India has been rapidly developing in various industrial sectors, building itself a reputation as an international investment hub with promising returns. This remarkable transformation has become possible primarily due to the tremendous infrastructure improvement and growing consumer demand, making India a desirable destination for business expansion.
However, international organisations must abide by regulatory compliance requirements to conduct business in India. These regulations cover various areas, including FDI mandatory compliance requirements, organisational policies, registration and more.
Below is a summary of the most important regulatory requirements that international investors should keep in mind when devising their market entry plan.
Key takeaways
- All foreign enterprises must maintain the transparency of all organisational documents, data, and accounts according to the Companies Act of 2013
- All foreign businesses investing in the nation must abide by these to safeguard workers’ rights and ensure labour
- All foreign companies must follow some significant corporate regulatory compliance requirements after starting their operations in Indian industrial sectors as outlined by the Companies Act of 2013 and the Companies (Registration of Foreign Companies) Rules of 2014
Organisational transparency
All foreign enterprises must maintain the transparency of all organisational documents, data, and accounts according to the Companies Act of 2013.
Therefore, foreign investors must strictly abide by all of the act’s provisions, including Section 3, which deals with the formation of the company, Section 23, which deals with ensuring proper details for public offerings, Section 128, which deals with the maintenance of the books of accounts, and Section 139, which deals with the appointment of the auditor, etc.
Workforce welfare
The Indian government has established rules under several pieces of legislation that all foreign businesses investing in the nation must abide by to safeguard workers’ rights and ensure labour welfare.
These include the Maternity Benefits Act (1961), the Industrial Disputes Act (1947), the Trade Union Act (1926), the Workmen’s Compensation Act (1923), and others.
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Environment protection compliance
Foreign businesses must also abide by all environmental regulations put in place by the Indian government to reduce air and water pollution. These laws include the Forest (Conservation) Act (1980), the Indian Forest Act (1927), the Environment Protection Act (1986), the Storage and Import of Hazardous Chemical Rules (1989), and others.
FDI & regulatory compliance under the FEMA act
Regulatory Compliance under the FEMA act
FEMA (Foreign Exchange Management Act) was introduced by the Indian Government to ensure a seamless FDI transaction and maintenance and attract foreign investment in the country.
Some of the mandatory compliances under FEMA include:
Annual Return on Foreign assets and Liabilities
An FLA, or Foreign Liabilities and Assets Return, is required from any business invested in the Indian industrial sector. Such returns must be filed annually.
Report on Annual Performance
All resident enterprises in India that have undertaken an ODI (Overseas Direct Investment) are required to file an annual performance report on or before December 31st. This annual performance report must be provided in the form of AD bank regarding the Joint Ventures or ODI Part II to the Authorised Dealer or Wholly Owned Subsidiaries outside India.
External Commercial Borrowings (ECB)
All qualified entities in India taking on debt from non-resident entities must report all ECB transactions to the RBI. Every month, the ECB reports should be submitted via an AD Category 1 Bank using the “ECB 2 Return” form.
Establishment of business and financial statement forms
All foreign companies must follow some important corporate regulatory compliance requirements after starting their operations in Indian industrial sectors as outlined by the Companies Act of 2013 and the Companies (Registration of Foreign Companies) Rules of 2014. These consist of the following:
Business India Report Establishment (E-FORM FC-1)
According to the regulation, all foreign corporations with Indian registrations must submit an E-Form FC-1 to the Registrar of Companies within 30 days of their founding. Additionally, the E-Form FC1 must contain all the paperwork mandated by section 380’s sub-section (1).
In accordance with FEMA regulations, the application must also be supported by a certified copy of the RBI’s approval.
Report on Financial Statements (E-FORM FC-3)
Every foreign business investing in India must prepare and submit financial statements in E-Form FC-3 to the Registrar of Companies within six months of the end of the fiscal year. The foreign companies must also prepare and submit a list of places of business in India established within the same form. Additionally, all financial statements must adhere to Schedule III of the 2013 Companies Act.
How we can help keep your company compliant
As mentioned above, foreign investors must comply with various regulatory requirements while investing in the Indian industrial sector. As a matter of fact, understanding the different requirements is an essential aspect of developing an entry strategy for an Indian market.
To avoid delays and complications when entering and operating in India, businesses are recommended to seek the assistance of an experienced corporate service advisor like Acclime.
At Acclime India, we have an extensive understanding of the local legal requirements and can help you advance your business in India easier and faster.
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