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Establishing a Liaison Office in India is a practical way for foreign companies to explore the Indian market, build business relationships, understand industry trends, and coordinate with their overseas headquarters without immediately setting up a full-fledged commercial operation. India offers significant opportunities across manufacturing, technology, financial services, infrastructure, and international trade, making it an attractive destination for foreign businesses seeking a local presence. However, a Liaison Office operates under specific regulatory conditions and cannot conduct revenue-generating business activities in India. Understanding the RBI approval process for a Liaison Office in India, permitted activities, eligibility requirements, and compliance obligations is essential for a smooth and legally compliant establishment. This guide explains the key requirements under the Foreign Exchange Management Act, 1999 (FEMA), and the applicable Reserve Bank of India (RBI) framework.  What Is a Liaison Office in India?  A Liaison Office (LO) in India, also known as a representative office, is an establishment of a foreign company that acts as a communication channel between its overseas head office and Indian customers, suppliers, business partners, or other stakeholders. Its primary purpose is to facilitate communication, promote the foreign company’s interests, and understand potential business opportunities in the Indian market.  Under the FEMA framework, a Liaison Office cannot undertake commercial, trading, or industrial activities, directly or indirectly. It is also prohibited from earning income in India through its operations. Instead, its operating expenses must generally be funded through inward remittances received from the foreign head office through normal banking channels. A Liaison Office is therefore suitable for foreign companies that want to establish a representative presence in India before making a larger investment. It is not an alternative to a branch office or subsidiary when the objective is to conduct business, provide chargeable services, or generate local revenue.  RBI Approval Process for a Liaison Office in India  The establishment of a Liaison Office is governed by FEMA, the Foreign Exchange Management (Establishment in India of a Branch Office or a Liaison Office or a Project Office or any Other Place of Business) Regulations, 2016, and the relevant RBI directions, as amended from time to time.  For most eligible foreign applicants, the application is submitted through a designated Authorised Dealer (AD) Category-I bank. Under the applicable approval framework, the bank examines the application, conducts due diligence, verifies eligibility, and determines whether it can grant approval under its delegated authority. Certain cases must be referred to the RBI for prior approval.  The process generally begins with selecting an AD Category-I bank in India that will handle the application and the Liaison Office’s banking arrangements. The foreign company then submits Form FNC, together with the prescribed supporting documents. These typically include the certificate of incorporation or registration, constitutional documents, the latest audited financial statements, details of the applicant’s business activities, information about the proposed Indian office, and relevant declarations. Documents must satisfy the bank’s authentication, verification, and due-diligence requirements. The bank evaluates the applicant’s financial standing, ownership and background, proposed activities, source of funds, and intended location of the office. Where the applicant falls within a category requiring government or RBI approval, the relevant additional clearances must be obtained before establishment. Once approval is granted, the foreign company must establish the office within the stipulated period and complete the applicable post-approval formalities.    Eligibility Criteria for Opening a Liaison Office  A foreign company applying to establish a Liaison Office must generally satisfy the prescribed financial eligibility criteria. Under the established FEMA framework, the applicant should have a profit-making track record during the immediately preceding three financial years in its home country and a net worth of at least USD 50,000, or its equivalent.  If the applicant is a subsidiary that does not independently meet the financial criteria, a Letter of Comfort from its parent company may be considered, subject to the applicable conditions and the parent’s ability to satisfy the prescribed profitability and net-worth requirements. Meeting these financial thresholds does not, by itself, guarantee approval. The bank or relevant authority may also examine the applicant’s business history, proposed activities, source of funds, ownership structure, and regulatory background. Additional approval requirements may apply to applicants from specified jurisdictions, offices proposed in certain sensitive regions, and businesses operating in regulated sectors.  Foreign companies should therefore undertake an eligibility assessment before preparing the application. This helps identify potential regulatory obstacles early and reduces the risk of delays or rejection.  Permitted Activities of a Liaison Office in India  The activities of a Liaison Office are restricted to representative and communication functions permitted under the applicable RBI framework. Its role is to support the foreign parent company without independently carrying on commercial operations in India. Permitted activities generally include representing the parent company or group companies in India, promoting export and import activities involving India, facilitating technical or financial collaborations between the overseas parent and Indian businesses, and acting as a communication channel between the foreign head office and Indian entities.  A Liaison Office may also collect information about potential market opportunities, study industry developments, understand customer requirements, and share information about the foreign company’s products or services with prospective Indian customers. These activities can help the parent company evaluate market demand and develop future business strategies. However, the distinction between promotion and commercial execution is critical. A Liaison Office must remain within the scope of its approved activities and cannot use its representative status to undertake activities that would amount to running a business in India. Any proposed expansion of its role should be reviewed against the applicable FEMA regulations and approval conditions before implementation.  Restrictions and Limitations of a Liaison Office  The most important limitation is that a Liaison Office cannot earn income or undertake commercial, trading, or industrial activities in India, either directly or indirectly. It cannot function as an independent sales or service delivery establishment or conduct activities beyond those permitted under its approval. The office must generally meet its operating expenses through funds remitted by its overseas head office through normal banking channels. Its Indian … Read more

The best way to assess RBI compliance support is to check whether the provider handles every reporting step for foreign investment, from the first payment received from abroad to annual returns, in a clear, step-by-step order. Once an Indian company receives foreign investment, it assumes obligations under the Foreign Exchange Management Act (FEMA), the legislation governing cross-border capital flows, enforced by the Reserve Bank of India (RBI). The certificate of incorporation marks only the beginning. The greater portion of regulatory risk resides in the post-incorporation compliance work that follows.  India Company Incorporation (ICI) approaches this as a structured, multi-step process rather than a one-off filing. The following sections give founders and finance heads a practical framework to assess any compliance provider’s handling of that sequence.  Why Incorporation and Foreign Exchange Reporting Are Separate Workstreams In India  Company registration and the reporting of foreign investment fall under distinct regulatory authorities. The Ministry of Corporate Affairs (MCA) issues the certificate of incorporation, while the RBI receives details of inbound foreign capital. A provider that treats the latter as secondary leaves the newly incorporated entity exposed from its very first transaction.  This is precisely where ICI most frequently observes clients misjudging their position. A founder may assume that once incorporation is complete, the company is prepared to receive funds. In practice, the bank account, the remittance, and the reporting must all align. Only at that point can foreign capital be considered fully consistent with statutory requirements.  The filing deadlines show why company registration and foreign investment reporting should be treated as separate tasks. Under the RBI reporting framework, Form FC-GPR for the issue of capital instruments to a non-resident is generally due within 30 days from the date of issue of shares. The annual Foreign Liabilities and Assets (FLA) return is typically due by 15 July each year for the preceding financial year. These are RBI reporting obligations, not incorporation milestones. They are governed by the RBI’s FIRMS reporting guidance and Master Direction on reporting under FEMA.  What A Complete RBI Support Offering Covers  A comprehensive offering addresses every filing and banking step that FEMA attaches to foreign capital, not merely the primary form. For an investment into a private company, the core elements include:  Reporting of the inward remittance and the issuance of shares through the RBI’s online reporting system.  Coordination with the Authorised Dealer bank, the bank licensed to handle foreign exchange transactions, to ensure remittance certificates and know-your-customer records are in order.  Annual reporting of the company’s foreign liabilities and assets.  Filings for any subsequent transfer of shares between a resident and a non-resident.  Identifying and managing each of these elements is the provider’s responsibility. Support of genuine value assigns each obligation a clear owner and a defined timeline. ICI serves as a single point of contact for incorporation, taxation, and RBI reporting. The team that incorporated the entity is the same team that monitors the filings thereafter.  This continuity matters because foreign-invested entities rarely encounter a single filing. A typical company with overseas shareholders may face at least 3 recurring FEMA touchpoints even in the absence of a new funding round: the initial reporting of the remittance and share issue, the annual FLA return, and transfer reporting if ownership changes. The RBI requires some filings after specific events and others every year. A provider that handles only one form does not cover all compliance requirements.  Managing Deadlines and Regulatory Risk  Foreign exchange filings are time-bound, and the windows are narrow. The primary form reporting a share issue to a non-resident investor must be filed within a prescribed period following share allotment. Late submission attracts a fee under the RBI’s regulatory framework. Founders are advised to consult the RBI’s Master Direction on reporting under FEMA, published at rbi.org.in, for a current and verified schedule of applicable fees.  Late submission of prescribed FEMA returns may attract a Late Submission Fee (LSF) under the RBI’s regulatory framework. The applicable fee depends on the nature of the filing and the period of delay. This makes timely reporting an important aspect of compliance management. Providers with regular FEMA reporting experience therefore treat deadline monitoring as an operational responsibility rather than an administrative formality.  When evaluating a provider, the way it addresses timing is instructive. A capable provider presents a working calendar that identifies what triggers each filing and who holds responsibility for it.  Beyond the Compliance Checklist  Regulatory compliance involves more than familiarity with individual filing requirements. It requires an understanding of the sequence of processes, clarity in responsibilities, and effective coordination with stakeholders, particularly the Authorised Dealer bank. A service provider’s ability to manage these interconnected requirements offers a better insight into its practical experience and capabilities.  A few questions can help assess this:  Who is responsible for filing the share issuance report, and within what timeline following allotment?  How does the team coordinate with the Authorised Dealer (AD) bank for remittance certificates?  Who handles the annual Foreign Liabilities and Assets (FLA) return, and what is the filing deadline?  How are missed deadlines addressed, and does the team have experience managing delayed filings?  Ultimately, the quality of a service provider is reflected not in claims of a flawless track record, but in its ability to address challenges transparently and resolve compliance issues effectively.  Sustaining Compliance Beyond Incorporation  Speed of incorporation is straightforward to advertise and to benchmark. Continuity, however, is what protects the entity across multiple years of operation. Foreign exchange obligations recur. Investment rounds, share transfers, and annual returns continue to generate new filings long after the company has been established. If a provider withdraws once the certificate of incorporation is issued, the founder is left to reconstruct the compliance history independently.  In practice, this is where a single integrated provider demonstrates its value. ICI also manages accounting, corporate secretarial work, and taxation. The foreign exchange record therefore sits within the company’s broader compliance file rather than in an isolated silo. When a new capital round arises, the team can identify … Read more

Introduction  Incorporating a company outside India does not automatically mean that it will be treated as a non-resident for Indian income tax purposes. A company registered in Singapore, Dubai, the United Kingdom, or another foreign jurisdiction may still become a tax resident of India if its Place of Effective Management (POEM) is situated in India. This is particularly relevant for multinational corporations, overseas holding companies, Indian entrepreneurs operating foreign entities, and businesses with senior management based in India. The POEM rules in India focus on where a company’s key management and commercial decisions are made rather than simply where it is incorporated. Understanding these provisions is essential for determining foreign company tax residency in India, evaluating cross-border tax exposure, and maintaining compliance with applicable Indian tax laws.  What Is the Place of Effective Management (POEM)?  Place of Effective Management, commonly referred to as POEM, means the place where key management and commercial decisions necessary for conducting the business of an entity are made. The concept examines the actual exercise of management authority and considers the company’s commercial realities rather than relying exclusively on formal corporate arrangements.   For example, a company may be incorporated in Dubai, maintain a registered office there, and hold board meetings overseas. However, if its founders and senior executives based in India effectively make all significant decisions concerning investments, financing, business strategy, and operations, the company’s POEM may be considered to be in India. The outcome depends on the complete facts and applicable guidelines.   When Does a Foreign Company Become a Tax Resident of India?  For periods up to 31 March 2026, Section 6(3) of the Income-tax Act, 1961 applies. A company is resident if it is an Indian company or if its POEM is in India during the relevant previous year. From tax year 2026-27, Section 6(10) of the Income-tax Act, 2025 applies the same two-limb test, with POEM in India in that tax year. The Central Board of Direct Taxes (CBDT) issued Circular No. 6/2017 on 24 January 2017, establishing guiding principles for determining POEM. The guidelines focus on the substance of decision-making, the authority exercised by the board and senior management, and the company’s actual business arrangements.  Following a press release of 24 January 2017, CBDT Circular No. 8/2017 dated 23 February 2017 clarified that the POEM-based residency test does not apply to a foreign company whose turnover or gross receipts are ₹50 crore or less in a financial year. This relief is limited to the POEM test. It is not a general exemption from Indian tax obligations. Other provisions may still apply depending on the company’s activities and income in India.   CBDT Guidelines on POEM in India  Under the Active Business Outside India (ABOI) test, passive income must not exceed 50% of total income. Passive income covers royalty, dividend, capital gains, interest and rental income, as well as income from transactions where both the purchase and the sale are with associated enterprises. In addition, less than 50% of total assets must be situated in India, less than 50% of employees must be situated in India or be Indian residents, and payroll expenditure on such employees must be less than 50% of total payroll. The test is applied on the average of data for the relevant previous year and the two years before it. All four conditions must be satisfied together.    For a company satisfying the ABOI conditions, POEM is generally presumed to be outside India if most of its board meetings are held outside India. This presumption is subject to the guidelines, including situations where the board merely formalises decisions made elsewhere. For companies that do not qualify under the ABOI test, the guidelines (para 6.1 of Circular 6/2017) provide a two-stage process. First, identify who actually makes the key management and commercial decisions. Second, determine where those decisions are in fact made. If the board genuinely exercises its authority independently outside India, that may support foreign POEM. However, if it merely approves decisions already made by Indian promoters, executives, or other controlling persons, the substantive location of decision-making becomes particularly important.  POEM vs. Permanent Establishment (PE): Key Differences  Basis of comparison  POEM  Permanent Establishment (PE)  Meaning  Determines a company’s place of effective management  Identifies a taxable business presence in a country  Primary focus  Location of key management and commercial decisions  Business activities and treaty-defined establishment criteria  Main purpose  Determines corporate tax residency  Determines whether business profits may be taxed in the source country  Tax implications  Indian residence can bring global income within India’s tax framework, subject to applicable law and relief  Generally, concerns profit attributable to the Indian PE under applicable provisions    How Is POEM Determined in Practice?  The POEM assessment examines where a company’s highest level management decisions are genuinely made. Relevant considerations include where directors exercise their authority, where senior executives develop business strategy, where major investments and financing arrangements are approved, and who has the practical power to make decisions affecting the company.  The location of board meetings is relevant but not necessarily conclusive. A company cannot establish foreign POEM simply by conducting meetings overseas if substantive decisions are already taken in India. Similarly, an Indian resident director or an occasional board meeting in India does not automatically establish Indian POEM.                 Tax Implications of POEM for Foreign Companies in India  If a foreign company is determined to be resident in India under the POEM provisions, its tax treatment may change significantly. Indian tax residence generally brings its global income within the scope of Indian taxation, subject to applicable statutory provisions, exclusions, treaty relief, and foreign tax credit rules.  This differs from the treatment of a non-resident foreign company, whose Indian tax liability generally depends on income received, accruing, or deemed to accrue in India under the relevant provisions. A POEM determination may therefore affect tax calculations, reporting obligations, return-filing requirements, and the treatment of income earned outside India. The possibility of double taxation should also be considered where the company’s country of incorporation continues to treat … Read more

Introduction Exiting the Indian market is an important business decision for foreign companies and multinational groups. An Indian subsidiary may no longer be required because business plans have changed, operations have stopped, or the parent company wants to focus on other markets. In such situations, choosing the right exit route can help reduce costs, avoid unnecessary compliance, and protect the company’s financial interests. In India, strike-off, liquidation, and sale are three common ways to exit a subsidiary, but each serves a different purpose. While strike-off may suit an inactive company, liquidation is generally considered when the company’s assets and liabilities need to be settled, and a sale may be preferable when the business still holds commercial value. Understanding these differences can help foreign parent companies make a more informed and cost effective decision. Understanding the Three Exit Routes for an Indian Subsidiary Before choosing an exit strategy, a foreign parent company should assess the subsidiary’s current position, including its business activities, assets, outstanding payments, and prospects. Strike-off involves removing an eligible company’s name from the official company register. Liquidation involves closing the company’s affairs, settling its liabilities, and distributing any remaining assets according to the applicable rules. A sale involves transferring ownership of the subsidiary or its business to another buyer. Strike-Off Strike-off is generally considered when an Indian subsidiary has stopped operating and is no longer needed by its foreign parent company. Under Section 248 of the Companies Act, 2013, an eligible company can apply to have its name removed from the Register of Companies maintained by the Registrar of Companies (ROC). The application is generally made using Form STK-2, subject to the applicable requirements. For example, a foreign company may have established an Indian subsidiary to explore a market or support a project that has since ended. If the subsidiary has no continuing business purpose and meets the legal conditions for strike-off, this route may help the parent company avoid the expense of maintaining an unnecessary entity. However, simply stopping business operations does not automatically make a company eligible for strike-off. Before applying, the company should review its pending statutory filings, tax obligations, bank accounts, intercompany loans, employee dues, creditor payments, and other outstanding matters. Any applicable requirements relating to shareholder approval, declarations, indemnities, and supporting documents must also be completed. The main advantage of strike-off is that it can be a relatively simple and cost-effective way to close an eligible company. However, it may not be suitable where significant assets or unresolved liabilities remain. It should not be used to avoid paying creditors or meeting legal obligations, as certain liabilities and legal proceedings may continue even after the company’s name is removed from the register. Liquidation Liquidation is generally more suitable when an Indian subsidiary has assets, outstanding liabilities, or other financial matters that need to be dealt with before closure. Unlike strike-off, which is intended for companies that meet specific eligibility conditions, liquidation provides a more structured process for winding up a company’s affairs. For a solvent company that can pay its debts in full, voluntary liquidation under Section 59 of the Insolvency and Bankruptcy Code, 2016, may be an option. The company must meet the applicable conditions and follow the prescribed process. Consider a foreign-owned subsidiary that has stopped operations but still holds money in its bank accounts, owns equipment, or has outstanding payments to suppliers. In such a case, liquidation may provide a clearer process for selling assets, settling eligible claims, and distributing any remaining funds to shareholders. The process generally begins with a review of the company’s financial position and its ability to pay its debts. The necessary board and shareholder approvals are then obtained, and an eligible insolvency professional is appointed as liquidator. Although liquidation can involve more time, documentation, and professional fees than strike-off, it may be better suited to companies with more complex financial affairs. It can also provide a more organised way to deal with outstanding obligations before the company is formally closed. Sale of an Indian Subsidiary Closing a subsidiary is not always the best option. If the Indian business continues to generate revenue, has an established customer base, or owns valuable assets, selling it may offer a better commercial outcome. A sale allows the foreign parent company to transfer ownership to another investor or business instead of shutting down the subsidiary. Depending on the circumstances, the transaction may involve selling the shares of the Indian company or transferring its business or selected assets. The company generally continues to exist as the same legal entity, meaning its existing contracts, assets, and liabilities may remain with it, subject to applicable law and contractual terms. A sale may be attractive when the subsidiary has an established market presence, valuable technology, intellectual property, customer relationships, or future growth opportunities. It can allow the parent company to exit India while recovering part of its investment and giving the business an opportunity to continue under new ownership. However, selling an Indian subsidiary requires careful planning. Foreign-to-resident or resident-to-non-resident share transfers may be subject to India’s foreign exchange rules, including the Foreign Exchange Management Act (FEMA), applicable pricing requirements, sectoral restrictions, and reporting obligations. Depending on the transaction, government approval or regulatory reporting may also be necessary. Tax implications should be reviewed before finalising the deal. The buyer will also usually review the subsidiary’s financial records, tax filings, contracts, employee matters, legal disputes, and regulatory compliance. Preparing these records in advance can make the sale process smoother and help the parent company avoid last minute negotiations or delays. Strike-Off vs Liquidation vs Sale The main difference between strike-off, liquidation, and sale is the purpose of the exit. Strike-off is generally intended for an eligible company that no longer needs to operate. Liquidation is designed to close the company’s affairs in an organised manner, including dealing with its assets and liabilities. A sale, on the other hand, focuses on transferring ownership or business operations rather than necessarily closing the company. The cost and complexity … Read more

India offers foreign investors opportunities across manufacturing, technology, healthcare, infrastructure and financial services. However, the extent of foreign ownership permitted depends on the business activity, the applicable sectoral cap and the entry route prescribed under India’s Foreign Direct Investment (FDI) policy.  While many sectors permit 100% foreign ownership under the automatic route, certain activities have lower automatic-route limits, require government approval for higher foreign ownership or are subject to specific operating conditions. Understanding these distinctions is essential for foreign companies planning to establish an Indian subsidiary, acquire an existing business or expand their operations into India.    What Does 100% FDI in India Mean?    FDI refers to foreign investment in the equity instruments of an eligible Indian entity, subject to applicable foreign exchange regulations. Under 100% FDI, a foreign investor can hold the entire permitted equity ownership of an Indian business.  India follows two principal investment routes:  Automatic route: Prior government approval is not required, provided the investment complies with the applicable sectoral conditions and regulations.  Government route: Prior approval from the competent government authority is required before proceeding with the investment.  Importantly, a sector permitting 100% FDI does not necessarily allow every activity within that sector to receive the entire investment through the automatic route.     Sector-Wise FDI Eligibility in India  The following sectors are among the most relevant to foreign businesses considering entry into the Indian market.  1. Manufacturing and Industrial Operations   FDI limit: Up to 100% under the automatic route.   Manufacturing generally permits full foreign ownership, including industrial machinery, electronics, automotive components, engineering products and consumer goods. However, defence manufacturing follows a separate framework. Foreign investment in eligible defence activities is permitted up to 74% under the automatic route, with investment beyond 74% requiring government approval under the applicable conditions.   Investors should also assess industrial licensing, environmental approvals, factory registrations and product-specific regulations.     2. Information Technology and IT-Enabled Services  FDI limit: Generally up to 100% under the automatic route.  Software development, IT consulting, business process management, technology support and many IT-enabled services permit full foreign ownership. Foreign companies commonly establish wholly owned subsidiaries or Global Capability Centres (GCCs) to provide technology and business services.  However, activities involving regulated telecommunications services or other separately regulated operations may require additional licences or authorisations. Data protection, employment and transfer pricing requirements should also be considered.    3. Business Services and Consulting  FDI limit: Generally up to 100% under the automatic route for eligible activities.  Management consulting, finance and accounting support, research services and shared service centres can offer suitable entry opportunities for foreign companies. The position differs for regulated professional services. Activities such as practising certain professions may be subject to professional qualification requirements, restrictions or separate regulatory frameworks. Investors should confirm that the intended services can legally be provided through the proposed Indian entity.     4. E-Commerce, Wholesale and Retail Trading  FDI eligibility varies by business model.  Marketplace-based e-commerce: Up to 100% under the automatic route, subject to prescribed conditions.  Inventory-based e-commerce: FDI is not permitted under the standard policy framework.  Wholesale trading: Generally up to 100% under the automatic route, subject to applicable conditions.  Single-brand retail trading: Up to 100% government approval is generally required beyond 49%. Conditions relating to sourcing and other requirements apply. Multi-brand retail trading: Up to 51% under the government approval route, subject to prescribed conditions. Foreign investors must distinguish between facilitating transactions for independent sellers and selling inventory owned or controlled by the e-commerce entity. Retail eligibility also depends on the proposed product range and operating model.     5. Pharmaceuticals and Healthcare  FDI eligibility depends on the activity and whether the investment is greenfield or brownfield.  Greenfield pharmaceuticals: Up to 100% under the automatic route. Brownfield pharmaceuticals: Up to 74% under the automatic route; investment beyond 74% requires government approval. Medical devices: Generally up to 100% under the automatic route, including eligible greenfield and brownfield projects.  Hospitals and eligible healthcare services: Generally up to 100% under the automatic route.  Greenfield investments involve establishing a new operation, whereas brownfield investments involve an existing business. Drug manufacturing licences, product approvals and applicable healthcare regulations remain relevant irrespective of the permitted FDI limit.  6. Telecommunications  FDI limit: Up to 100% under the automatic route, subject to applicable conditions.  Foreign investors can consider eligible telecom services and infrastructure activities. However, the business must comply with applicable licensing or authorisation requirements, security conditions and regulations administered by the Department of Telecommunications. Investors should establish whether their proposed activity falls within the permitted investment framework and identify the operational approvals required before commencing services.    7. Insurance and Financial Services  FDI eligibility depends on the specific financial activity.  Following the 2026 changes to India’s insurance-sector framework, eligible insurance companies can receive up to 100% FDI under the automatic route, subject to the prescribed conditions, including requirements concerning the investment of premiums in India. Life Insurance Corporation of India (LIC) remains subject to a separate 20% FDI limit.  Insurance intermediaries and other financial services have their own applicable provisions. Banking, pension services and regulated financial activities should not automatically be treated as equivalent to insurance companies. Investors should verify the operative foreign investment rules, licensing requirements and applicable regulatory conditions before proceeding.    8. Renewable Energy and Power Generation  FDI limit: Generally up to 100% under the automatic route for eligible activities.  Foreign companies can explore solar and wind power generation, eligible power projects and associated infrastructure. Although full foreign ownership is generally permitted for eligible activities, projects may require land-related approvals, environmental clearances, grid connectivity, power purchase agreements and state-level permissions.  9. Defence Manufacturing  FDI limit: Up to 74% under the automatic route; above 74% under the government route, subject to conditions.  Eligible defence manufacturing activities, including those subject to industrial licensing, permit foreign investment up to 74% under the automatic route. Investment beyond 74% may be approved where the applicable policy conditions are satisfied, including provisions relating to access to modern technology or other prescribed considerations.  Security clearances, industrial licences and other defence-sector requirements may apply.  The limits above are indicative … Read more

Introduction For foreign investors planning to establish a business in India, appointing directors and completing the necessary regulatory formalities are important steps in the incorporation process. Two key requirements for foreign nationals intending to become directors of Indian companies are obtaining a Director Identification Number (DIN) and a Digital Signature Certificate (DSC). Although both are essential for many corporate procedures, they serve different purposes. A DIN is a unique identification number allotted to an individual who intends to become a director of an Indian company, while a DSC enables the electronic signing of documents and regulatory filings. Understanding the application process, documentation requirements and applicable procedures can help foreign investors complete these formalities efficiently and avoid unnecessary delays. What Is a Director Identification Number (DIN)? A Director Identification Number (DIN) is a unique identification number allotted by the Ministry of Corporate Affairs (MCA), Government of India, to an individual who intends to become a director of an Indian company. Under the Companies Act, 2013, an individual must generally obtain a DIN before being appointed as a director, subject to applicable statutory requirements. The DIN serves as a permanent identifier for the individual across eligible directorships and is not restricted to a particular company. Why is a DIN required? A DIN helps the MCA maintain accurate records of company directors and track their appointments and other statutory particulars. It is used in various regulatory filings relating to directorships. For foreign investors, obtaining a DIN is relevant when establishing an Indian subsidiary, joining the board of an existing Indian company or being appointed as a nominee director, where the appointment is structured as a directorship. It is important to note that a DIN is an identification number and does not, by itself, provide a visa, work permit or authorisation to conduct business in India. What Is a Digital Signature Certificate (DSC)? A Digital Signature Certificate (DSC) is an electronic credential used to verify the identity of a person signing digital documents. In India, DSCs are issued by licensed Certifying Authorities under the Information Technology Act, 2000. Since company incorporation and many regulatory filings are completed electronically through the MCA portal, a DSC enables directors and other authorised individuals to authenticate the relevant documents digitally. Why does a foreign director need a DSC? A foreign director may require a DSC to sign incorporation forms, consent documents and other statutory filings, depending on the applicable procedure and their role in the filing. Unlike a DIN, which identifies the director, a DSC facilitates electronic authentication. Obtaining one does not replace the requirement to obtain a DIN where applicable. DIN vs DSC: Understanding the Difference Particulars DIN DSC Purpose Identifies an individual as a director for Indian company-law purposes Authenticates electronic documents and filings Issuing authority Ministry of Corporate Affairs (MCA) Licensed Certifying Authority Format Unique identification number Digital certificate linked to the applicant’s identity Primary use Director identification and statutory records Electronic signing and authentication Validity Generally remains valid for life, subject to applicable legal requirements Issued for a specified validity period and must be renewed or replaced as required How Can a Foreign National Obtain a DIN? The application process for a DIN for a foreign director in India depends on whether the foreign national will join a newly incorporated company or an existing Indian company. Route 1: DIN during company incorporation Foreign investors establishing a new Indian company can generally apply for a DIN through the SPICe+ incorporation process, administered by the MCA. The broad steps are as follows: Step 1: Finalise the company structure. Identify the proposed directors and ensure that the company meets the applicable requirements under the Companies Act, 2013. A private company generally requires at least two directors, including at least one director who satisfies the statutory residency requirement. Step 2: Prepare the documents. Gather the proposed director’s passport, residential address proof, photograph and other supporting documents required for incorporation. Documents issued overseas may require notarisation, apostille or consularisation, depending on the circumstances. Step 3: Complete the SPICe+ application. Submit the incorporation application through the MCA portal. Where eligible, DIN applications for proposed directors who do not already hold a DIN are included in the prescribed incorporation process. Step 4: Complete digital authentication. Ensure that the relevant forms are digitally signed by the individuals specified under the applicable MCA requirements. Step 5: MCA review and allotment. The MCA examines the application and supporting documents. If the requirements are satisfied, the company is incorporated and DINs are allotted to eligible proposed directors through the prescribed process. The number of DINs that can be allotted through the incorporation process is subject to the applicable rules and MCA requirements. Route 2: DIN for an existing company If a foreign national is being appointed as a director of an already incorporated Indian company, the DIN application generally follows the prescribed procedure under Form DIR-3, subject to applicable rules. The applicant must submit the required personal particulars and supporting documents, along with the prescribed verification and digital authentication. Once the DIN is allotted, the company can proceed with the director’s appointment and complete the relevant statutory filings. Important: An individual should not obtain multiple DINs. The company should verify whether the proposed director already holds one before initiating an application. Documents Required for a Foreign Director The documents required for a foreign director’s DIN and DSC may vary depending on the application route, the applicant’s country of residence and the verification requirements of the relevant authorities. Commonly required documents include: Valid passport: Primary proof of identity, nationality and date of birth. Residential address proof: A bank statement, utility bill or another accepted document verifying the applicant’s current address. Recent photograph: For identification and application records. Email address and mobile number: For communication and verification. Supporting declarations and consent forms: As required for the DIN, DSC or incorporation application. Notarisation, apostille and consularisation Foreign investors should pay particular attention to document authentication. Depending on the country where the documents are issued or executed, the … Read more

Introduction: What Is an Import Export Code (IEC)? When a foreign company is incorporated or operating in India and plans to import goods in India or export goods out of India, understanding the Import Export Code (IEC) is essential. An Import Export Code, commonly known as IEC, is a unique identification number required for businesses that undertake import or export activities in India. It is issued by the Directorate General of Foreign Trade (DGFT), which operates under the Ministry of Commerce and Industry, Government of India. The IEC is generally linked to the company’s Permanent Account Number (PAN) and serves as an important identification for international trade transactions. Do Foreign-Owned Companies Need an IEC in India? A foreign company, or finished products from its overseas parent company may need an IEC for those transactions. Similarly, a foreign-owned Indian company exporting products manufactured or sourced in India may require an IEC for its export operations. It is important to understand that foreign ownership and the place of incorporation are different considerations. A company incorporated in India may be wholly owned or partly owned by overseas investors and can still obtain an IEC as an Indian business entity. However, a foreign company that is not incorporated in India may have different regulatory requirements depending on how it conducts business in India. Therefore, businesses should evaluate their corporate structure and proposed trade activities before applying for IEC registration. How to Apply for IEC Registration The IEC application process is primarily conducted online through the DGFT portal. A company generally needs to create or access its DGFT account and provide the required business and tax-related information. The application typically requires details such as the company’s legal name, PAN, registered office information, bank account details, and information about the authorised person submitting the application. The company must ensure that its details are accurate and consistent with its official records. For foreign-owned companies, this is particularly important because information relating to the Indian entity, foreign shareholders, directors, authorised representatives, and corporate documents may need to be properly maintained for other regulatory purposes as well. After completing the application and submitting the applicable government fee, the details are reviewed through the prescribed process. Once the application is successfully processed, the IEC is issued electronically. Businesses should retain the IEC details and ensure that the information associated with the code remains accurate. Documents Required for IEC for Foreign-Owned Companies The documentation required for IEC registration can vary depending on the applicant’s legal structure and current DGFT requirements. Generally, an Indian company applying for IEC should have its PAN and valid corporate information available. Bank account details and supporting information relating to the applicant may also be required as part of the online application. Foreign-owned companies operating through an Indian subsidiary should make sure that the subsidiary’s corporate records are updated and that the applicant’s information matches the details maintained with relevant Indian authorities. In cases where an authorised representative submits the application, appropriate authorisation and identity-related information may also be required. Since DGFT procedures can change over time, companies should check the latest requirements on the official DGFT portal before submitting an IEC application. Using current information can help reduce delays caused by incorrect or outdated documentation. Obtaining an IEC is not the end of compliance responsibilities. Businesses must keep IEC details updated, including changes to business information, bank details, address, or ownership, through the DGFT system. Importance of IEC for International Trade IEC registration is important because it provides a recognised identification for businesses involved in India’s import and export ecosystem. It can be required for customs related processes and other trade documentation associated with the movement of goods across international borders. Without the appropriate registration, a business may face difficulties when attempting to complete certain import or export transactions. For a foreign-owned company, the IEC can also support smoother coordination between its Indian operations and overseas headquarters.  Foreign-owned companies should update IEC details following restructuring, mergers, acquisitions, personnel changes, or changes to their Indian business structure to avoid administrative issues in future import-export transactions. Conclusion The Import Export Code (IEC) is an important requirement for foreign-owned companies involved in importing or exporting goods in India. Whether the business is bringing raw materials into India, importing equipment from its overseas parent company, or exporting products manufactured in India, understanding the IEC process can support smoother international trade operations. Obtaining an IEC through the DGFT portal, maintaining accurate business information, and monitoring related regulatory requirements can help foreign-owned companies remain compliant while expanding their activities in the Indian market. IEC is one part of a foreign-owned company’s broader compliance framework. Therefore, for businesses planning international trade in India, IEC registration should therefore be considered an important part of establishing a compliant and efficient cross border business operation. Frequently Asked Questions About IEC for Foreign-Owned Companies What is an IEC and who issues it in India? An Import Export Code (IEC) is a unique identification number used by businesses involved in importing or exporting goods in India. The IEC is issued by the Directorate General of Foreign Trade (DGFT), under the Ministry of Commerce and Industry, Government of India. It is generally linked to the applicant’s Permanent Account Number (PAN). How can a foreign-owned company apply for IEC registration in India? A foreign-owned company operating through an Indian entity can generally apply for IEC online through the DGFT portal. The applicant typically needs to provide its PAN, legal and registered office details, bank account information, and other prescribed business and applicant details. The application should be submitted with accurate information and the applicable government fee. What documents are required for IEC registration for a foreign-owned company? The documents and information required can vary depending on the applicant’s legal structure and current DGFT requirements. Generally, an Indian company should have its PAN, corporate details, bank account information, and details of the authorised person available for the IEC application. Companies should verify the latest document requirements on the DGFT portal … Read more

Introduction  India has become a major destination for foreign investment, international expansion, technology development, and global business operations. As multinational companies establish subsidiaries, liaison offices, branch offices, and joint ventures in India, they increasingly appoint foreign directors and hire international employees. However, working in India requires more than an appointment letter or board resolution. Foreign nationals must comply with Indian immigration laws, visa requirements, and registration formalities. Businesses must therefore understand Employment Visa rules, Foreigners Regional Registration Office (FRRO) requirements, and related immigration obligations to avoid regulatory complications and maintain smooth operations. S   Understanding the Employment Visa in India  An Employment Visa is an Indian visa category intended for eligible foreign nationals who come to India to undertake employment with an Indian company, organisation, or other qualifying employer. It is generally relevant to foreign professionals, technical experts, senior management personnel, and directors who will perform substantive employment-related duties in India, subject to the applicable visa conditions.  The Indian Employment Visa requirements for foreign employees depend on the nature of the proposed employment, the applicant’s qualifications and experience, the employer’s business activities, and the applicable immigration rules. Indian authorities may examine the employment contract, salary structure, job responsibilities, educational qualifications, professional expertise, and the justification for engaging a foreign national. A foreign national should not assume that a Business Visa automatically permits regular employment in India. Business visits for permitted commercial activities and taking up employment are distinct immigration purposes. Companies should therefore determine the correct visa category before the individual travels to India or begins performing employment duties.   Employment Visa for Foreign Directors in India  Foreign directors occupy an important position in the governance and management of Indian companies. However, the fact that a foreign national has been appointed as a director does not, by itself, establish the immigration permission required to work in India. The appropriate visa depends on the person’s actual role, the activities to be undertaken in India, the terms of the appointment, and the applicable immigration requirements. The distinction between business-related visits and substantive employment should be evaluated carefully.  An Employment Visa for a foreign director in India may be appropriate where the individual’s proposed activities qualify as employment under the applicable rules. Companies should also ensure that the director’s visa conditions remain consistent with the activities performed in India. Where a foreign director holds multiple roles, such as board member, executive director, managing director, or technical head, the immigration position should be assessed according to the substance of those responsibilities rather than the designation alone.  FRRO Registration for Foreign Nationals in India  The Foreigners Regional Registration Office (FRRO) administers important immigration and registration functions for foreign nationals in India. Registration requirements are determined by the foreigner’s visa category, nationality, visa conditions, duration of stay, and applicable immigration rules.  FRRO registration for foreign employees in India is an important compliance consideration after a foreign national enters the country on an eligible visa. Depending on the visa and the rules applicable to the individual, registration may be required within a specified period, commonly within 14 days of arrival for visa categories subject to that requirement. Certain visa conditions, exemptions, and special circumstances may affect the applicable deadline, so the individual and employer should verify the specific requirements rather than relying on a general rule.  The registration process is generally handled through the official Indian visa and immigration services, including the relevant online registration facilities where applicable. Depending on the case, the foreign national may be required to submit passport details, visa information, an Indian residential address, employment documents, photographs, and supporting documents relating to the Indian employer.  Once the registration process is completed, the relevant registration certificate or residential permit, where applicable, should be retained and kept accessible. Companies should maintain accurate records of the foreign employees’ visa validity, registration status, residential address, and other applicable immigration conditions.  FRRO registration is not merely an administrative formality. Failure to comply with applicable registration requirements can result in penalties, difficulties with visa extensions, or other immigration-related complications. For this reason, organisations should incorporate registration checks into their employee onboarding and international mobility procedures.  Documents Required for Employment Visa and FRRO Registration  The documentation required for an Indian Employment Visa and FRRO registration varies according to the applicant’s circumstances and the requirements of the relevant Indian mission or immigration authority.  For an Employment Visa application, commonly relevant documents include a valid passport, the prescribed visa application form, photographs, an employment contract or appointment letter, details of the employing organisation, and evidence of the applicant’s qualifications and professional experience. The Indian employer may also need to provide company registration documents, a description of the proposed position, remuneration details, and other supporting information requested by the authorities.  For FRRO registration, the required documents may include the passport, valid visa, arrival details, proof of residential address in India, employment or appointment documentation, and additional forms or declarations required for the specific application. Foreign directors may also need to provide documents establishing their appointment or position within the Indian company. Applicants should ensure that the information provided across the visa application, employment agreement, registration application, and company records is accurate and consistent. Differences in names, addresses, dates, job titles, or employment details can result in requests for clarification or processing delays. Since requirements can vary, the current official checklist should always be reviewed before applying.  Employment Visa Validity, Extension, and Ongoing Compliance  Obtaining an Employment Visa is only one part of the immigration compliance process. Foreign nationals and their employers must also monitor visa validity, registration conditions, and any requirements applicable to extensions or changes in employment.  An Employment Visa extension in India may be possible where the individual continues to meet the applicable eligibility requirements and submits the necessary application and supporting documents. Approval is subject to the relevant authorities and should not be assumed to be automatic. Employers should initiate internal reviews sufficiently in advance of the visa’s expiry date to allow time for document preparation and processing.  Changes in employment, … Read more

India continues to attract foreign investors looking for technology talent, manufacturing capacity, financial services opportunities and access to a large domestic market. However, choosing the right location requires more than comparing infrastructure and labour costs. India’s leading business cities have developed distinct investment ecosystems, supported by sector-specific policies, industrial clusters and government initiatives. Recent developments include new Global Capability Centre (GCC) policies, expansion of international financial services and increased investment in advanced technology. For international companies evaluating foreign direct investment (FDI) in India, understanding the strengths of each city is essential to selecting the right business location. This guide examines seven major investment destinations, their industry advantages, recent developments and practical business setup considerations.  Foreign direct investment in India  India continued to attract substantial foreign investment in FY 2025–26. According to the Department for Promotion of Industry and Internal Trade (DPIIT), India’s total FDI inflow reached approximately US$94.53 billion, representing a 17% increase over the previous financial year. This total includes equity capital, reinvested earnings and other capital.  Sr No.   State   Foreign Direct Investment state wise   Key Strength   1  Maharashtra   US$18.42 billion  Financial services, technology, GCCs and corporate headquarters  2  Karnataka  US$12.94 billion  IT services, software development, R&D and technology GCCs  3  Delhi  US$ 6.18 billion   Corporate services, technology and access to the Delhi-NCR market  4  Gujarat  US$ 5.71 billion   Manufacturing, chemicals, pharmaceuticals and industrial infrastructure  5  Tamil Nadu   US$ 4.72 billion   Automotive manufacturing, engineering, electronics and exports  6  Telangana  US$ 2.25 billion   IT and technology services, pharmaceutical manufacturing and government investment incentives    Mumbai (Maharashtra) Mumbai remains a preferred destination for foreign investors entering India’s financial services market. Its concentration of banks, insurance companies, investment firms, professional services providers and corporate headquarters makes it particularly suitable for businesses requiring access to financial institutions. The Mumbai metropolitan region, including Navi Mumbai, also offers significant opportunities in digital infrastructure, data centres, logistics and international trade.  An important recent development is Maharashtra’s Global Capability Centre Policy 2025, which aims to attract new GCC investments and strengthen the state’s position as a destination for high-value corporate functions. Mumbai is particularly relevant for multinational companies establishing financial GCCs, regional management offices and risk management teams.   Mumbai also benefits from strong transport and trade connectivity, supported by the Jawaharlal Nehru Port (JNPA) in Navi Mumbai, Mumbai Port, an international airport, and an extensive road and rail network. These connections facilitate international shipping, import-export activities, and the movement of goods across major Indian markets. For foreign investors, this infrastructure makes the Mumbai metropolitan region a practical choice for financial services, logistics, data centres, and businesses requiring access to international trade networks. For foreign investors, Mumbai’s important consideration is cost. Premium office rentals, employee compensation and commuting requirements can significantly influence operating expenditure.   Bengaluru (Karnataka) Bengaluru is one of the strongest destinations for foreign companies establishing technology-led operations in India. Its combination of software engineering talent, research institutions, technology startups and multinational technology companies supports businesses moving beyond traditional outsourcing towards product development, artificial intelligence and global research operations.  A significant policy development is the Karnataka GCC Policy 2024–2029, which seeks to strengthen the state’s GCC ecosystem and encourage higher-value business functions. Karnataka’s broader technology strategy also reflects growing interest in artificial intelligence, digital infrastructure and advanced engineering. For investors, the opportunity is not simply access to lower cost technical talent; it is the ability to establish teams responsible for global product development and innovation.  Bengaluru also benefits from strong air connectivity through Kempe Gowda International Airport, which supports international business travel and global operations. Its road network connects major technology parks and industrial areas with neighbouring manufacturing hubs, while ongoing infrastructure development aims to improve regional connectivity. Businesses should nevertheless evaluate competition for experienced employees, office rental costs and traffic congestion. A carefully selected location can improve recruitment, employee retention and operating efficiency.  New Delhi   Delhi-NCR, which includes Gurugram, Noida, and surrounding business districts, is among the most versatile destinations for foreign investment in India. The region combines access to government institutions, a large consumer market, corporate headquarters, and extensive business infrastructure. Its international airport and road connectivity also support regional and global business operations.  Major industries across Delhi include information technology, business process management, consulting, telecommunications, automotive manufacturing, electronics, retail, e-commerce, and financial services. Gurugram is known for its concentration of multinational corporations, corporate offices, and technology-driven businesses, while Noida has developed a significant presence in IT services, electronics manufacturing, and commercial infrastructure.  Delhi-NCR benefits from extensive road connectivity through national highways and expressways. Indira Gandhi International Airport provides access to international markets, while rail networks and dedicated freight corridors in the wider region support logistics and distribution. These connectivity advantages make the region suitable for foreign investors seeking efficient supply chains, corporate offices, electronics manufacturing, and access to India’s large consumer market. Businesses must also assess the relevant state level policies and identify whether their operations are better suited to Gurugram, Noida, or another nearby industrial area. Hyderabad (Telangana) Hyderabad has established itself as a major destination for international businesses seeking a combination of technology talent, modern infrastructure, and competitive operating costs. The city has attracted multinational companies across technology, pharmaceuticals, biotechnology, and research, supported by established commercial districts and a growing innovation ecosystem.  Compared with some larger metropolitan business districts, Hyderabad can offer a favourable balance between infrastructure quality and operating expenses, although actual costs depend on the industry and location. Hyderabad benefits from strong air connectivity through Rajiv Gandhi International Airport, which supports international business travel and the movement of high-value goods. The city’s established pharmaceutical and life sciences clusters, supported by logistics infrastructure and specialised research facilities, make it an attractive location for foreign investors seeking to establish technology operations, pharmaceutical manufacturing units, and research and development centres.  Chennai (Tamil Nadu) Chennai is a prominent Indian city for foreign investors focused on manufacturing, engineering, automotive production, and international trade. Its established industrial base, port connectivity, supplier networks, and engineering talent make it particularly suitable for companies that require reliable … Read more

For foreign companies looking to establish a presence in India, understanding the Significant Beneficial Ownership (SBO) Rules and the company incorporation process in India is an important first step. Once the subsidiary is incorporated, the foreign parent must also consider India’s corporate disclosure and transparency requirements, including the rules relating to beneficial ownership and Significant Beneficial Owners (SBOs).  Under the Companies Act, 2013, the Indian regulatory framework looks beyond the name appearing on the Indian subsidiary’s register of members. Where the shares are held through a foreign parent or another corporate entity, the ultimate natural persons who hold or control the relevant interest may also need to be identified and disclosed.  This makes SBO compliance particularly relevant for foreign-owned Indian subsidiaries, especially where the ownership structure involves multiple entities, holding companies, trusts, investment vehicles or other intermediate entities.   What is Beneficial Ownership?  The Companies Act, 2013 distinguishes between the registered owner of shares and the person who ultimately enjoys the benefits or rights attached to those shares.  Section 89 addresses beneficial interest in shares. Beneficial interest can include, directly or indirectly, through a contract, arrangement or otherwise, the right or entitlement to exercise rights attached to shares or to receive or participate in dividends or other distributions.  For example, an Indian subsidiary may have a foreign company as its registered shareholder. Although the foreign company is the registered member, the ownership structure may ultimately lead to one or more individuals who exercise ownership or control over the foreign parent and, indirectly, over the Indian subsidiary.  This is where the Significant Beneficial Owner framework under Section 90 becomes relevant.  What is a Significant Beneficial Owner (SBO)?  Under Section 90 of the Companies Act, 2013, read with the Companies (Significant Beneficial Owners) Rules, 2018, an SBO is essentially an individual who has significant beneficial ownership or control in an Indian reporting company but whose name is not entered in the company’s register of members as the holder of those shares.  The prescribed threshold under the SBO Rules is generally 10% or more, rather than the 25% threshold appearing in the enabling language of Section 90. The Rules also cover certain forms of significant influence or control.  An individual may qualify as an SBO where the individual, acting alone or together with others, holds the prescribed rights or entitlements indirectly, or through a combination of direct and indirect holdings, subject to the conditions specified under the SBO Rules.  Holds not less than 10% of the shares;  Holds not less than 10% of the voting rights;  Has the right to receive or participate in at least 10% of the distributable dividend or other distribution in a financial year; or  Has the right to exercise, or actually exercises, significant influence or control through means other than direct shareholding.  Importantly, the SBO is an individual or natural person, not simply the foreign parent company appearing on the Indian subsidiary’s share register.  How Does This Apply to a Foreign Parent?  Consider a simple structure:                                                                                                                         Individual A → Foreign Parent Co. → Indian Subsidiary  Suppose Foreign Parent Co. owns 100% of the Indian subsidiary.  Foreign Parent Co. is the registered shareholder of the Indian subsidiary. However, the Indian subsidiary may need to examine the ownership and control structure of Foreign Parent Co. to determine whether an individual qualifies as an SBO.  Where an Indian subsidiary is owned by a foreign corporate shareholder, the identification of an SBO requires examining the indirect ownership rules prescribed under the Companies (Significant Beneficial Owners) Rules, 2018, as amended. In the case of a corporate shareholder, an individual may be considered to hold an indirect interest where that individual holds a majority stake in the corporate shareholder or its ultimate holding company. The applicable SBO assessment must also consider the prescribed thresholds for ownership interests in the Indian reporting company and any rights relating to significant influence or control.  Therefore, foreign parent ownership should not automatically be treated as the end point of the analysis.  The Indian subsidiary should examine the ownership chain to determine the relevant SBOs. Individuals who meet the applicable conditions under the SBO Rules may be required to make the prescribed declaration.  If no natural person can be identified under the applicable ownership or control tests, the Rules provide for identification of the relevant senior managing official in specified circumstances.  Direct and Indirect Ownership Matter  One of the key features of the SBO framework is that the analysis is not restricted to direct shareholding in the Indian company.  The Rules recognise indirect holdings and ownership through corporate entities, trusts and other structures. For a corporate member, the rules specifically contemplate situations where the relevant individual has a majority stake in the member or its ultimate holding company, subject to the prescribed framework.  This is particularly important for multinational groups because the Indian subsidiary may sit several levels below the ultimate parent.  What Does the Indian Subsidiary Need to Do?  The SBO framework places obligations not only on the individual SBO but also on the Indian reporting company.  Identify potential SBOs The Indian subsidiary is required to take necessary steps to determine whether an individual qualifies as an SBO.  Where a member other than an individual holds 10% or more of the shares, voting rights, or rights to receive or participate in dividends or other distributions, the reporting company must issue a notice seeking the required information. This is done through Form BEN-4.  This is particularly relevant for an Indian subsidiary whose shares are held by a foreign parent.  Obtain the SBO declaration An individual who becomes an SBO or whose SBO particulars change is required to provide the prescribed declaration to the company in Form BEN-1.  Under the applicable rules, the declaration is generally required within 30 days of acquiring significant beneficial ownership or a change in such ownership.  File Form BEN-2 with the Registrar Once the Indian company receives the SBO declaration, it is required to file Form BEN-2 with the Registrar of Companies within 30 days … Read more