Starting Business outside India

Doing business outside India and growing internationally is an essential part of a company's business expansion policy.It is governed by a company's aim to diversify its commercial activities across national frontiers and increase its competitiveness.
In India economic reforms opened up important avenues for promoting global business by Indian entrepreneurs.The most important legislation was the Foreign Exchange Management Act (FEMA) which changed the entire perspective on foreign exchange particularly those relating to investment abroad.
Indian companies can directly invest outside India by way of contribution to the capital or subscription to the Memorandum of Association of a foreign entity, signifying a long term interest in the overseas entity. It involves setting up a Joint Venture (JV) or a Wholly Owned Subsidiary (WOS) abroad. Under the guidelines, all applications for grant of approval for setting up joint ventures/wholly owned subsidiaries are to be made and processed by the Reserve Bank of India.
If you as a business enterprise, for setting up a business outside India, not only the legal requirements of that country becomes applicable, but also quite a few of the Indian legislation and statutory requirements have to be kept in mind as well.
Under the ODI Indian Entities can directly invest outside India by way of contribution to the capital or through subscription to the Memorandum of Association of the foreign entity, as this signifies long term interest in the overseas entity. In other words there are limited options available through a Joint Venture (JV) or a wholly owned subsidiary (WOS)A JV means a foreign concern formed, registered or incorporated in a foreign country in accordance with the laws and regulations of that country and in which investment has been made by an Indian entity. In a WOS scenario, the entire capital is owned by an Indian entity.

Legal Entities permitted to make investments :

  • Company incorporated in India
  • Body created under an Act of Parliament (NTPC, Airport Authority of India)
  • Partnership registered under the Partnership Act, 1932
  • (and no, LLP or an individual is not permitted. See below for exceptions)

Legal entities permitted to open overseas branches

  • A firm
  • A company
  • Body corporate registered and incorporated in India
  • Proprietary concern

Entry routes for doing business Abroad
Automatic Route
Under the Automatic Route, an Indian Party does not require any prior approval from theReserve Bank of India for setting up a JV/WOS abroad (except in case of investment in the financial sector, where, prior approval is required from the concerned regulatory authority both in India and abroad).

Normal Route
The proposals not covered by the conditions under the Automatic Route require the prior clearance of the Reserve Bank of India(RBI) for which a specific application along with the documents prescribed therein is required to be made to the Overseas Investment Division in the Foreign Exchange Department of the Reserve Bank of India.

Incorporation of a Company in Singapore

In the process of incorporation of a company two key parties are involved, namely a shareholder and a Director. Shareholders are owners of the company. Whatever company owns - its property, cash, stock and the profit it makes, ultimately belongs to the shareholders.
Director is like a manager of the company, who runs the show. The responsibility of whatever happens with the company is with Director. Any individual (above 18 years old) or a corporate or any other business entity (For e.g. a company or a trust) is allowed to establish a company in Singapore as long as it abides by Singapore law. He can become Foreign Director of the company as well as can take shareholding in the company. There are no residency requirements or special qualifications for the person to incorporate a company. The person should not have been involved in any fraud or criminal activity and is not an undischarged bankrupt.
As in case of an individual any overseas body corporate or business entity can also subscribe shares in the Singapore Company and incorporate the same.
It’s worth noting that Singapore companies act allows a 100% foreign ownership of companies. So, whatever assets & profits which business generates will be totally belonging to the foreign individual or corporate. There are no special qualifications, or visas required for incorporation.

  • Requirements for incorporating a company in Singapore
    • Director
      Director is like manager of the company. Director (or board of directors) oversees the operations of the company. Every Singapore based company must have minimum one director who should be a Singapore Citizen or a Singapore permanent resident or an employment pass holder. Foreign nationals can be appointed as foreign directors in addition to the local director. Any person who is 18 years + of age can act as a director. However, undischarged bankrupt or people convicted of any malpractice cannot be appointed as a director.
    • Shareholder
      To incorporate a company in Singapore you will need minimum one shareholder. Shareholder can be an individual or a corporate. Shareholders are like owners of the company. They may or may not actively operate on day to day operations of the company. Singapore companies act allows 100% foreign shareholding. In most of the small private limited companies, shareholders and directors may be the same person.
    • Company Secretary
      Every company needs a secretary who is individual and resident in Singapore. Secretary is like administrator of the company, who takes care of all compliance aspects. Secretary is responsible for maintaining all the statutory registers, resolutions, minute books of the company.
    • Share Capital
      Minimum share capital required is $1, however in reality, the share capital will usually depend on nature of business and its future plans.
    • Local registered address
      Every company needs to provide local Singapore address to register a company. This address cannot be a PO Box address.
  • Documents required for incorporation
    • Company registration form
      This form captures all relevant details like company name, shareholding structure, Directors and shareholders of the company.
    • Completed KYC form (In case engaging nominee director service)
      KYC form collects information about client's existing business and purpose of new Singapore entity. This form is important consideration before providing Nominee Director service.
    • Copies of passports of all directors / shareholders of proposed new company
      Proof of identification of all Directors / Shareholders of new company.
    • Residential address proof of all directors / shareholders
      Usually utility bill, telephone bill, bank statement with address will suffice.
    • Clients business profile in his home country
      Certificate of incorporation of your business in home country. If you are currently not owning any business, then you can provide your work and experience history. (In case of corporate shareholding this document is must).
    • Bank statement / Bank reference letter
      Issued in the name of your business in home country. Alternatively reference letter issued in your personal name will suffice.
    • Certificate of incumbency of parent company
      In case of shareholding by foreign corporate, a certificate of incumbency will be required. This document shows latest list of directors and shareholders in the parent company.
    • Procedure and Timeline
      Registration of a Singapore subsidiary is computerized and can be completed within a day. The basic steps include name approval and company incorporation. Delays in the process can happen only when the documents are incomplete and/or there is a delay in the approval of name. All foreigners setting up a company in Singapore are required to use a professional firm that specializes in setting entities in the country.
    • Opening a Bank Account
      A Singapore company can open an account in any banks operating in Singapore, whether local or international. Procedures in opening an account depend on individual banks.
      We generally recommend a visit of 2-3 days to Singapore to complete incorporation process. On the first day, after signing all the forms the company is registered and on the second day we organize your meeting with the bank representative.
  • Types of Business Entities in Singapore for foreigners
    There are many types of business entities in Singapore. These range from simple sole proprietorship to a listed public limited company. However, some forms of business entities are only available to local residents. As a foreigner you cannot register a sole proprietorship or a partnership. Limited liability partnership can be registered but with some constraints.
    The most common option for foreigners is to incorporate a private limited company. Within private limited company category there are 4 options as explained below.
    • Independent limited liability company
      You as a foreigner can incorporate a company in Singapore and subscribe to the shares in your individual name. You can be the sole shareholder or shareholding can be with few people who are your relatives, friends or business associated.
      Most of the small business enterprises registered in Singapore are of this type. If you are taking an entrepreneurial route, this business entity is the perfect vehicle. Private limited companies have many benefits. The shareholders and the company have independent existence, and the owner’s liability is limited to the amount of capital invested. By a simple transfer of shares, ownership in the company can be passed between shareholders. If your company transacts less than 5 million dollars in sales, it is exempt from auditing.
    • Subsidiary private limited company
      A foreign company may incorporate a company in Singapore by taking shareholding in Singapore entity. In that case it will be called a subsidiary private limited company. Like in above case shareholders and the company have independent existence, and the owner’s liability is limited to the amount of capital invested. By a simple transfer of shares, ownership in the company can be passed between shareholders. However, audit exemption is not available for subsidiary private limited companies.
      Above two company types are very similar, except that the ownership of company in 2nd case is with a foreign corporate.
    • Singapore branch office
      Singapore branch office is a special type of company which is actually an extension of foreign company in Singapore. As such a branch office is not considered independent from its parent. The liability of branch office extends to the parent entity. The parent company's balance sheet must be lodged with ACRA within two months from the date of its annual general meeting. For large foreign corporates this option can be beneficial in some specific circumstances.
    • Representative office
      Representative office is like a temporary admin office which a foreign company establishes to do market research, admin support for large project etc. A rep office is not allowed to book sales. The registration for representative office is valid for 3 years, and it lapses if not renewed.

Business Incorporation in Europe

The GmbH is the most common form of all new companies incorporated in Germany and can be compared to the French Sàrl, the Spanish SL or the well-known Private Limited in the UK. Most foreign investors incorporate a GmbH in order to have a representative office in Europe which allows them to start and grow their sales operations in both Germany and the rest of Europe.

Process of Incorporation
The German GmbH is successfully established by having the Deed of Formation documents as well as the Articles of Association signed by the director in front of an official German notary. The GmbH can also be represented by further natural persons. Those representatives are required to hold power of attorney, which has to be notarized by the German notary as well.

To complete the process of incorporation, the proposed GmbH must be registered with the local Chamber of Commerce and Industry. For registration the managing director has to sign the application in front of the German notary. The notary certifies the signatures, informs the managing directors about their duties and finally files the application.

Upon registration in the commercial register, the GmbH becomes a legal entity and gains full legal capacity. Furthermore, a newly-incorporated GmbH must also be registered at the local trade office. The GmbH can already start its business without this last registration, however, the limitation of liability of the shareholders will only become effective when the registration is filed.

The time period which needs to be considered for the successful incorporation of the new company in Germany is subject to the individual business objectives and complexity of the defined business model. To provide a rough guideline, approximately three working weeks have to be taken into consideration.

  • Costs of the investment
    To form a GmbH, a minimum share capital of EUR 25,000 is required (paid on a company bank account or made of contribution in kind). To facilitate the formation, at the time of registration it is sufficient for half of the minimum capital, (EUR 12,500), to have been actually and verifiably contributed. According to the newest legislation, a so-called Mini-GmbH can be formed. According to this form of investment, the investor does not have to pay the whole sum of EUR 25,000.00, but the Mini-GmbH will have to retain a part of its profits until the minimum share capital of EUR 25,000.00 is reached. If the Mini-GmbH only has a single shareholder, this shareholder is liable for any unpaid amount of the minimum share capital and must provide security for it.
    The Mini GmbH (UG) is a kind of sub-form of the regular GmbH and has the suffix UG, standing for (haftungsbeschränkte) Unternehmensgesellschaft, or limited liability business corporation and was actually designed to be an entrepreneurial company. The difference between the UG and the GmbH is the amount of share capital required to incorporate this legal form. Here the share capital amounts to at least one Euro for the Mini-GmbH (UG) in comparison to least EUR 25,000 for the incorporation of the German GmbH.
    Assets of any kind are not permitted in a Mini GmbH. The registration at the trade register can only be carried out when the share capital has been paid in full. The Mini-GmbH is a legal body of its own. It must therefore settle all its liabilities from its corporate capital. This form of liability is very important for many shareholders since the fear of personal liability often acts as a deterrent to investment. It must sign with the suffix GmbH (UG) (liability limited) so that possible business partners are made aware of the limited liability.
  • Managing directors
    A GmbH is managed and legally represented by its managing directors (Geschäftsführer). The corporation must have at least one managing director which can be a legal or a natural person. The managing director does not have to be a shareholder or a German resident and may receive an income for carrying out his duties, although this is not required by law. The shareholders have the power to exercise direct influence on the GmbH's management by issuing binding instructions or directions to the managing director. When no binding instructions are given, the managing director is free to act.
  • German corporate bank account
    An active company in Germany must also obtain a German bank account. In order to open a German bank account, you must have a valid passport and a confirmation that Germany is your current place of residence from the local Public Office (Bürgeramt). In many banks, it is possible to have accounts administered in foreign currencies. For account deposits of more than EUR 15,000 cash, banks are required to validate the identity of the depositor.
    Capital can be moved in and out of Germany without any restrictions. However, amounts over EUR 12,500, or equivalent payments with valuables, must be reported to the German Central Bank (Bundesbank). These reports are for statistical purposes only.
    Whether a person needs to report money transfers from abroad depends on whether his or her place of residence is in Germany, nationality is irrelevant. A person or company with a place of residence or business in Germany must report incoming and outgoing payments from abroad for all transactions over EUR 12,500. Alternately, an investor with a place of residence abroad does not have to register a capital transfer to an account in Germany, even if the investor is the account holder.
    If you intend to engage in any commercial activity in Germany the wider European market, it might be a good approach to incorporate a new business in Germany. The different German company forms as follows :
    • German "Mini" - GmbH
    • German Limited - GmbH
    • Joint Stock Company - AG
    • Limited Partnership - KG
    • General Partnership - OHG
    • GmbH & Co. KG
    • Subsidiary & Branch
  • Corporate tax in Germany
    There is a standard corporate tax rate of 25% for both, a company's distributed as well as for it's retained (undistributed) profits.
    On profits that are paid to shareholders a 25% withholding tax also needs to be settled according to the German double taxation treaty.
    The German "half-income system" can be taken into consideration to reduce this burden of double taxation. The "half-income system" allows the shareholder to pay taxes on only 50% of the dividends and profit that were paid by the company. As a result, only 50% of the dividends are subject to withholding taxes while the other half of the dividends remains free of taxes.
    Example :
    For a dividend payout of 100,000 Euros the corporation tax is 25 percent = 25,000 Euros. Of the remaining 75,000 euros, the company transfers withholding tax of 20 percent, i.e. a further 15,000 Euros to the tax authority before the payout is made to the shareholder.
    However, this withholding tax counts as an advance payment for the shareholder's income tax once the dividend has been paid out, and therefore added again when the shareholder's income tax is calculated.
    Of the remaining 75,000 Euros to be assessed after the dividend payment, only 50 percent = 37,500 Euros are subject to income tax, the other 37,500 Euros are tax-free. Assuming the income tax rate to be 35 percent, this would lead to income tax of 13,125 Euros on the taxable half.
    This is then offset against the withholding tax of Euro 15,000 deducted before the dividend payment, resulting in a tax rebate of 1,875 euros from the tax authority. Ultimately, therefore, the shareholder receives an amount of 61,875 euros after the German income tax has been deducted.
  • Trade tax in Germany
    The trade tax on income (Gewerbeertragsteuer) is based on the federal Trade Tax Act, but is levied by the local authorities (Finanzamt). A regional German Finanzamt is allowed to adjust their own trade tax rate depending on the value of its regional industry by using a multiplier (Hebesatz).
    The trade tax deduction on income usually ranges between 7% and 20% of the business income. Trade tax is also deductible as an expense against taxable income within the year of assessment.
    Example :
    As an individual community is allowed to commercialize its area, the trade tax of a major German city would be much higher than the one of a community outside this city.
    For this reason, the trade tax should be taken in consideration when evaluating the right location to set up your business.

Starting Business in Dubai

  • Company Incorporation in Mainland
    • Limited Liability Company (LLC)
      • Most common form of business entity formed in UAE for engaging in commercial activities.
      • Can be formed with a minimum of 2 shareholders and a maximum of 50 shareholders.
      • Liabilities are limited to their shares in the capital of the company.
      • 51% of the share holdings shall be legally held by a UAE national and 49 % can be held by the expatriate person or company.
      • Normally no special permission is required for normal commercial business activities.
      • Business Activities which require special approval and licenses from the authorities
        • Tourism activities
        • Health Care activities,
        • Architectural and engineering consultancy,
        • Shipping , freight forwarding and logistics activities,
        • Educational services
    • How we can help you
      » Guidance on identifying right type of legal structure based on the business activities
      » Arranging local UAE national for forming the Limited Liability Company
      » Preparation of Memorandum of Association & Article of Association of the company
      » Obtaining Incorporation Certificate
      » Assistance in opening of bank accounts
      » Handling other documentation formalities

    • Professional Firms (Civil Companies)
      • Partnership firms set up by qualified foreign investors to carry out their professional practice activities in the UAE.
      • Management consultants, marketing consultants, interior designing etc are regarded as Professional Firms (Civil Companies).
      • Not allowed to do non-commercial activities.
      • The expatriate investor can hold 100% stake in the equity and ownership of such companies.
      • No requirement of 51% local equity.
      • Appointment of a UAE national as a local service agent.
      • The local service agent will have no direct involvement in the business.
      • The local service agent is paid service fees as per agreement.
    • How we can help you
      » Guidance on identifying right type of legal structure based on the business activities.
      » Identifying the local service agent
      » Drafting Partnership agreements
      » Assistance in opening of bank accounts
      » Handling other documentation formalities

    • Branch Or Representative Office Of Foreign Companies
      • UAE Commercial Company Law (13) of 1988 allows foreign companies and corporations to open Branch and Representative Offices to exercise their activities (Licensed) in UAE.
      • Branch office is permitted to exercise the activities (Licensed) of its parent entity
      • Representative offices are only allowed to have promotional activities supplementing the business activity of parent company
      • Representative office cannot enter into business transactions or market products.
      • Approval from the Ministry of Economy is required for obtaining the license for a branch or the representative office of a foreign company from the respective licensing authority of different emirates
    • How we can help you
      » Obtaining approvals and clearances from various authorities.
      » Identifying the local service agent
      » Preparation and drafting of the legal and other documents
      » Assistance in opening of bank accounts
      » Handling other documentation formalities

  • Company Incorporation in Freezones
    • Free Zones are special economic zones set up with the objective of offering tax free, and free customs duty benefits to expatriate investors.
    • Free zones are designed for boosting international business by providing complete ownership to the foreign investors.
    Advantages
    • 100 % foreign ownership
    • 100% repatriation of capital and profits possible
    • No foreign exchange controls
    • State of the art infrastructure
    • No personal or corporate income taxes
    • No customs duties, import/export taxes
    • A one stop shop facility for processing of all documentation including immigration, registration and licensing
    • Shared offices and virtual office facilities are provided by some of the free zones
    • Shared services and synergies with other companies
    • Each Free Zone is managed by separate Independent Free Zone Authority, which is responsible for issuing business permits and licenses, employee visas and regulating the business requirements
    • Provisions pertaining to Commercial Companies Law do not apply to Free Zones
    • A free zone company is expected to do business within the respective free zones or outside UAE. If they intend to do business with entities outside free zone but within UAE main land, then they need to appoint an authorized agent (LLC or any other related entity) or open a branch of a Free Zone Company with the permission from respective departments.
    • Free Zone entities may trade, import/export with entities within the free zone or outside UAE. Free zone entities may buy from UAE, but, in case they need to sell goods to the main land of UAE they have to employ the services of a distributor or agent in the main land who will be liable to pay custom duty as if the purchase from the free zone entity constitutes an import into UAE. A free zone company cannot directly sell or provide any services to entities or other parties outside the free zone but within the mainland of UAE without an authorized agent or distributor in the mainland of UAE.
    • In free zones you can set up following types of companies based on your requirements
      • Free Zone Establishment (FZE)
        • 100% Ownership
        • Minimum Capital Required
        • 1 Shareholder
      • Free Zone Company (FZC)
        • 100% Ownership
        • Minimum Capital Required
        • 2-5 Shareholders
      • Branch of a Local or Foreign Company
        • 100% Ownership
        • No Capital Required
    • Minimum capital is specific to each free zone depending up on the type of entity.
    • The cost of formation of a Free Zone company and cost of office space etc differs from one free zone to another.


    MAJOR FREE ZONES IN UAE
    • Abu Dhabi Free Zones
      • Abu Dhabi Airport
      • Abu Dhabi Ports Company
      • Industrial City of Abu Dhabi
      • Khalifa Port and Industrial Zone (KPIZ)
      • Twofour 54 Media and Production
      • Masdar City
    • Dubai
      • Dubai Airport Free Zone
      • Dubai Silicon Oasis
      • Dubai South
      • Jebel Ali Free Zone
      • Dubai Multi Commodities Center
      • Dubai Creative Clusters Authority
      • Dubai Biotech Research Park
      • Dubai International Financial Centre
      • Dubai Logistics City
      • Dubai Maritime City
      • Dubai Flower Centre
      • Mohammad Bin Rashid Technology Park – Jebel Ali Area
      • Heavy Equipment and Trucks Zone (HETZ)
      • Meydan FZC
      • Dubai Car and Automotive City (DUCAMZ)
      • Dubai Health Care City (DHCC)
      • Dubai Technology and Media
      • International Humanitarian City
      • Dubai Carpet Free Zone
      • International Media and Production Zone
      • Dubai Industrial City (DIC)
      • Dubai Textile Village
      • Dubai International Arbitration Center (DIAC)
      • JLT Free Zone (JLT)
      • Economic Zones World (EZW) – Jafza International, Techno Park, Gazeley, Dubai Auto Zone
      • Dubai Outsource Zone (DOZ)
      • Dubai Media City (DMC)
    • Sharjah Free Zones
      • Sharjah Airport Free Zone(SAIF ZONE)
      • Hamriyah Free Zone
      • Sharjah Media City Free Zone (SHAMS)
    • Ajman Free Zones
      • Ajman Free Zone Authority
    • Umm Al Quwain Free Zones
      • Umm Al Quwain Free Trade Zone
    • Ras Al Khaimah Free Zones
      • RAK Free Zone
      • RAK Investment Authority (RAKIA FZ)
      • RAK Media Free Zone (RAKMFZ)
      • RAK Industrial and Technology Park
      • RAK Maritime City
      • Injaz Training Centre
      • RAK Education Zone
      • RAK Financial Centre
      • RAK Industrial and Technology Park
    • Fujairah Free Zones
      • Fujairah Free Zone
      • Fujairah Creative City
  • How we can help you
    » Advising of choosing the right free zone after evaluating the business activities and the requirement of the prospective investors.
    » Liaison with respective Free zone authorities in obtaining initial approval.
    » Preparation and drafting of legal and other documents for the formation of the company.
    » Assist in identifying the office space and other facilities.
    » Assisting in visa procedures.
    » Assistance in obtaining the approvals, clearances and license from the Free zone authorities.
    » Providing the cost structure and the documents required to form a company in different Free Zones according to the proposed activities of the company.

  • Company Incorporation in Offshores

    UAE is one of the well known jurisdictions in the world for incorporating offshore companies as “tax-free” business territory Especially because one can avoid the cumbersome process of having the off shore incorporation company documents attested by various embassies and Ministries of Foreign Affairs. UAE offshore incorporation helps to run the business or asset ownership in the Middle East. 100% foreign ownership is permitted.

    Benefits
    • 100% Foreign Ownership
    • 100% repatriation of the profits and capital
    • Exemption from Corporate Taxes
    • Simple Registration Procedures
    • Cost Efficiency
    • Low Operational Costs
    • No Requirement of Minimum Share Capital
    • Limited Liability
    • Transferable Shares

    Restrictions
    • Cannot carry on business with Persons resident in UAE
    • Cannot Own an interest in real property situated in UAE, other than a lease referred to by or as approved by authority.
    • Carry on banking business
    • Carry on business as an insurance or reinsurance company, insurance agent or insurance broker or
    • Carry on any other business which may, by regulation made by the authority, be prohibited by the Authority

    Three Free Zones in UAE for Offshore Formations
    • Jebel Ali Free Zone Authority (JAFZA)
    • RAK Investment Authority (RAKIA)
    • RAK Free Trade Zone
  • How we can help you
    » Assisting in acquiring registered office with P.O. Box.
    » Preparation of Memorandum of Association, Articles of Association and other legal documents.
    » Liaison with the authorities and completion of incorporation procedures.
    » Assisting in opening the bank accounts.
    » Follow up services in obtaining attested documents and certificates.