Ownership structures
May a foreign supplier establish its own entity to import and distribute its products in your Jurisdiction?
Yes, a foreign supplier can establish an entity in India for import and distribution, subject
to compliance with the foreign exchange control regulations, namely the Foreign Exchange
Management Act 1991 and accompanying regulations and the prevailing Foreign Direct
Investment Policy (the FDI Policy).
The FDI Policy prescribes, among other things, the types of business entities that may be
established by a foreign party, the cap on foreign investments and the minimum investments
that should be made by foreign parties. Foreign suppliers can acquire up to a 100 per cent
stake in an Indian entity engaged in a wholesale cash-and-carry business, single-brand retail
trading (SBRT), or an e-commerce marketplace platform business. However, foreign parties
can acquire up to a 51 per cent stake, with government approval, in an Indian entity engaged
in multi-brand retail trading (MBRT). The FDI Policy also prescribes several other compliance
obligations for Indian entities with foreign ownership engaged in SBRT, MBRT, wholesale
cash-and-carry business and e-commerce market platform business. For example, entities
engaged in MBRT should ensure that at least 30 per cent of the value of products purchased
should be sourced from India. Similarly, minimum sourcing conditions apply to the entities
that are engaged in SBRT and where foreign investment is more than 51 per cent.
