The Indian government has a very open and transparent policy for setting up of a Branch office in India or a Liaison office of a foreign corporation. Through a general notification, the RBI has listed the permitted activities for which branch office (BO) or a Liaison Office (LO) can be opened under the automatic route. However, in case the proposed activities are not covered within the permitted list then the application for the establishment of branch office or liaison office needs to be made under the approval route directly to the RBI. A liaison office can be upgraded as a Branch Office subject to the prior approval of the RBI.
List of permitted activities for a Branch Office of a Foreign Corporation.
- Export / Import of Goods
- Professional or Consultancy Services, subject to sectoral regulators policy or approval. Please note that Hon’ble Supreme Court of India vide its order dated July 4, 2012, and again on September 14, 2015, has barred foreign law firms from opening a branch office.
- To carry on research work for the areas where the parent company is engaged
- To engage in activities which promote technical or financial collaboration between Indian companies and parent or overseas group company
- To act as a buying or selling agent in India or to represent the parent/group company
- To engage in any business or technical activities for software development or for the rendering of any service related information technology.
- To provide technical support services to the clients in India for the goods or services supplied by parent/group company
- To act as an authorised representative for a foreign shipping or airline company in India.
List of permitted activities for a Liaison Office of a Foreign Corporation
- Representing the parent company/group companies in India
- Promoting export/import from/to India
- Promoting technical/financial collaboration between parent/group companies and companies in India.
THE PROCEDURE TO OPEN A BRANCH OFFICE OR A LIAISON OFFICE OF A FOREIGN COMPANY OR GROUP COMPANY CAN BE SUMMARISED UNDER FIVE BROAD STAGES
i. Documentation: List of documents required to open a BO/LO is provided below, We recommend that the soft copies be first shared to us for our verification and drafting before signature and attestation. The mode of attestation is also explained in detail in the relevant section. All documents which are required to be filed with RBI of the foreign company like their certificate of incorporation, board resolutions, the MOA and articles of the foreign company and the documents of the authorised signatory of the foreign company need to be legalised either through Indian Embassy or to be apostilled as per Hague convention.
ii. Application to RBI: After complete documentation is done, the application for cases falling under the automatic route is filed in FNC Form with the category AD-1 Banker for further process of the application as per the guidelines of RBI. The AD Bank plays a crucial role as all the communication to the RBI has to be routed through them. We have an excellent relationship with many banks in India, which certainly help in applying to the RBI and Follow Up. After FNC Form is filed with the AD Bank, a request for verification of documents is sent to the banker of the foreign company. This process is also known as swift based verification. We take care of the entire procedure on our own, however, in some cases, we may require your assistance for speedy swift based KYC confirmation from the banker of the parent company.
iii. Registration with ROC: After the permission to open a branch office is received from the RBI, the next stage is to register the parent company as a foreign company in India, by filing an application in form FC-1 within 30 days to the ROC. In case there are Indian directors the DIN number of such director is needed, and the digital signature of the authorised signatory is required to e-file statutory forms with the ROC having jurisdiction based on the registered office of the branch office in India.
iv. Registration with Local Police: For a foreign company to operate in India, the same need to get itself registered with the local police in India. The application for police verification must be accompanied with the KYC documents of the parent company, registered address proof in India and the KYC of its directors and authorised signatories of the company.
v. Tax and Location-based registrations: After the completion of all the four stages above the branch office need to apply for Pan Card, TAN Number, GST Registration. There are other registrations or licenses which may be required based on the location of the registered office of the branch office.
Branch Office Registration
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List of Documents Required for Registration of BO/LO in India
i. Copy of Certificate of Incorporation / Registration attested by the Notary Public in the country of registration Note : If the original Certificate are in a language other than in English, the same may be translated into English, attested by notary public in the country of registration and cross verified/attested by the Indian Embassy/Consulate in the home country OR Translated Document can also be Apostille under the Hague Convention
ii. Declaration from the applicant on eligibility under Foreign Direct Investment Regulations (Networth and Profitability Track Record) & Source of Funds for the proposed branch office/liaison office in India duly signed by the authorised representative of the parent company.
iii. Duly attested copy of the Board Resolution approving the opening of the branch office/Liasion Office in India and Authorisation to represent the parent company in favour of any person who would be visiting India for signing. However in case, the AR does not intend to travel to India, we would be charging an additional fee as facilitation charges on the case to case basis.
iv. Copy of Memorandum of Association (MOA) and Articles of Association (AOA) duly attested by the Notary Public.
- If the MOA and AOA are in a language other than in English, the same may be translated into English, attested by a notary public in the country of registration, and cross-verified/ attested by the Indian Embassy/ Consulate in the home country OR Translated Document can also be Apostille under the Hague Convention
- In case MOA/AOA is not mandatory as per the law of the country then the same needs to be declared by the client on its letterhead.
- Additionally required for the parent entity in case a comfort letter is being taken from the parent company due to the deficiency in meeting the eligibility requirement of the applicant company.
v. Form FNC: Completely filled and signed by the duly appointed Authorised Signatory of the parent company (Foreign Entity)
vi. Latest Audited Balance sheet of the applicant company attested by Certified Public Accountant (CPA) (Please refer Note – points i), ii) iii) and iv) below)
- If the audited financial statement is in a language other than in English, the same may be translated into English, attested by a notary public in the country of registration and cross verified/attested by the Indian Embassy/Consulate in the home country OR Translated audited financial statement can also be Apostille under the Hague Convention
- If the audited financial statements of the applicant company is in consolidated form (i.e. including subsidiary/ group companies) then CPA certificate providing standalone net worth and profit figures of the applicant company only is required to establish the eligibility criteria applicable for the BO/ LO
- If the applicants’ home country laws/regulations do not insist on audit of accounts, an Account Statement certified by a CPA or any Registered Accounts Practitioner by any name, clearly showing the net worth should be submitted.
- Audited financial statement requirement: last five preceding years audited financial statement
vii. Applicants that do not satisfy the eligibility criteria (Networth and Profitability Requirement) can submit a Letter of Comfort in the prescribed format from their parent company subject to the condition that the parent company satisfies the eligibility criteria required as per regulations.
viii. Banker’s Report from the applicant’s banker in the host country/country of registration showing the number of years the applicant has had banking relations with that Bank.
Note: In the case where a foreign entity’s parent company has given a comfort letter then similar information is required for the parent company.
The eligibility criteria to register a Branch Office of Liasion Office in India is as under
- Branch Office: The foreign parent company must have a profitable track record of five years in a row with a net worth of more than $ 1,00,000/- duly supported by the financial statement.
- Liaison Office: The foreign parent company must have a profitable track record of three years in a row & the net worth must be more than $ 50,000 attested by their auditors.