquidator in case of voluntary winding up under the provisions of the Companies Act, as applicable. AD Category-I banks shall allow the remittance provided the applicant submits:
- No objection or Tax clearance certificate from Income Tax Department for the remittance.
- Auditor's certificate confirming that all liabilities in India have been either fully paid or adequately provided for.
- Auditor’s certificate to the effect that the winding up is in accordance with the provisions of the companies act, as applicable.
- In case of winding up other than by a court, an auditor's certificate to the effect that there are no legal proceedings pending in any court in India against the applicant or the company under liquidation and there is no legal impediment in permitting the remittance.
- Repatriation of Dividend: Dividends are freely repatriable without any restrictions (net after Tax deduction at source or Dividend Distribution Tax, if any, as the case may be). The repatriation is governed by the provisions of the Foreign Exchange Management (Current Account Transactions) Rules, 2000, as amended from time to time.
- Repatriation of Interest: Interest on fully, mandatorily & compulsorily convertible debentures is also freely repatriable without any restrictions (net of applicable taxes). The repatriation is governed by the provisions of the Foreign Exchange Management (Current Account Transactions) Rules, 2000, as amended from time to time.
Winding up of a company is a process whereby all the affairs of the company are wound up, all assets sold, liabilities paid off and the balance, if any, is distributed to its shareholders. An administrator, called a liquidator, is appointed; collects the debts of the company and distributes any surplus among the members. A company may be wound up either compulsarily by the instuction of the court or voluntary by its shareholders or creditors. For details, visit the following link- (http://www.mca.gov.in/MinistryV2/CloseCompany.html)
There are two modes in which a company may be wound up.
- Winding up by the court
- Voluntary winding up (subject to supervision of the court):
- Voluntary winding up
- Creditors Voluntary winding up
Under mode II; a company may be voluntarily wound up, either by passing an ordinary resolution, that the purpose for which the company was formed has completed, or the time limit for which the company was formed, has expired; or by way of special resolution.
Both types of resolution shall be passed in the general meeting of the company. Once the resolution of voluntarily winding up is passed, the company may be wound up, either through:
- Members voluntarily winding up, or
- Creditors voluntarily winding up
The only difference between the above two is that in case of members voluntarily winding up, Board of Directors has to make a declaration to the effect that company has no debts.
The Official Liquidators (http://companyliquidator.gov.in/winding_up.html) are officers appointed by the Central Government and are attached to various High Courts. The Official Liquidators are under the administrative charge of the respective Regional Directors, who supervise their functioning on behalf of the Central Government.
A corporate body incorporated outside India can establish office in the following categories in India1
- Branch Office (BO): BOs are permitted to represent the parent / group companies and undertake restricted activities as permissible by Reserve Bank in India. The details of permissible activities have been given in Question no. 10 (next FAQ).
- Liaison Office (LO): Liaison office is a place of business that acts as a channel of communication between the Head office (principal place of business) and entities in India. LO does not undertake any commercial /trading/ industrial activity, directly or indirectly, and maintains itself out of inward remittances received from abroad through normal banking channel.
- Project Office (PO): Project office is a place of business in India to represent the interests of the foreign company executing a project in India but excludes an LO. A foreign company refers to any corporate body incorporated outside India2
- Site Office (SO): Site Office is a sub-office of the Project Office established at the site of a project but does not include a Liaison Office
- Stand Alone Basis: Stand-alone basis refers to branch offices, which would be isolated and restricted to the Special Economic Zones (SEZs). No business activity/ transaction will be allowed outside the SEZs in India, which includes branches/subsidiaries of its parent office in India.
Process and Criteria for Establishment of Such Offices
Process and Criteria for Establishment of Such Offices A corporate body incorporated outside India (including a firm or other association of individuals), who want to open an LO/ BO in India shall obtain permission from the RBI under provisions of FEMA 1999, by submitting its application to the concerned AD Category-I Banks. The prescribed application form FNC can be accessed at
https:// www.rbi.org.in/scripts/FS_Notification.aspx?Id=10398&fn=5&Mode=0. It is applicable in such cases wherein principal business of the foreign entity falls under sectors where 100% Foreign Direct Investment (FDI) is permissible under the automatic route (earlier known as the reserve bank route)
- Automatic Route: The applicants under this route include those whose principal business falls under sectors where 100% FDI is permissible under the automatic route.
- Government Route: The applicants under this route require approval from the Reserve Bank in consultation with the Ministry of Commerce and Industry, Government of India. This route is applicable under following situations:
- When principal business of the foreign entity falls under a sector wherein 100% FDI is not permissible under the automatic route.
- Applicants / entities which fall under the category Non - Government Organizations / Non - Profit Organizations/ Government Bodies/ Departments.
- Application from a person residing outside India for opening of a BO/LO/PO in India shall require prior approval of Reserve Bank of India in the following cases:3
- The applicant is a citizen of or is registered/incorporated in Pakistan.
- The applicant is a citizen of or is registered/incorporated in Bangladesh, Sri Lanka, Afghanistan, Iran, China, Hong Kong or Macau and the application is for opening a BO/LO/PO in Jammu and Kashmir, North East region and Andaman and Nicobar Islands.
- The principal business of the applicant falls in the four sectors namely Defence, Telecom, Private Security and Information and Broadcasting. In the case of proposal for opening a PO relating to defence sector, no separate reference or approval of Government of India shall be required if the said non-resident applicant has been awarded a contract by/ entered into an agreement with the Ministry of Defence or Service Headquarters or Defence Public Sector Undertakings. There shall be no requirement of any approval from RBI also only for such cases.
- Applicants / entities which fall under the category Non - Government Organizations / Non - Profit Organizations/ Government Bodies/ Departments.
The applicants shall be evaluated on the following conditions by the Reserve Bank while sanctioning Liaison or Branch offices of foreign entities in India:
- The application for establishing BO/ LO in India should be forwarded by the foreign entity through a designated AD Category - I bank to the General Manager, Foreign Exchange Department, Central Office Cell, Reserve Bank of India.
- Previous record of the Applicant:
- For Branch Office — a profit making track record during the immediately preceding five financial years in the home country.
- For Liaison Office — a profit making track record during the immediately preceding three financial years in the home country.
- Net Worth of the Applicant:
- For Branch Office — not less than USD 100,000 or its equivalent.
- For Liaison Office — not less than USD 50,000 or its equivalent.
- English version of the Certificate of Incorporation/ Registration or Memorandum & Articles of Association attested by Indian Embassy/ Notary Public in the Country of Registration.
- Latest Audited Balance Sheet of the applicant entity.
- Applicants which are subsidiaries and which do not satisfy the above mentioned eligibility criteria may submit a Letter of Comfort4 from their parent company, subject to the condition that the parent company satisfies the eligibility criteria as prescribed above, such applications may then be considered by RBI for approval.
- A person from Bangladesh, Sri Lanka, Afghanistan, Iran, China, Hong Kong or Macau opening a branch office or a liaison office or a project office or any other place of business in India shall have to register with the concerned State Police Authorities. Copy of approval letter for ‘persons’ from these countries shall be marked by the AD Category-I bank to the Ministry of Home Affairs, Internal Security Division-I, Government of India, New Delhi
Procedure of Application
The application for establishing BO/ LO/ PO in India may be submitted by the non-resident entity in Form FNC (Annex-1 https://www.rbi.org.in/Scripts/BS_ViewMasCirculardetails.aspx?id=9861#AN1), to a designated AD Category - I bank along with the prescribed documents mentioned in the Form and the LOC, wherever applicable.
The AD Category-I bank shall, after exercising due diligence in respect to the applicant’s background, and satisfying itself in regard to adherence to the eligibility criteria for establishing BO/LO/PO, antecedents of the promoter, nature and location of activity of the applicant, sources of funds, etc., and compliance with the extant KYC norms, grant approval to the foreign entity for establishing BO/LO/PO in India. The AD Category-I banks may frame appropriate policy for dealing with these applications in conformity with the FEMA Regulations and Directions.
For the applicants which have been granted permission for establishing BO/LO in India, the AD Category-I bank before issuing the approval letter to these applicants shall forward a copy of the Form FNC along with the details of the approval proposed to be granted by it to the General Manager, Reserve Bank of India, for allotment of Unique Identification Number (UIN) (www.rbi.org.in/scripts/Fema.aspx) to each BO/LO. After receipt of the UIN from the Reserve Bank, the AD Category-I bank shall issue the approval letter to the non-resident entity for establishing BO/LO in India.5
The BOs/ LOs shall also obtain a Permanent Account Number (PAN) from the Income Tax Authorities on setting up the offices in India.6
Criteria for establishing Project Offices
The Reserve Bank of India will provide permission to foreign companies to establish POs in India, provided that they have secured a contract from an Indian company to execute a project in India. A project office can be established by a foreign company7 in India given the following criteria:
- The project is funded directly by inward remittance from abroad.
- The project is funded by a bilateral or multilateral International Financing Agency.
- An appropriate authority has cleared the project.
- A company or entity in India awarding the contract has been granted Term Loan by a Public Financial Institution or a bank in India for the project. However, if the above criteria are not met, then such applications need to be forwarded to the RBI.
Criteria for establishing Branch Offices in SEZs
Reserve Bank of India has also provided the general permission8 for opening a BO in SEZs provided such units are functioning in those sectors where 100% FDI is permitted; such units comply with the Part XI of the Company’s Act 1956 and function on a standalone basis.
Other conditions for establishing such Offices
Approval of the Reserve Bank in certain cases for establishment of branch office, liaison office or project office or any other place of business in India has been illustrated in the following link (https://rbi.org.in/scripts/NotificationUser.aspx?Mode=0&Id=10327)
- It should, however be noted that general permission in case of PO/ BO is not available to investors from Pakistan, Afghanistan, Bangladesh, Sri Lanka, Iran and China.
- Applicants from Bangladesh, Sri Lanka, Afghanistan, Iran, China, Hong Kong, Macau or Pakistan desirous of opening BO/LO/PO in India shall have to register with the State Police authorities. Copy of approval letter for ‘persons’ from these countries shall be marked by the AD Category-I bank to the Ministry of Home Affairs, Internal Security Division-I, Government of India, New Delhi for necessary action and record.9
- Within 30 days of obtaining approval from the RBI, a Form of Establishment (Form FC-1), is required to be filed with the Registrar of Companies (RoC) along with the prescribed documents and fees. The LO/ BO/ PO also needs to comply with Chapter XXII and corresponding rules of the Company’s Act 2013 (Section 379 to 393). The provisions of the Act and rules can be seen from the following links- (http://www.mca.gov.in/Ministry/pdf/CompaniesAct2013.pdf) (http://www.mca.gov.in/Ministry/pdf/NCARules_Chapter22.pdf)
- The validity of an LO is generally for three years (as provided in Regulation 4.d. of the Notification), except in the case of Non-Banking Finance Companies (NBFCs) and those entities engaged in construction and development sectors, for whom the validity is two years only. The validity of the PO is for the tenure of the project.10 The validity of LO/ BO may be extended. For further details Section 9 of the following link may be referred to:
8 General permission means no prior approval is required from RBI subject to prescribed conditions
Permitted activities for Liaison Office
Liaison Office can take following activities as permissible by Reserve Bank:
- To represent in India the parent company/ group companies.
- To promote export/ import from/ to India.
- To promote technical/ financial collaborations between parent/ group companies and companies in India.
- To act as a communication channel between the parent company and Indian companies.
Permitted activities for Branch Office
Branch Office can undertake following activities as permissible by Reserve Bank:
- Companies incorporated outside India and engaged in manufacturing or trading activities - Such Branch Offices are permitted to represent the parent/ group companies and undertake the following activities in India.
- Export / Import of goods.
- Render professional or consultancy services.
- To carry out research work, in areas in which the parent company is engaged.
- To promote technical or financial collaborations between Indian companies and parent or overseas group company.
- To represent the parent company in India and acting as buying/ selling agent in India.
- To render services in information technology and development of software in India.
- To render technical support to the products supplied by parent/group companies.
- Foreign airline/ shipping company.
- Branch Office should be engaged in the same activity in which the parent company is engaged.
- Retail trading activities of any nature are not allowed for a Branch Office in India.
- Profits earned by the Branch Offices are freely remittable from India, subject to payment of applicable taxes.
- Branch Office in Special Economic Zones (SEZs) in India.
Reserve Bank has given general permission to foreign companies for establishing branch/unit in Special Economic Zones (SEZs) to undertake manufacturing and service activities. The general permission is subject to the following conditions:
- Such units are functioning in those sectors where 100 per cent FDI is permitted.
- Such units comply with part XI of the Companies Act, 1956 (Section 592 to 602).
- Such units function on a stand-alone basis.
- Branch Offices of Foreign Banks
Foreign banks do not require separate approval under FEMA for opening branch office in India. Such banks are, however, required to obtain necessary approval under the provisions of the Banking Regulation Act, 1949, from Department of Banking Regulation, Reserve Bank of India.
Additional Activities for Branch and Liaison Office
Additional Activities- Requests for undertaking activities in addition to what has been permitted initially by the Reserve Bank may be submitted through the designated Authorized Dealer Category-I bank to the General Manager, Foreign Exchange Department, Reserve Bank of India.
Additional Branch or Liaison Office
Requests for establishing additional BOs / LOs may be submitted through fresh FNC form (https://www.rbi.org.in/Scripts/BS_ViewMasCirculardetails.aspx?id=9861#AN1 ) duly signed by the authorized signatory of the foreign entity in the home country to the Reserve Bank of India.
Repatriation guidelines in case of LO/BO/PO are given below:
- Profits earned by the Branch Offices are freely remittable from India, subject to payment of applicable taxes.
- Authorized Dealer (AD) Category-I bank may extend fund and/or non-fund based facilities to branch office and project offices based on the guidelines issued by the Reserve Bank in this regard.
- Branch office may remit outside India profit of the branch net of applicable Indian taxes, on production of the following documents to the satisfaction of the AD Category-I bank through whom the remittance is effected.
- A certified copy of the audited Balance Sheet and Profit and Loss account for the relevant year.
- A Chartered Accountant’s certificate certifying the manner of arriving at the remitted profit, the entire remitted profit has been earned by undertaking the permitted activities and the profit does not include any profit on revaluation of the assets of the branch.
- AD Category–I bank may permit intermittent remittances by project offices pending winding up / completion of the project subject to submission of documents mentioned in Master Circular Notification No FEMA 22(R)/RB-20161
Reporting Methodology in case of LO/ BO/ PO is given below:
- All new entities setting up LO/ BO shall submit a report containing information, as per format provided in Annex 3 (https://rbidocs.rbi.org.in/rdocs/content/pdfs/54MC01072015_AN3.pdf) within five working days of the LO/BO becoming functional to the Director General of Police (DGP) of the state concerned in which LO/BO has established its office. If there is more than one office of such a foreign entity, in such cases to each of the DGP concerned of the state where it has established office in India2
- Branch Offices/ Liaison Offices have to file Annual Activity Certificates (AAC) (Annex 4) (https://www.rbi.org.in/Scripts/BS_ViewMasCirculardetails.aspx?id=9861#AN4) from Chartered Accountants, at the end of March 31, along with the audited Balance Sheet on or before September 30 of that year. In case the annual accounts of the LO/ BO are finalized with reference to a date other than March 31, the AAC along with the audited Balance Sheet may be submitted within six months from the due date of the Balance Sheet to the designated AD Category-I bank, and a copy to the Directorate General of Income Tax (International Taxation), New Delhi along with the audited financial statements including receipt and payment account. The designated AD Category - I bank shall scrutinize the AACs and ensure that the activities undertaken by the BO/LO are being carried out in accordance with the terms and conditions of the approval given. In the event of any adverse findings reported by the auditor or noticed by the designated AD Category-I bank, the same should immediately be reported to the General Manager3.
- A copy of the report in Annex 3 shall be filed with the DGP concerned on annual basis along with a copy of the annual certificate, and also with the AD concerned4.
- The certificates are to be filed by the following offices as applicable:
- Single Branch or Liaison Office- Certificates and reporting to be undertaking by the respective Branch Office
- Multiple Branch or Liaison Office- A combined Annual Activity Certificate in respect of all Offices in India by the Nodal Office of the BO/Los
The Companies Act, 2013 is an act of the Parliament of India, which regulates incorporation of a company, manner of conducting the affairs of a company, responsibilities of its directors and dissolution of a company. A substantial part of the Act is governed by various sets of rules promulgated by the Ministry of Corporate Affairs (MCA), Government of India. The MCA is responsible for ensuring compliance with the provisions of the Act through Registrar of Companies (RoC) and Regional Directors (RD).
The registrations required to set up a business will vary across sector and state. The following are some of the registrations needed to be obtained in India for business (for details, please refer link: http://smallb.sidbi.in/%20/policies-regulations/guidelines-procedures-starting-new-business-india)
- Permanent Account Number (PAN)
- Tax Deduction Account Number (TAN)
- Service Tax
- Value Added Tax
- Excise Registration
- Foreign Regional Registration Officer (if required)
- Import Export Code (if required)
- Shops and Commercial Establishment Act (if required)
Process of registration of a manufacturing unit will vary across state and sector, for example, no industrial license would be required for setting up electronics manufacturing unit.
Sale of Goods Act, 1930 (SG Act) is important for buyers because it makes elaborate provisions regarding delivery of goods to buyers. It is to be mentioned that the SG Act embodies the legal maxim “Caveat Emptor” and therefore, there is no implied warranty or condition to quality of goods for any particular purpose, except those specified in the SG Act.
Listed below are the most essential compliances as far as auditing and annual reporting requirements are concerned:
- Accounting: All businesses in India need to maintain accounting records, which meet the generally-accepted accounting principles. In India, a business entity has to mandatorily close books of accounts on a financial year basis from April 1 to March 31 of next year. However, holding or subsidiary incorporated outside India can follow different year after taking the approval from tribunal.
- Employment Payroll: Business is needed to draft appropriate employment contracts keeping in view the income tax laws and employment regulations.
- Statutory Audit: The Companies Act mandates that businesses have their account audited.
- Tax Audit: LO is not required to do a tax audit. Companies are also required to undergo a VAT audit.
- Annual return on Foreign Liabilities and Assets: Refer to Page Nos. 80 to 83 (Section 7.2) of the following link http://www.dipp.nic.in/English/policies/FDI_Circular_2015.pdf
- Every company is required to file the following documents with the ROC:
- Annual Return
- Compliance Certificate
- Other documents as per requirements of new companies Act, 2013
- Other compliances: (http://www.mca.gov.in/MinistryV2/Download_eForm_choose.html)
- Board meeting: Every company shall hold the first meeting of the board of directors within 30 days of the date of its incorporation and thereafter hold a minimum number of 4 meetings of its board of directors every year in such manner that no more than 120 days shall intervene between two consecutive meetings of the board.
- Annual general meeting: Within 180 days from the date of closing of financial year. The first AGM can be held within 9 months from the date of closing of the financial year and not more than 15 months shall elapse between the date of one AGM meeting of the company and that of the next.
- Annual return with ROC: Within 60 days of holding the AGM
- Corporate tax return: September 30 and November 30
- Tax audit report: September 30 and November 30
- Transfer pricing report: November 30
- TDS returns: Quarterly
- Other reports, submissions, payments like excise, service tax returns etc: Monthly
- The filling requirements under the Companies Act can be seen on the following link-(http://www.mca.gov.in/MinistryV2/AnnualFiling.html)
- The reporting requirements of BO/PO/LO can be seen on the following link-
- The reporting, auditing requirements of Limited Liability Partnerships can be seen on the following FAQ available on the following link- (http://www.mca.gov.in/LLP/faq_llp_basic_concept.html)
Closure of office and remittance of winding up proceeds:
Requests for closure of the branch office/liaison office may be submitted to the Authorised Dealer (AD) Category - I bank along with the following documents1:
- Copy of the Reserve Bank's/Authorized Dealer Category-I bank’s approval for establishing the office.
- Auditor's certificate:
- Indicating the manner in which the remittable amount has been arrived at and supported by a statement of assets and liabilities of the applicant, and indicating the manner of disposal of assets.
- Confirming that all liabilities in India including arrears of gratuity and other benefits to employees, etc. of the office have been either fully met or adequately provided for.
- Confirming that no income accruing from sources outside India (including proceeds of exports) has remained un-repatriated to India.
- Confirmation from the applicant/parent company that no legal proceedings in any Court in India are pending against the office and that there is no legal impediment to the remittance.
- In case of winding up of the branch office/liaison in India, a report from the Registrar of Companies regarding compliance with the provisions of the Companies Act, 2013 have to be submitted.
- Any other document/s, specified by the Reserve Bank/Authorised Dealer Category-I bank while granting approval.
- No-objection / Tax Clearance Certificate from Income-Tax authority for the remittance/s.
AD Category-I bank shall send a consolidated list (as per Annex) of all the BOs/LOs/ POs for which a UIN has been granted by RBI, excluding those of banks and insurance companies, closed by them during the month, by the fifth of the succeeding month, to the General Manager, Reserve Bank of India, CO Cell, New Delhi.2
The Remittances of winding up proceeds of branch or liaison office established in India shall be governed by the guidelines issued under Foreign Exchange Management (Remittance of assets) Regulations3.
Apart from above, provisions of Companies Act, 2013 shall also apply on closure. The act may be referred to at the link - http://www.mca.gov.in/Ministry/pdf/CompaniesAct2013.pdf.
There are various types of incentives available from Central and State Government departments for establishing a manufacturing unit. The companies should be registered to obtain various kinds of incentives. Some of the key incentives available are listed below:
I. Direct tax incentives:
The Government of India provides certain direct tax incentives in the form of tax holiday, deductions, etc., to new industrial undertakings, R&D activities, and for promotion of specified areas, exports etc. These incentives are as follows
- Profit linked incentives for new undertakings: New undertakings formed, by means other than the division or reconstruction of an existing business or transfer of used machinery or plant (subject to certain conditions and exceptions), are eligible for 100% deduction for the first 10 years. This is applicable for specified manufacturing facilities of eligible articles in North Eastern states i.e., Arunachal Pradesh, Assam, Manipur, Meghalaya, Mizoram, Nagaland, Sikkim and Tripura.
- Incentives for R&D:
- 100% deduction on expenditure toward salary/purchase of materials used in scientific research and capital expenditure (other than on acquisition of land) incurred during the three years preceding the commencement of business
- 125% to 200% deduction on payment to a research association/university/specified company for scientific research National Laboratory, etc.
- Accelerated depreciation/Incentives: Incremental depreciation (over and above normal) of 20% of actual cost will be available in respect of any new machinery or plant (other than those specified) used in the business of manufacture or production or in the business of power generation.
Furthermore, if the undertaking is set up in specified geographical areas i.e. states of Andhra Pradesh, Telangana, West Bengal and Bihar, or after 1 April 2015, additional depreciation at the rate of 35% (vis-a-vis 20% mentioned above) will be available.
Incentive for acquisition and installation of a new asset: In case a company engaged in the business of manufacture or production, acquires any plant or machinery (other than those specified), a one-time incentive of 15% of actual cost of such plant or machinery will be available (if such investment exceeds INR250m). If such asset is acquired and installed in specified geographical areas during period 1 April 2015 to 31stMarch 2020, an additional one-time deduction of 15% of the actual cost of such asset acquired would be provided.
Additional deduction for wages paid to new workmen: A deduction of 30% for additional wages for 3 financial years shall be applicable to Wages paid to “new” regular workmen employed by any undertaking registered under Factories Act, 1948, engaged in manufacture or production
- New provisions under Union Budget 2016: for details refer to http://deity.gov.in/esdm/budget_2015-16
II. Incentives on exports:
The foreign trade policy provides various kinds of incentives for export of goods and services. The various types of incentives are as follows:
- Duty exemption/remission scheme: Key features of this schemes are
- Advance Authorization: Duty free imports of inputs are allowed for exports provided minimum 15% value addition is achieved (excluding gems, jewelry & tea). The scheme also requires import to be completed in 12 months and exports within 18 months.
- Annual Advance Authorization: Advance Authorization for Annual Requirement shall only be issued for items notified in Standard Input Output Norms (SION). It is available only to exporters with at least 2 years of exports. The entitlement will be equivalent to 300% of the FOB value or INR 10 million whichever is more. The authorization will be valid for 12 months.
- For more details on standard input output norms, see the link - http://www.dgft.org/standard_input_output_norms_io_norms_sion.html
- Duty Free Import Authorization: Under this, exporters will be allowed to import inputs including oil & catalyst used, consumed/utilized in the process of producing exports, free of basic customs and/or additional/SAD duty except on raw sugar. Minimum value addition should be 20% and exports should be complete within 12 months of filing application with the authority (to be done before starting exports). It shall be issued on post export basis for products for which Standard Input Output Norms have been notified.
- Duty Drawback: The exporters will get rebate of duty chargeable on imported material or excisable material used in the manufacturing of goods that is exported. Drawback Schedule covers now about 4600 products.
- Export promotion capital goods scheme: Under the scheme import of capital goods at a zero basic custom duty is allowed for export purposes. The capital goods for pre/post production stage are permitted. The Authorization holder may also procure capital goods from indigenous sources in case of deemed export products. Imports shall be subject to export obligation equivalent to 6 times the duty saved on capital goods. But the exports have to be completed in 6 years from the date of authorization. Authorization shall be valid for import for 18 months from the date of issue of Authorization. Revalidation of authorization not permitted.
- Merchandise exports from India Scheme (MEIS): Introduced with the objective of offsetting infrastructural inefficiencies and associated costs involved in export of goods/products, which are produced/manufactured locally to improve our export competitiveness. This scheme is applicable to exports made in SEZ units too. Duty Credit Scrips shall be granted as rewards under MEIS. The Duty Credit Scrips and goods imported / domestically procured against them shall be freely transferable. These Duty Scrips can be used to pay for custom duties on import of goods/inputs, excise duties on domestic procurement of inputs/goods, service tax for services. In April 2015, the GOI unveiled a new Foreign Trade Policy (FTP), which targets to nearly double India’s exports to US$900b by 2020. Five existing schemes1 to promote merchandise exports have been brought under a single Merchandise Exports from India Scheme (MEIS).
- Service Exports from India Scheme (SEIS): Served from India Scheme (SFIS) has been replaced with Service Exports from India Scheme (SEIS). SEIS shall apply to ‘Service Providers located in India’ instead of ‘Indian Service Providers’. Thus SEIS provides rewards to all Service providers of notified services, who are providing services from India, regardless of the constitution or profile of the service provider. For list of services and the rates of rewards under SEIS, please refer Annexure 2 at link: http://dgft.gov.in/exim/2000/highlight2015.pdf)
- Market Access Initiatives: Under MAI scheme, financial assistance is provided for export promotion activities on focus country and on focus product basis. Financial assistance is available for:
- Export Promotion Organizations/ Trade
- Promotion Organizations/ National Level Institutions/ Research Institutions/ Universities
- Laboratories, Exporters, etc.
The activities eligible for financial assistance under this scheme include marketing projects abroad, capacity building, support for statutory compliances, studies, project development etc. The project should be for a particular product for a particular market for the period of 2-3 years.
For more details see the link- http://commerce.nic.in/trade/mai_guide.pdf
- Incremental Exports Incentivization Scheme: A duty credit scrip @ 2% on the incremental growth (achieved by the IEC holder) during the current year is given. (Incremental growth shall be in respect of each exporter (IEC holder) without any scope for combining the exports for Group Company). The scheme is region specific and covers exports to USA, Europe and Asia. In addition, to 53 countries in Latin America and Africa. For more details, visit the link (http://dgft.gov.in/exim/2000/Updated_FTP_2015-2020.pdf)
- Other incentives
- The details of various exports incentives schemes and procedures can be seen from the Foreign trade policy and procedures available on the following link-(http://dgft.gov.in/exim/2000/Updated_FTP_2015-2020.pdf)
- North Eastern States: There is an incentive scheme of central government for undertaking established in north eastern states. The details can be seen from the following link-(http://dipp.nic.in/English/Schemes/ner.aspx#MainContent)
- Incentives for other specified states like Jammu & Kashmir, Uttarakhand, Himachal Pradesh can be seen from the following links-(http://dipp.nic.in/English/Schemes/Category_states.aspx)
- Apart from above, additional incentives are given under various schemes in ESDM sector and by the state governments.
III. Special Economic Zones
Government of India has taken many measures to revive the investors’ interest in SEZs by liberalizing various norms such as minimum land area requirements, transfer/sale of ownership, etc
- Direct tax incentives on SEZ: For Undertakings/units located in SEZs and engaged in the manufacturing or Production/provision of services, Government of India provides incentives for the following manner:
- 100% deduction in respect of export profits for 5 years.
- Subsequently, 50% deduction for next 5 years (subject to certain conditions).
- MAT is applicable.
- Indirect tax incentives on SEZ: SEZ developers and units are eligible to avail exemption of customs/excise duty, central sales tax, service tax, etc. (subject to certain conditions). Similarly, exemption or concessions from local levies such as VAT, entry tax, stamp duty, registration charges and electricity duty are available in states where the state governments have granted such exemption.
IV. State level incentives
Various States offer multiple investment-linked incentives (concessions/ exemptions) to attract investments and create employment/promote infrastructure and education. Incentives typically include capital/interest subsidy, concessional power/stamp levies, etc. Moreover, large/mega projects are provided with incentives based on negotiations, depending on the quantum of investment proposed, strategic importance of the project, proposed employment and other similar criteria.
V. Sector Specific incentives
India provides sector specific incentives through centrally sponsored schemes in electronics manufacturing, textiles sector, food processing, renewable energy.
1 Focus Product Scheme, Market Linked Focus Product Scheme, Focus Market Scheme, Agri. Infrastructure Incentive Scrip, VKGUY
Various forms of financing or funding options are available to carry out a business in India:
- Equity Capital: Additional capital can be raised by any of the following modes subject to regulatory conditions:
- Right Issue.
- Partly Paid equity shares/warrants.
- Against import of capital goods and pre-incorporation expense.
- Against legitimate dues of the investee company.
- Preference Share Capital: The rate of dividend paid to non-residents should not exceed 300 basis points over the Prime Lending Rate of State Bank of India on the prescribed date.
- Debentures and borrowings: Companies can raise funds by issuing debentures, bonds and other debt securities or by accepting deposits from the public. Debentures can be redeemable, perpetual, bearer or registered, and convertible or non-convertible.
- Compulsorily Fully Convertible Debentures are treated as equity under the FDI policy. Non- convertible/optionally convertible debentures are construed as ECB and should conform to ECB guidelines.
- Conversion ratio on Compulsorily Convertible Debentures should be determined upfront.
- Rate of interest is subject to transfer price under tax and company law.
- External Commercial Borrowing: Commercial loans availed in foreign currency are termed as ECBs. The RBI has announced a new policy regime for ECBs under which funds can be raised under three tracks:
- The ECBs under the three tracks have differing conditions with respect to eligible borrowers, eligible lenders, all-in-cost ceiling, end-use restrictions, etc.
- ECBs can be availed under two routes — automatic route and approval route. An empowered committee set up by the RBI decides all the cases outside the purview of the automatic route.
- Overseas lenders, who have provided ECBs to Indian entities, are allowed concessional tax rates on the interest income earned subject to satisfaction of certain conditions.
- Listed debentures/bonds: SEBI-registered FIIs/QFIs/FPIs are allowed to invest in listed debt securities, subject to regulatory conditions.
- ADRs, GDRs and FCCBs
- Qualifying Indian companies can raise equity capital overseas by issuing American Depository Receipts (ADRs), Global Depository Receipts (GDRs) or Foreign Currency Convertible Bonds (FCCBs) (INR denominated equity shares/bonds). The company must seek approval of the FIPB in specific cases.
- There is no monetary limit on the amount for which ADRs and GDRs can be issued.
- There are end-use restrictions only for utilization of funds in real estate/Stock market.
- FCCBs have to conform to ECB guidelines
- Long-term Loans from special financial institutions: This includes financial institutions at national as well as state level. For example:
All India associations like:
- IDBI (http://www.idbi.com/index.asp)
- Industrial Finance Corporation of India (IFCI) (https://www.ifciltd.com)
- EXIM (http://www.eximin.net/) &
- SIDBI (http://www.sidbi.in/)
- State Financial Corporations (SFCs): The list of SFCs can be seen from the following link - http://sidbi.in/?q=state-financial-corporations
- State Industrial Development Corporations (SIDCs): The list of SIDCs can be seen from the following link - http://sidbi.in/?q=sidcs-siics
- Short term finance from financial institutions:
- Bank credit in the form of loans, cash credit, overdraft and discounting of bills. The list of banks can be seen in the financial intermediaries section of the following link (http://www.rbi.org.in/scripts/sitemap.aspx).
- Customer advance, accounts receivable financing, Installment credit & trade credit.
- Funding of LLP
- Investment in LLP is through capital contribution and is subject to conditions under the FDI policy.
- LLPs are not permitted to avail ECB.
- Trade Credit1
Companies can buy raw materials, components, stores and spare parts on credit from different suppliers. Generally suppliers grant credit for a period of 3 to 6 months, and thus provide short-term finance to the company.
Through capital market, companies can raise funds but the company has to list its shares by going public i.e. Private limited company will have to convert into public company. The conditions relating to this listing can be seen from the following link-(https://www.nseindia.com/getting_listed/content/eligibility_criteria.htm)