Direct selling or MLM or network marketing company in case of working as a foreign company planning to start operations in India can serve in the following ways:
As an international direct selling company through a company shall operate as a liasonofficeRepresentative office project office and branch office.
As an Indian Direct selling company incorporated under the Indian Companies Act, 1956 through a Joint Venture Wholly Owned Subsidiary.
AS A FOREIGN COMPANY (Direct Selling)
A foreign is one, which has been incorporated outside India and conducts business in India. Foreign direct selling companies can set up a liaison, Project and Branch Offices in India. Such offices can undertake activities permitted under the Foreign Exchange Management (Establishment in India of a branch office or another place of business) Regulations, 2000.
LIAISON OFFICE/REPRESENTATIVE OFFICE
One of the practices for foreign companies to enter the Indian markets is the setting up a Liaison /Representative office.
A Liaison office is not allowed to undertake any business activity in India. And cannot earn any income in India.
The role of such offices is limited to collecting information about possible market opportunities. And another purpose is to provide information about the company and its products to prospective Indian customers.
Foreign Companies planning to execute specific projects in India can set up temporary project/site offices in India. RBI has now granted general permission to external entities to establish project offices subject to specified conditions.
Such offices can not undertake or carry on any activity other than the business relating and eventually related to the performance. Project offices may remit outside India the surplus of the project, after meeting the tax liabilities, on its completion.
Government has allowed foreign companies engaged in manufacturing and trading activities abroad to set up Branch Offices in India for the following purposes: To represent the parent company/ other international companies in various matters in India, e.g. acting as buying/selling agents in India.
AS AN INDIAN COMPANY
A foreign company can commence operations in India with the corporation of a company under the provisions of the Indian Companies Act, 1956.
- JOINT VENTURE WITH AN INDIAN PARTNER/ESTABLISHMENT OF WOS
- Foreign Companies can set up operations in India by forging strategic alliances with Indian partners.
- Up of operations through a joint venture may entail the following advantages for a foreign investor.
- Established distribution/ marketing set up of the Indian partners.
- Financial status and establishment of Indian partners.
- Established contacts of the Indian partners which help smoothen the process of setting up of operations.
Foreign investment approved through two routes:
AUTOMATIC ROUTE Indian companies can issue shares under the electronic direction up to 100% of their paid capital except those engaged in specific sectors. In particular other industries, the foreign investment is limited to a prescribed percentage ceiling. A company eligible to issue shares under the Automatic Route can receive foreign inward remittance and issue shares without obtaining any prior approval subject to specific reporting requirements.
GOVERNMENT APPROVAL All other cases where the automatic route is not applicable require prior specific authorisation from the Foreign Investment Promotion Board.
Further to know how to start direct-selling as Indian directors? read our blog: How to Start MLM or direct selling company?
- Department of Industrial Policy and Promotion: www.dipp.gov.in
- Reserve bank of India: www.rbi.org.in
- Department of Economic Affairs: www.finmin.nic.in
- Department of Company Affairs: www.dca.gov.in
- Central Board of Direct Taxes: www.incometaxindia.gov.in
- Central Board of Excise and Customs: www.cbec.gov.in.
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