Setup a Foreign Office in India in 2022
Since the time of the privatization of markets, foreign firms have been established in India. There are many reasons why an abroad office has been launched in India. One of the reasons could be to expand business presence. Specific regulations have been issued by the Government of India for setting up Indian offices.
Foreign Exchange Management (FEMA) enables foreign companies to stabilize a branch office, liaison, or investment office in India. The requirements of the foreign company will determine the details required for setting up an Indian office.
Eligibility Criteria for forming of Foreign Office in India
To establish a Foreign Office in India, the criteria for the establishment of a Foreign office vary.
For a Branch Office, the requirements for formation of Foreign Office are:
- A business must be existing overseas for the establishment of an office branch in India;
- The company’s track record, as well as its profit and track record over the previous five years, are taken into account;
- The net price of the business must be higher than $100000 USD or equal.
- Branch Office Activities are not limited;
- Any kind of work is possible to carry out through branches offices.
For a Liaison Office, requirements for foreign offce formation are:
- Liaison Office shouldn’t carry any commercial effort.
- A foreign corporation should establish the Liaison Office in India;
- The orbit certificate of the company, the preliminary three years’ income, and track record are taken into deliberation as follows:
- The net price of the enterprise shouldn’t be bigger than $50000 USD or the equivalent.
For a Project Office- Formation of Foreign Office
- Project Office should simply be prep if the abroad corporation was granted the contract.
- Project Office should be assigned by an abroad corporation in India;
- A Foreign parent company has to finance the company;
- Global Financial and Monetary Agencies may also offer to reserve.
- The Regulation requires specific candidates from certain countries to register with the authority before opening an office branch, liaison office, or project office.
Read More: Investment In A Foreign Company By Indians
Steps for forming of Foreign Office in India
- The applicant must ensure that they meet the criteria for being eligible to establish a Branch Office or Liaison Office.
- If this is completed after which the applicant must apply.
- The RBI must apply.
- The application for the RBI is made through an authorized dealer.
- The candidates need to be submitted via FORM- FNC. (Annex B of the Regulations)
When applying to set up a Branch Office/ Liaison Office in India, the necessary documents must be supplied by the firm;
- Certificate of Incorporation of the Firm. The reports to be offered must be written in English;
- Memorandum of Association;
- Articles of Association;
- The Balance Sheet of the business that was audited and
- Power of Attorney in favour of the person who is signing Form FNC if the person in charge of the foreign company isn’t going to complete the FNC.
- Once the bank is authorized to receive these documents, the bank reviews the application to determine whether applicants meet the eligibility criteria. They will moreover perform background tests on the background that the endorser.
- The source of the funds will be scrutinized to determine when it comes via a proper bank channel for the business.
- It is mandatory to have a separate UIN for each liaison office or branch office.
- The Reserve Bank of India will pass on the UIN together with the replica of the original to a valid dealer. A legitimate dealer is required to then provide the UIN to the person who is applying to open an office. Branch Office /Liaison office.
- The RBI will keep a record of all Branch Offices/Liaison Offices established in India.
- The establishment of an office branch or liaison office could take up to 45 days.
- If approval is given by the Branch Office/ Liaison Office, the headquarters should be opened within 6 months.
Documents Required for forming of Foreign Office in India
The required documents for setting up an overseas office in India are the same as those for branches, liaison offices as well as project offices.
The following documents are needed to establish an office of foreign origin in India.
- Certificate of Incorporation of the Firms. The copies to be delivered should be written in English.
- Memorandum of Association.
- Articles of Association.
- Power of Attorney in favour of the person who is signing Form FNC in the event that the person in charge of the foreign company isn’t going to fill out the Form FNC.
- The Annual Activity Certificate (AAC): This document, which is included in Annexure D on Form FNC must be filed by 31 March.
- In addition, the AAC must be sent in writing to RBI.
- The paper must be delivered within 30 days of the day that you start the office.
- The eForm-EC-2 that contains information pertaining to any kind of alteration should be sent at the time of application to the Registrar of Companies within 30 days of the alteration.
Types of Founding a Foreign Office in India
These types of offices can be established in India by a resident or foreign company:
Branch office (BO)
The type of office that is established will depend on the needs of the abroad firm. A branch office in India is a good option if the abroad firm plans to extend its production in India.
Branch offices can do anything they want. Branch offices can do all kinds of activities. This includes receiving remittances from foreign companies. If the foreign office wants to increase its geographic presence, it can open an Indian branch office.
Liaison Office(LO).
Liaison is the act of coordinating and improving relationships between entities or organizations. The liaison office operates as a juncture for foreign firms.
To perform operations, the abroad office can transfer internal money to the liaison office. Marketing, advertising actions, and characterizing the foreign ministry in India are all permitted for liaison offices. The Indian foreign office’s liaison office is their point of contact.
Project Office (PO)
An abroad firm can also establish an enterprise office in India. However, establishing a project headquarters in India for an abroad company, there are certain conditions.
- An agreement must be permitted by an Indian firm for a foreign firm.
- The contract must be on the approved activities list.
- Remittances of aboard reserves must be used to finance the project in India.
- A financial or monetary authority can also finance the project, such as the International Monetary Fund or the World Bank.
Catalog of Activities Authorized for Setting up of Foreign Office in India
Forming of Foreign Office in India
- Receiving and sending of Products and Services;
- Consultancy & Proficient Employment;
- Analysis and Advancement function which is permitted through the parent firm;
- Behaving as a dealer for the parent firm;
- Improvement of Software for the Parent firm;
- Technical Support for the Aboard Parent firm; and
- Transportation Firm.
Liaison Office- Authorized Activities- Formation of Foreign Office in India
- Characterizing the company group in India;
- Publicity and Advertising actions for the Foreign firm in India;
- Alliance Activities- like Economical & Technological alliance; and
- Method of Transmission Between both the abroad Parent firm and the Indian Governments.
Regulates the structure of the Foreign Office in India
The Reserve Bank of India is the primary regulatory authority for the establishment of foreign offices in India. The Authorized Dealer (AD) or Banks (Category-I) will act for the person applying to establish a foreign Office in India. The law that governs the foreign office within India is The Foreign Exchange Management Act 1999. The RBI has the authority to change regulations at any time.
In expansion, distinct reporting regulations must be adhered to:
- MCA- Ministry of Corporate Affairs;
- Income Tax authorities;
- Insurance Regulatory and Development Authority of India;
- Registrar of Companies;
- Ministry of Finance; and
- Revenue Department.
Permission from RBI for Forming of Abroad Office in India
Before establishing a branch office, liaison office, or project office, the RBI must approve the specific applications.
- If the application comes by a person from Pakistan, Bangladesh, China, Iran, Nepal, and Afghanistan the prior approval must be obtained to be obtained from RBI.
- If the industries that applicants are interested in becoming involved in our Defence Atomic Energy, Private Security, and Broadcasting.
- The applicant can be an NGO (Non-Governmental Organization) or a business that engages in non-governmental activities.
Fact Period- Establishment of Foreign Office in India
- Project Office- The project office will remain open until the program is completed. That means that if the project is finished and the office is closed, it will be closed.
- Liaison Office- Expires & Revival of enrollment is due after 3 years.
- Branch Office- Expires and Revival of registrations is required after three years.
Conclusion
As we have already discussed, India is the most popular country for foreign companies to set up their LO/BO/PO here. They should ensure that their law firms are within the bounds of our law. Legal acts include activities that are not covered by our law. India does not allow foreign business firms to regularly carry out legal activities as long as they fly in and out.
If you’re still having questions regarding the establishment of a foreign office in India or any other questions, we are ODINT Consultancy. We are here to assist you in all possible manner.
FAQ’s
If there is a negative reporting issue with the AAC of the Liaison Office Branch Office, the matter will be noted to the RBI.
No. To open another bank account, RBI approval is required. The RBI requires that the company justifies why a different account is needed.
Geographical factors, strategic culture, India’s requirements and goals, global and regional challenges, and resources all influence India’s foreign policy.
Yes. A BO /PO of an abroad institution, repealing an LO is allowed to obtain possession for their usage and to perform authorized accidental activity, but not to lease or rent out the property.
Yes, provided that the bank account is re-designated to a BO account.
No, Only a foreign company with an office on this route can open a branch.
