India Matters

How a Foreign National from Bangladesh can start and Register Company in India? Home India has emerged as a hub of opportunities for foreign investors and entrepreneurs. With a thriving economy, progressive reforms, and a liberalized foreign investment regime, Indian markets are highly attractive to foreign nationals, including those from neighbouring countries like Bangladesh. This article provides a complete guide for Bangladeshi citizens and entities aiming to start and register a company in India, along with a special focus on compliance if the company is treated as a Foreign Subsidiary. Legal Framework Applicable to Foreign Subsidiary Companies in India Foreign subsidiary companies are governed under several Indian statutes. The primary legislation includes the Companies Act, 2013, which defines and regulates the incorporation, operation, governance, and closure of companies. In addition, foreign subsidiaries must comply with other applicable laws and sector-specific regulations. These include: Companies Act, 2013 Under Section 2(42) of the Companies Act, 2013, a foreign company is defined as a company incorporated outside India but having a place of business in India either directly or through an agent. For foreign subsidiaries, registration under the Companies Act is mandatory, and they must comply with various statutory filings, disclosures, and secretarial standards. Foreign Exchange Management Act (FEMA), 1999 The FEMA regulates the inflow and outflow of foreign exchange and capital into India. Any foreign investment by a Bangladeshi company in its Indian subsidiary must follow the FDI norms, including sectoral caps, automatic vs. approval routes, and reporting requirements to the Reserve Bank of India (RBI). FEMA also mandates that the Indian subsidiary files Annual Return on Foreign Liabilities and Assets (FLA) and other forms concerning foreign remittances. Income Tax Act, 1961 The foreign subsidiary is treated as a domestic company for tax purposes and is liable to pay taxes on income earned in India. It must comply with Indian income tax laws, including corporate tax, transfer pricing regulations, advance tax, and withholding tax obligations. Goods and Services Tax (GST), 2017 If the Indian subsidiary engages in supply of goods or services and crosses the threshold turnover, GST registration is mandatory. The company must file GST returns regularly and maintain records as per GST rules. Labour and Employment Laws Foreign subsidiaries employing staff in India must comply with applicable Indian labour laws. These include the Minimum Wages Act, Shops and Establishments Act, Payment of Bonus Act, Payment of Gratuity Act, EPF and ESIC regulations, and the Industrial Disputes Act, among others. This ensures the protection of workers’ rights and fair employment practices. Environmental Regulations If the business activities of the subsidiary involve environmental impact, it must obtain necessary environmental clearances and comply with laws relating to air and water pollution, waste management, and wildlife protection, enforced by bodies like the Central Pollution Control Board (CPCB) or State Pollution Control Boards. SEBI Regulations In case the foreign subsidiary plans to list securities or interact with capital markets in India, compliance with the Securities and Exchange Board of India (SEBI) regulations becomes necessary. SEBI governs listing obligations, disclosures, insider trading rules, and takeover codes. Intellectual Property Laws Protection of brand identity and innovation is important. Foreign subsidiaries must ensure that their trademarks, patents, and copyrights are registered under Indian IPR laws, governed by the Controller General of Patents, Designs and Trademarks. Types of Business Entities Available for Bangladeshi Investors When a Bangladeshi national or company seeks to enter the Indian market, choosing the right business structure is a important first step. India offers several forms of business entities suited for varying operational scopes, compliance levels, and investment goals. However, since Bangladesh is categorized as a country sharing a land border with India, investments from its nationals or entities attract additional scrutiny and require government approval under the FDI policy. Private Limited Company The most preferred form of business structure among foreign investors, including those from Bangladesh, is the Private Limited Company. This structure is favoured due to its distinct legal identity, limited liability for shareholders, the capacity to raise funds, and a well-regulated corporate governance framework under the Companies Act, 2013.To establish a private limited company, a minimum of two directors is mandatory, out of which at least one must be an Indian resident. The company must also have at least two shareholders. The maximum limit of shareholders for a private limited company is capped at 200. Foreign Direct Investment (FDI) is allowed in a private limited company either through the automatic route or with prior government approval, depending on the sector. For Bangladeshi investors, government approval is compulsory irrespective of the sector due to their geopolitical categorization. Limited Liability Partnership (LLP) The Limited Liability Partnership is another viable business structure that combines the operational flexibility of a partnership with the limited liability feature of a company. It is governed by the Limited Liability Partnership Act, 2008, and is particularly useful for professional services and small-to-medium enterprises. FDI in LLPs is permitted through the automatic route only in sectors where 100% FDI is allowed and there are no performance-linked conditions. However, since Bangladesh falls within the list of countries that require prior approval, a Bangladeshi investor must obtain clearance from the Department for Promotion of Industry and Internal Trade (DPIIT) and other competent authorities before investment. This extra step makes the LLP structure slightly less attractive unless the operational needs specifically demand it. Branch Office, Liaison Office, or Project Office Bangladeshi companies not looking for full-scale incorporation may opt to establish a Branch Office, Liaison Office, or Project Office in India. These entities serve different purposes and are governed by RBI’s Foreign Exchange Management (Establishment in India of Branch Office or Other Place of Business) Regulations, 2016. ■ A Branch Office can engage in commercial activities permitted under Indian law, such as export/import of goods, consultancy services, or research. ■ A Liaison Office acts merely as a representative office and cannot undertake any commercial or revenue- generating activity. Its role is limited to promoting the parent company’s interests and establishing communication channels. ■