Introduction to Offshore Companies in India
India is the peninsular country in Asia with the Arabian Sea on its southwest, the Indian Ocean on its south, and the Bay of Bengal on its southeast. It is the second most populated country having more than 1.40 billion as the total population. The Companies Act 2013 governs all the corporate entities in India.
With the modernization and increase in the use of technology, any business can reach out to the legal boundaries of the destination where it was incorporated. It can also operate outside the geographical boundaries legally.
This helps many US and European-based companies to operate their offshore company in India for taking benefit of low-cost, skilled labor, and many others.
The companies which are operated outside the country in which it has their head office are known as offshore companies. The owner offshores its company to foreign countries to expand it by taking benefit of that destination.
An offshore company can easily operate and invest. These companies have to follow the regulations, policies, laws, and other forms of the country in which it is operating, not of that in which it has its headquarters or its founder or owner resides.
In this article, we will be going to discuss more in brief about the offshore companies in India, their requirements for establishment, benefits, the procedures for incorporation, and other related topics.
Which Acts Govern Offshore Companies in India?
In India, two main acts govern the offshore companies established in India. These acts are the Companies Act, 2013, and Foreign Exchange Management Act (FEMA), 1999. The foreign owner who established its offshore company in India must comply with the provisions of the Companies Act, 2013, and investment and transactions it has to follow the FEMA Act.
According to these acts, any foreign owner can establish an offshore company as a private limited company or as a public limited company. The FDI is allowed by these forms of companies in India through direct routes only if these are not restricted. They can also establish a limited liability partnership form of company in India as an offshore company as it also allows FDI in India.
In the following forms, a foreign owner can establish its offshore company in India:
- Joint venture
- Wholly-owned subsidiary company
- Branch office
- Project office
Some examples of offshore companies in India are CISCO, IBM, Microsoft, EOSIL, and many others.
Requirements for Registering an Offshore Company in India
- Authorized capital: For registering an offshore company in India, the authorized capital of ₹1,00,000 is required as the minimum amount. There is no special requirement for minimum paid-up capital for the registration of an offshore company in India.
- Directors and shareholders: In case an offshore company is established in the form of a private company, then it is required to have at least 2 shareholders and 2 directors. In case it is established as a public company, it can have seven shareholders and three directors as minimum requirements. In case it is established as a limited liability partnership, it is required to have at least two designated directors and an additional director or member who is an Indian citizen.
- Article of association and Memorandum of Association: As per the requirement of the Companies Act, 2013, the foreign owner must prepare and file the Memorandum of Association (MOA) and Article of Association (AOA) with the registrar of companies.
- Office address: It must have its head office in a foreign country or a place outside India. A locally registered office is required for offshore companies in India and a registered agent for incorporating their company in India.
Procedure for Registering an Offshore Company in India
- Applying for directors’ identification number
- Acquiring the Digital signature certificate
- Reservation of the name of the company
- Registering for e-filling of the form
- Uploading of required documents
Benefits of Registering an Offshore Company in India
- Low requirement for authorized capital: The authorized capital required by an offshore company in India of at least ₹1,00,000.
- Corporate tax: The corporate tax rate of Indian companies is 30%.
- Highly skilled labor: India has many highly skilled laborers who are ready to work, especially in IT and other sectors.
- Double taxation treaties: India has double taxation avoidance agreements with about 85 countries, allowing companies to avoid double taxation.
- Technological infrastructure: India’s advanced technological infrastructure supports IT sectors and software development offshore work.
Compliance of an Offshore Company in India
An offshore company in India is required to comply with the provisions of the Companies Act, 2013, the Income Tax Act, 1961, and the FEMA Act, 1999. Offshore companies must conduct an annual general meeting each year and file financial statements and reports with the MCA.
Successful Offshore Companies in India
- IBM
- Dell
- Microsoft
- American Express
- Ford Motor Company
Conclusion
India has experienced significant growth in business, attracting foreign investments from all over the world. Setting up an offshore company in India allows businesses to benefit from India’s skilled labor, low costs, and business-friendly environment.
If you are intending to set up an offshore company in India, it is best advised to seek assistance from OnDemand International as we are the go-to consulting service backed by years of expertise in the registration sector.
