100% Subsidiary of a Foreign Company
Most foreign companies that are interested in setting up their operations in India, do so by the way of a wholly owned subsidiary. The subsidiary will have to be ‘incorporated’ as a company and will have to obtain certain registrations with the government authorities.
A branch would mean an establishment carrying on substantially the same activity, as its Head Office. Foreign companies intending to open a Branch Office (BO) in India need to obtain prior permission of RBI which would encompass even approval to the scope of activities that are intended to be carried out in India as per the guidelines laid down by the RBI.
A Liaison Office (LO) is in the nature of a representative office set up primarily to explore and understand the business and investment climate. A LO is not permitted to undertake any commercial / trading / industrial activity, directly or indirectly, and is required to maintain itself out of inward remittances received from abroad through normal banking channels.
Foreign companies can establish Project Offices (POs) in India specifically for the purpose of execution of specific projects. A PO is similar to a branch office opened for the limited purpose of executing a particular contract.