FAQs

1. What is franchising? Franchising is a business strategy to get and retain customers. It is a marketing system to create an image in the minds of current and future customers on the usefulness of a company's products and services to them. It is a method for distributing products and services that satisfy customer needs. In short, franchising is a strategic alliance between groups of people who have specific relationships and responsibilities with a common goal to dominate markets, i.e. to get and retain more customers than their competitors. Read More...

2. How can one set up a company in India? The promoters of a company may be individual entrepreneurs or a body corporate engaged in efforts to incorporate a company. They have the power to define the objectives of the company and to decide on various matters relating to the company proposed to be incorporated. It is dependent upon the purposes for which the company is to be incorporated, the proposed scale of operations, the capital involved, etc. The promoters can select the type of company they wish viz. private company, public company, non-profit making company, etc. Read More...

3. PAN Card Registration Permanent Account Number (PAN) is a ten-digit alphanumeric number, issued, in the form of a laminated card, by an Assessing Officer of the Income Tax Department. A typical PAN is AFRPP1595D. Read More...

A non-resident entity (other than a citizen of Pakistan or an entity incorporated in Pakistan) can invest in India, subject to the FDI Policy.  

• A company can be incorporated under the Companies Act, 1956, as a Joint Venture (JV) or a Wholly-Owned Subsidiary (WOS)
• Or the company can set up a Liaison Office (LO) / Representative Office (RO) or a Project Office (PO) or a Branch Office (BO) of the foreign company which can undertake activities permitted under the Foreign Exchange Management (Establishment in India of Branch Office or Other Place of Business) Regulations, 2000)
  

Two routes, permitted under which an Indian company may receive FDI, are:

1. Automatic Route: FDI up to 100% is allowed under this route in all activities/sectors except where the provisions of the consolidated FDI Policy are attracted. FDI, to the extent permitted under this route, does not require any prior approval either of the Government or the RBI.
2. Government Route: FDI, which is not covered under the above route, requires prior Government approval. The FDI is considered by the Foreign Investment Promotion Board (FIPB), Department of Economic Affairs and the Ministry of Finance. An application has to be made on Form FC-IL under this route.

On receipt of share application money:

• Within 30 days of receipt of share application money from the non-resident investor, the Indian company is required to report to the RBI (through authorized dealer bank), the Advance Reporting Form, containing the following details:

1. Name and address of the foreign investor/s
2. Date of receipt of funds and the Rupee equivalent
3. Name and address of the authorized dealer through whom the funds have been received
4. Details of the Government approval, if any
5. KYC report on the non-resident investor from the overseas bank remitting the amount of consideration.
6. Foreign Inward Remittance Certificate

On receipt of intimation, the RBI allots a Unique Identification Number which is to be used in all further correspondence with RBI. The importance of the remittance receipt date is that the Indian company has to issue shares within 180 days of the receipt of remittance.

Upon issue of shares to non-resident investors:

Within 30 days from the date of issue of shares, a report on Form FC-GPR- PART A, together with the following prescribed documents, should be filed with the Regional Office concerned of the RBI:

• A certificate from the Company Secretary of the Indian Company accepting investment from persons resident outside India, certifying that
1. the company has complied with the procedure for the issue of shares as laid down under the FDI scheme as indicated in the Notification No. FEMA 20/2000-RB, dated 3rd May, 2000, as amended from time to time.
2. the investment is within the sectoral cap / statutory ceiling permissible under the Automatic Route of the Reserve Bank and it fulfils all the conditions laid down for investments under the Automatic Route.
• Certificate from Statutory Auditors/ SEBI registered Category - I Merchant Banker /Chartered Accountant indicating the manner of arriving at the price of the shares issued to the persons resident outside India.
• Copy of Memorandum of Association & Article of Association
• FIRC copy
• Copy of intimation to RBI
  

An Indian company is required to file an Annual Return on Form FC-GPR Part B with the RBI. The Annual Return is to be submitted by July 15th of every year. The Return must contain details with respect to all investments by way of direct/portfolio investments/re-invested earnings/other capital in the Indian company made during the previous years. 

Indian companies can issue equity shares, fully, compulsorily and mandatorily convertible debentures and fully, compulsorily and mandatorily convertible preference shares, subject to pricing guidelines/valuation norms prescribed under FEMA Regulations. 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., will apply.

FDI is prohibited in the following activities/sectors:

• Retail Trading (except single-brand product retailing)
• Lottery Business, including Government /private lottery, online lotteries, etc.
• Gambling and Betting, including casinos etc.
• Chit Fund Business
• Nidhi Company
• Trading in Transferable Development Rights (TDRs)
• Retail Trading (except single-brand product retailing)
• Manufacturing of Cigars, cheroots, cigarillos and cigarettes, of tobacco or of tobacco substitutes.
• Activities / sectors not opened to private sector investment, including Atomic Energy and Railway Transport (other than Mass Rapid Transport Systems).Besides foreign investment in any form, collaboration of foreign technology in any form, including licensing for franchise, trademark, brand name, management contract, is also completely prohibited for the Lottery Business and Gambling and Betting activities.

All foreign investments are freely repatriable (net of applicable taxes) except in cases where:

1. the foreign investment is in a sector such as Construction and Development Projects and Defence wherein the foreign investment is subject to a lock-in-period.NRIs choose to invest specifically under non-repatriable schemes.

Dividends (net of applicable taxes) declared on foreign investments can be remitted freely through an Authorised Dealer bank.

As per the regulations/guidelines issued by the RBI/Government of India, investment can be made by foreign investors in shares issued by an unlisted Indian company.

A Non-Resident Indian (NRI) or a Person of Indian Origin (PIO), resident outside India, can vest by way of contribution to the capital of a firm or a proprietary concern in India on non-repatriation basis, provided:

1. the amount  is  invested  by  inward  remittance  or  out  of  NRE/FCNR(B)/NRO  accounts maintained by Authorized Dealers / Authorized banks.
2. the firm or proprietary concern is not engaged in any agricultural/plantation or real estate business or print media sector.
3. The amount invested shall not be eligible for repatriation outside India. Investments with repatriation benefits: NRIs/PIO may seek prior permission of the Reserve Bank for investment in sole proprietorship concerns/partnership firms with repatriation benefits.  The application will be decided in consultation with the Government of India.
   

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