But Foreign Companies Need to Understand How Business Really Works Here
Guest Author
India offers foreign companies enormous commercial opportunity. But in my experience, the companies that succeed here are not simply those that identify the right market, partner or acquisition target. They are the ones that structure their entry carefully, retain visibility over how the business is run and understand where global governance standards must be adapted to local realities.
That is the central lesson I have drawn from working with foreign companies, investors, promoters and professional advisers entering India, expanding operations, acquiring businesses, establishing joint ventures or dealing with problems after operations had begun.
India is rarely difficult because opportunity is lacking. The harder part is structuring the journey correctly.
Many foreign businesses arrive with genuine commercial intent, strong governance standards and experienced global teams. Yet gaps can emerge between headquarters and the Indian operation. A local partner may interpret rules differently, a consultant may describe a practice as “normal”, or a commercial team may move ahead while documentation follows later.
That is where problems begin—and where the practical value of careful planning becomes clear.
The issues discussed below are not reasons to approach India with fear. They are the areas where foreign companies can preserve commercial momentum while avoiding preventable disputes, regulatory complications and governance failures. India offers one of the most significant long-term opportunities available to international businesses. But it rewards companies that understand the market seriously and retain control over how their business is conducted.
1. The Business Model and Legal Structure Must Speak the Same Language
I often see the commercial opportunity identified before the legal structure is properly understood.
The business team has found the customer, partner, factory, acquisition target or technology opportunity. Everyone is focused on closing the transaction. Only later do questions arise about foreign ownership, control, licences, investment conditions or repatriation.
To me, this is a sequencing problem.
A legal structure is not merely a wrapper around a commercial transaction. It determines what the company can actually do. A legitimate commercial objective can still be placed in a structure designed for a different activity, with the problem becoming visible only during a funding round, regulatory filing, acquisition, restructuring or exit.
The smoother India journeys are usually those where lawyers and commercial teams speak before the investment is made, not afterwards. That does not mean allowing law to slow business down. It means building the business on a platform capable of supporting its long-term objectives.
2. Foreign Exchange Compliance Can Become a Transaction Problem
Foreign exchange compliance is sometimes treated as paperwork that can be completed after the main transaction.
Capital arrives, shares are issued and operations begin. Then, years later, a new funding round or proposed sale exposes old share issuances, valuation issues, delayed filings or reporting gaps.
What looked administrative at entry becomes commercially important when an investor, buyer or lender is ready to commit substantial money.
For a business person, once money has moved and ownership has changed, the transaction may appear complete. Legally, however, it may continue until the regulatory trail is properly closed.
I therefore see foreign exchange compliance as part of the transaction itself. Historic gaps often surface at the worst possible time—when another investor or buyer is already involved.
3. The Local Partner Can Be the Greatest Strength or Risk
A good Indian partner can bring market knowledge, relationships, operating capability, distribution networks, regulatory familiarity and speed. In several successful transactions, the local partner was central to building the business.
But I have also seen foreign shareholders depend on a partner for almost everything—government permissions, consultants, banking, vendors and operational decisions—until they lose visibility into how the business is actually run.
Commercial trust and corporate governance must remain separate.
You can trust your partner and still insist on transparency, proper records, approval mechanisms and accountability. Problems often begin when someone says, “This is how business works in India; you do not need to get involved.”
Foreign investors do not need to micromanage India. But they should understand how material business is generated, how key approvals are obtained and how significant money is spent.
4. “This Is Normal in India” Is Not a Legal Defence
I have often heard variations of “This is standard practice here.” It may concern an undocumented payment, a consultant, an expense that does not match its description or the way a government interaction is handled.
The commercial team may accept it because the amount is small compared with the project. But the size of the payment is not always the point. Its character matters.
A small transaction can create a disproportionately large problem if it involves corruption, misrepresentation or falsification. For European companies, the conduct may also be examined under internal and home-country compliance standards.
Phrases such as “everybody does it”, “this cannot be documented” or “headquarters does not need to know” do not necessarily prove wrongdoing. But they should prompt further questions.
5. A Subsidiary Does Not Create an Invisible Wall Around Management
Once an Indian subsidiary is incorporated, senior management abroad may begin treating it as a separate legal box. Separate legal personality is fundamental, but practical investigations are more complicated.
When something goes wrong, questions may include: Who approved the transaction? Who appointed the consultant? Who received the reports? Who controlled the budget? Were concerns raised? Did anyone ignore warning signs?
The objective is not for every foreign director to manage daily Indian operations. But material decisions should leave a clear trail of responsibility. Good governance allows people to demonstrate what they knew, approved and did not approve—clarity that becomes valuable when relationships deteriorate or investigations begin.
6. The Documents and Money Trail Should Tell the Same Story
If the documents say one thing and the money trail says another, someone will eventually ask why.
A consultancy agreement should correspond with identifiable work. A marketing payment should relate to actual activity. A reimbursement should have an underlying expense. A commission arrangement should not require everyone to avoid describing its purpose.
Questionable documentation may not seem problematic while relationships are good. It becomes important during a shareholder dispute, audit, investigation or acquisition due diligence, when the reviewer sees only the records—not the informal understanding that existed years earlier.
Companies usually face greater difficulty when they explain a transaction retrospectively instead of documenting it properly when it occurs.
7. Commercial Disputes Can Acquire a Criminal Dimension
A joint venture disagreement may begin as a shareholder dispute. An investment dispute may concern the use of funds. A distributor dispute may follow termination of a contract.
In some cases, however, allegations develop around cheating, misuse of entrusted money, falsification, misrepresentation or diversion of assets.
I do not believe every commercial breach should be criminalised. Businesses fail, timelines are missed and partners disagree. A genuine contractual failure is not the same as dishonest conduct.
The difficulty arises where facts suggest that representations were knowingly false, money was intentionally used for another purpose or documents were created to conceal what happened.
The best protection in such a dispute is often created years earlier through clear rights, accurate records and disciplined conduct.
8. Due Diligence Should Ask How the Company Makes Money
A foreign investor may receive an excellent data room containing financial statements, licences, customer agreements, intellectual property documents and corporate records. Everything may look organised.
But useful due diligence must also ask how the business operates in practice.
How are major contracts obtained? Who are the key intermediaries? Why are particular consultants paid? Are related-party vendors involved? Does the business depend heavily on one regulatory relationship? Are there unexplained cash flows or repeated promoter disputes?
A financially successful company is not automatically well governed. The quality of the revenue matters, but so does the method through which it is generated.
9. A Joint Venture Agreement Must Work Outside the Conference Room
Joint venture negotiations often focus heavily on shareholding and valuation, while giving less attention to how the company will operate after signing.
Who controls bank accounts? Who hires key employees? Can a partner appoint a related-party vendor? Can the other shareholder stop a transaction? Who controls intellectual property? Who approves litigation? What happens if money is believed to be misused?
These questions matter after the honeymoon ends.
A shareholder agreement should function like an operating constitution. The best contracts do not assume everyone will always agree; they continue to work when the parties stop agreeing. That is especially important where cross-border cultural and commercial differences amplify ordinary disagreements.
10. Global Compliance Standards Need an Indian Operating Layer
Large European and international organisations often have sophisticated global compliance systems. That is a major advantage, but global policies can remain too distant from the Indian operation.
The concerns of a manufacturing facility in Maharashtra differ from those of a technology platform in Bengaluru. Consumer, financial and infrastructure businesses also face different authorities and risks.
Global compliance should therefore be the foundation, not the complete solution. The Indian business needs an operating layer reflecting its activities, states, licences, employees, vendors, government interfaces and regulatory exposure.
This is not about creating bureaucracy. It is about making global policy usable locally.
11. Internal Complaints Are Often Early Warning Systems
An employee may question a vendor arrangement, a finance person may challenge a payment, or someone may raise concerns about how a licence was obtained.
Management may view the issue as a personality conflict or operational disagreement. Sometimes that may be correct. But complaints involving money, compliance, false records, bribery or conflicts of interest deserve independent examination before being dismissed.
Many serious disputes have early warning signs. A company that identifies a problem early usually has more options than one that first learns about it through an investigating authority.
12. Intellectual Property Should Not Depend on Relationships
Foreign technology, manufacturing and consumer companies often bring valuable intellectual property into India. During the early stages of a partnership, the focus is usually on growth: brands are used, technology is shared, customer information is generated and digital assets are created.
When the relationship ends, questions arise about local adaptations, social media accounts, customer databases, domain names, technology improvements and registrations.
Intellectual property arrangements should be clearest when relationships are strongest. Waiting until a relationship deteriorates is too late to determine what the parties originally intended.
13. Signing a Government Filing Is Not Routine Administration
Foreign companies often rely on consultants for regulatory filings, particularly in an unfamiliar jurisdiction. But an executive may sign a declaration without fully understanding it because “the consultant prepared it”.
The regulator sees the company’s representation, not merely the consultant’s draft.
Material filings therefore require internal ownership. The business team should understand the factual statement, the consultant should assist with the process and the lawyer should interpret the requirement where necessary. Responsibility cannot disappear between them.
14. Exiting India Requires as Much Thought as Entering
Most India strategies begin with market entry, not exit. Yet a sound entry structure should anticipate how the investment may eventually be sold, repatriated, reorganised or closed.
I have seen commercial transactions completed while guarantees, shareholder loans, old directorships, intellectual property arrangements, unresolved filings or disputes remained.
Selling a business is not always the same as completing the legal exit. Historical connections can continue creating obligations long after management believes the India chapter has ended.
15. The Best Business Can Explain Its Decisions Years Later
A well-run company should be able to explain an important decision several years after it was taken.
Why was this consultant appointed? Why was this payment made? Who approved the partner? What was the commercial rationale? What records supported the decision?
If those answers exist clearly, the organisation is usually in a stronger position.
I sometimes describe this as building an investigation-ready organisation—not because every company should expect an investigation, but because governance should be strong enough that scrutiny does not change the story of the transaction.
India Does Not Need to Be Approached With Fear
I do not see these issues as reasons for foreign companies to hesitate about India. The opportunity is significant, and the market deserves serious attention.
The foreign companies best positioned here are not necessarily those that understand every regulation themselves. They are the ones that know what they do not know, choose partners carefully, ask uncomfortable questions early, retain visibility over material transactions and maintain proper records.
Most importantly, they do not assume something is acceptable merely because it is described as locally common.
India is becoming increasingly important to the global strategies of European and international businesses. That makes strong governance more relevant, not less.
My view can be expressed simply:
Do not lower your governance standards when you enter India. Bring them with you, understand India deeply, and build the local business around both.
The objective is not merely to enter India quickly. It is to build an Indian business that remains commercially strong, legally defensible and institutionally credible long after the first investment.
The recently signed Free Trade Agreement between the European Union and India adds another reason for optimism. A meaningful EU–India trade agreement could deepen market access, reduce cross-border friction, encourage investment, strengthen supply-chain cooperation and create opportunities for European companies in India and Indian companies in Europe.
If that framework delivers as many expect, businesses combining sound governance with a genuine understanding of both markets will be especially well placed to benefit. In my view, the future of EU–India commercial relations is not only about managing risk; it is about building a larger, more connected and more confident business relationship.
About The Author
Adv. Rahul Hingmire is Co-Founder & Managing Partner, Vis Legis Law Practice, Advocate. He is the Chairman – Arbitration & ADR Committee at Maharashtra Chamber of Commerce, Industry & Agriculture (MACCIA). He is the Author of “India, Restructured”, a practical playbook for converting the EU – India FTA into real business outcomes.
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