India, one of the major and fastest growing economies of the world, offers ample opportunities to foreign companies and investors for establishing their respective business in India. These opportunities are available through setting up diverse business or liaison offices anywhere in entire India, including the wholly-owned subsidiaries, joint ventures with Indian companies, limited liability partnerships, and entities like, the liaison offices (LOs), branch offices (BOs), and project offices (POs). The establishment, governance, and regulation of these entities set up in India by foreign people or entities are made as per the rules and regulations given in the FDI Policies of the Central and State Governments, the RBI Act of 1934, the Indian Companies Act of 2013, the FEMA Act of 1999, and so on.
On this web-page, we are presenting very informative and useful information regarding establishment of the Liaison Office (LO), Branch Office (BO), and Project Office (PO) in India by foreign people and companies. For such information related with all other types of entities to be set up in India by the foreign people/companies, please refer to other web-pages of this globally prominent legal website of India.
Except the proprietary concerns, and people/companies belonging to certain countries, the foreign companies in general can easily set up their liaison offices, branch offices, or project offices in India, after getting prior and proper permission from the Reserve Bank of India. The section below, gives exclusive information about how to set up a liaison office, branch office, or project office anywhere in India by people or companies located in countries abroad.
Here it must be noted that, people/companies located in Pakistan, Bangladesh, China, Sri Lanka, Iran, Afghanistan, Hong Kong, and Macau, require special permission from RBI for opening any of the three above-mentioned offices in India. Again, entities pertaining to these countries are not allowed to acquire immovable property anywhere in India for establishing any of these offices; they can lease the necessary property for a maximum permissible period of five years. The entities situated in Nepal can open only liaison offices in India.
How can Foreign Companies Open Liaison/Branch Offices in India?
Any of these offices are established in India after obtaining proper permission from the RBI beforehand, and if need be, also from the Ministry of Finance, Government of India. Only after this mandatory permission from RBI, requisite processes with the relevant Registrar of Companies (ROC) will take place. First of all, for setting up any of these three categories of entities anywhere in India, the concerned foreign companies/entities have to submit the completed application in Form FNC, along with all prescribed documents through an Authorized Dealer Category-1 Bank, to the General Manager, Foreign Exchange Department, Central Office Cell, RBI, New Delhi Regional Office – 110 001. After getting the completed form FNC, RBI will consider and analyze the forwarded application on the following bases ---- automatic or government route; track record of the applicant foreign company in its home country during three or five preceding financial years; the financial position of the applicant company, it should have a net worth of at least US$ 50,000 or more; the proposed activities of the applicant company in India; and the existing trade relations of the foreign country to which the applicant company belongs.
The requirements to be strictly met for getting permission from RBI vary depending upon the type of the proposed entity. The following are the general conditions to be satisfied by the applicant foreign companies/entities to set up the desired liaison office, branch office, or the project office anywhere in India:
- The liaison office/branch office/project office will have to open a non-interest bearing INR current account with Category-1 Bank in India.
- Foreign entities/companies located in countries other than the above-specified countries, can acquire immovable property anywhere in India only for the purpose of carrying out their activities permitted by the RBI, and not for giving the same on leasing or renting out.
- After approval to the application, the RBI will allot a Unique Identification Number (UIN) to the applicant company. Then, information about such an approval will be forwarded to the relevant ROC and the Director General of Police (DGP) of the State concerned. An application for getting the PAN is also to be made.
- After becoming functional, a LO/BO/PO has to submit a report in compliance with the information required under Annex provided in AP DIR.Circular.35 dated September 25, 2012, to the DGP within five working days.
- The liaison/branch office will be required to submit the copy of the Annual Activity Certificate (AAC) to the Director General of Income Tax (International Taxation) [DGIT (International Taxation)], accompanies by well-audited financial statements including the receipt and payment account, and also to the DGP of the concerned State. This is usually to be submitted at the end of March 31 every year, along with the audited Balance Sheet on or before September 30 of that year.
- Powers relating to transfer of assets of Liaison / Branch Office/Project Office have been delegated to AD Category-1 Banks subject to compliance with certain stipulations as mentioned in A.P.DIR (Series Circular) No. 142 dated June 12, 2014.
To know more about of any of these entities, or about our comprehensive advisory and legal services for establishing these offices anywhere in India, please contact us at: +91-8800-100-284; or just cast a mail to: companies@globaljurix.com.