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Foreign companies looking to establish a physical presence in India can do so by registering a foreign branch office. A foreign branch office is a representative office of a foreign company that can carry out certain activities in India, subject to certain conditions and limitations. Foreign Branch Office Setup in India by Foreign Investors/Entities are available for those who do not wish to register a Foreign Subsidiary in India.
Available Option for Foreign Investors to start a business in India
·Liaison office – To represent parent company in India
· Branch office – To undertake activities such as export, import of goods, research, consultancy etc.
·Project office – Activities as per contract to execute project in India
Joint Venture or Wholly owned subsidiary (100% Stake) – under Companies Act 2013
Limited Liability Partnership(LLP)
LLP, Subject to provisions of LLP Act, 2008;
FDI permitted under automatic route in LLPs as well for operating in activities where 100% FDI is allowed through automatic route and there no FDI linked performance conditions shall be checked.
Note: manufacturing/ services and other related business operations in India
From above cited table, it is easy to ascertain that business in India majorly can be done by two modes namely; -
First: Incorporation of Company at MCA (As a wholly owned subsidiary company or Foreign Subsidiary/ Joint venture company or LLP); and
Second: Unincorporated Mode Through branch office (“BO”) or liaison office (“LO”) or project office (“PO”).
Foreign Branch Office Setup is one of the option available to the Foreign Company or Investors with most feasible mode of doing business in India with optimum resources and minimum cost subject to the Legal formalities with AD Bank.
Purpose of Opening of Branch office is very simple and clear that if Foreign Parent Company is looking for place of business in India for providing the services or assistance to their supplied product including expansion of marketplace in Indian Economy, opening a Branch Office can be one easy way.
India branch office helps to get concrete information about market dynamics, customer choices and product ratings including to promote extension of business of parent company in India in same activity or business.
Branch Office can freely acquire any immovable property in India to carry out the permitted/ incidental activities but not for leasing or renting out the property.
Profits gained by the Branch Offices in India is freely remittable to Parent Company subject to payment of applicable taxes applicable as per Indian income tax Law.
Retail trading activities by Branch Office of any nature is not allowed as per the laws of India.
Foreign companies looking to establish a branch office in India must submit several documents to the Reserve Bank of India (RBI) and the Registrar of Companies (ROC). Here is a list of the documents required for a branch office in India by a foreign company:
Application Form: The foreign company must submit an application form to the RBI, which includes details such as the proposed activities of the branch office, the address of the office, and the names of the proposed personnel.
Certificate of Incorporation: The foreign company must submit a copy of its certificate of incorporation, attested by the Indian embassy or consulate in the country of origin.
Memorandum and Articles of Association: The foreign company must submit a copy of its memorandum and articles of association, attested by the Indian embassy or consulate in the country of origin.
Board Resolution: The foreign company must submit a board resolution authorizing the establishment of the branch office in India, along with a resolution regarding the appointment of an authorized representative in India.
Financial Statements: The foreign company must submit audited financial statements for the previous five years, along with a net worth certificate from a certified public accountant.
Power of Attorney: The foreign company must submit a power of attorney authorizing a resident representative in India to accept service of process and other legal notices on behalf of the branch office.
Address Proof: The foreign company must submit proof of the address of the proposed branch office, such as a lease agreement or a no-objection certificate from the landlord.
Identity Proof: The foreign company must submit identity proof of the proposed personnel, such as passport copies.
Other Documents: Depending on the nature of the business activities proposed by the branch office, the foreign company may also be required to submit additional documents such as NOCs from regulatory bodies or government departments.
Bonus Point: Foreign companies looking to establish a branch office in India must submit several documents to the RBI and the ROC. It is important to ensure that all documents are complete, accurate, and attested as required by Indian law. Seeking professional advice can help ensure a smooth and compliant registration process.
The procedures for securing angel funding or venture capitalist investment for your startup can vary depending on the investor and the specific investment opportunity. However, here are some general steps that you can follow to increase your chances of successfully securing funding:
There are two modes for approval of branch office in India:
When principal business of the Parent Company applying for establishment of Branch office falls under sectors where 100 % FDI is allowed under the automatic route then the approval of Authorized Dealer (i.e. AD Bank) is required only.
When principal business of the Parent Company does not falls under the sectors where 100% FDI is permissible under the automatic route. Applications shall be furnish by the entities and those from Non–Government Organisations / Government Bodies / Non-Profit Organisations are considered by the Reserve Bank of India in consultation with the Ministry of Finance, Government of India.
Eligibility: A foreign company can establish a branch office in India if it has a profitable track record for the previous five years and a net worth of at least USD 100,000. The company must also have a business interest in India.
Application: The foreign company must submit an application to the Reserve Bank of India (RBI) along with the required documents, including the company's certificate of incorporation, a board resolution authorizing the establishment of the branch office, and a letter of authority from the parent company.
Approval: Once the RBI approves the application, the foreign company must register with the Registrar of Companies (ROC) within 30 days of receiving approval. The company must also obtain a Permanent Account Number (PAN) and a Tax Deduction and Collection Account Number (TAN) from the Income Tax Department.
Activities: A foreign branch office can carry out activities such as market research, promoting the parent company's products and services, and acting as a liaison between the parent company and its customers in India. However, a foreign branch office cannot engage in any commercial or industrial activity, generate income in India, or offer any financial services.
Compliance: A foreign branch office must comply with all applicable laws and regulations in India, including filing annual returns and maintaining proper accounting records. The branch office must also appoint a resident representative who will be responsible for ensuring compliance with all applicable laws and regulations.
Bonus Points: Registering a foreign branch office in India can provide foreign companies with a physical presence in India and the ability to carry out certain activities in the country. However, it is essential to carefully consider the eligibility criteria, application process, and compliance requirements before establishing a foreign branch office in India. Seeking professional advice can help ensure a smooth and compliant registration process.
Why would any Parent / ForeignCompany like to open a Branch Office in India?
To represent the parent company in various fields in India like-
RBI explained that 'Foreign company' means a body corporate incorporated outside India and includes a firm or other association of individuals.
Any Person resident outside India want to do the business from India through open a branch office in India subject to the some legal formalities with AD Bank. No person resident outside India shall without prior approval of the RBI open a branch office by whatever name called except as some Direct Establishment allowed which are laid down in the RBI Regulations.
Understand step by step process for setting up the branch office in India:
Step-1: Check Eligibility before Situation of Place of Business in India
Step-2: Application to AD Bank
Step-3: Banking Approval & Extension if any
Step-4: Issue of UIN & Approval letter
Step-5: Apply for PAN for Branch Office
Yes, some are the Exemption given under RBI Guidelines Notification No. FEMA 22(R)/ 2016-RB:
Yes, Conditions for Branch Office are given under RBI Guideline:
A profit making track record during the immediately preceding 5 financial years in the home country and net-worth shall not be less than USD 1 lac or its equivalent.
But, if a person resident outside India that is not financially sound and are subsidiaries of other companies may submit a Letter of Comfort from their parent company subject to the condition that parent company fulfilling the prescribed criterion of net worth and profit.
Letter of Comfort given under Annex A of RBI Guidelines from their parent company subject to the condition that the parent company satisfies the prescribed criterion for net worth and profit;
Format of the Letter of Comfort
[See Regulation 4 (a)]
The Authorised Signatory,
(Address of the Authorised Dealer Category-I bank)
Dear Sir, Sub: Application for establishment of branch / liaison office in India by our subsidiary / group company, M/s_________________________
You may kindly refer to the application made by our subsidiary / group company, M/s_____________________________to your office for establishing branch / liaison office in India.
2. In this connection, we, ______________________(the parent company/group company) undertake to provide the necessary financial support for our subsidiary / group company's operations as a branch / liaison office in India. Any liability that may arise due to the functioning of the branch/liaison office in India will be met by us (the parent company/group company), in case of inability on part of the branch/liaison office to do so.
3. We are also enclosing the financial background of our company in the form of our latest Audited Balance Sheet / Account Statement certified by a Certified Public Accountant.
Authorised Representative of the parent company
As per company law, a resident having PAN to be authorised for receiving documents/notices/orders/etc. in India for on behalf of foreign Parent company.
Yes, you may refer to the official RBI Link here https://rbi.org.in/Scripts/NotificationUser.aspx?Id=10398&Mode=0
Branch office should be engaged in the activity in which the parent company is engaged for-
No, The Hon’ble Supreme Court via its interim orders on July 4, 2012 and September 14, 2015 respectively, order passed in one of the most famous case Bar Council of India vs A.K. Balaji & Ors., in which directed to RBI that not to grant any permission to any foreign law firm or Companies for practice profession of law in India, on or after the date of the said interim order, for opening of any place of business in India.
The Hon’ble Supreme Court held that those advocates enrolled under the Advocates Act, 1961 alone are only entitled to practice law in India and that foreign law firms/companies or foreign lawyers cannot practice profession of law in India. As such, foreign law firms/companies or foreign lawyers or any other person resident outside India, are not allowed to establish any branch office or project office or liaison office or other place of business in India for the purpose of practicing legal profession under Indian law.
AD Category – I banks are directed that not to grant any approval to any branch office, project office, liaison office or other place of business in India as per FEMA law for the purpose of practicing legal profession in India.
Applicable laws are: -
Yes, after approval from AD Bank application within 6 months office shall be opened. In case, no office is opened by the person resident outside India within six months from the date of approval letter, the approval for establishing the office in India shall be cancelled by the AD Bank and need to apply for Extension.
Any person resident outside India may establish in India under these Regulations a liaison office for a period of three years subject to the provisions of Regulation 4 d (III). After receipt of an application, the AD Category-I bank concerned Might extend the validity period of approval for a period of 3 years from the date of expiry of the original approval / extension granted by AD Bank, subject to directions issued by the RBI in this regard if any.
A person resident outside India desiring to establish additional branch office or liaison office may submit to the AD Category-I bank a fresh FNC Form along with the justification for the need for additional office(s) place in India.
Yes, person resident outside India for opening of a branch Office in India shall require prior approval of RBI in following cases:-
Such applications may be forwarded by the AD Category-I bank to the General Manager, Reserve Bank of India, Central Office Cell, Foreign Exchange Department, 6, Sansad Marg, New Delhi-110 001 who shall process the applications in consultation with the Government of India.
Yes, tax in Indian Economy is levied by either by the Central Government or the State Governments. But some minor taxes are also levied by the local authorities i.e. Municipality and Local Government of India. o Taxes in India are primarily into 2 categories - Direct and Indirect Tax.
India’s taxation system provides some relief such as:
No, branch office not allowed to carry out any manufacturing or processing activities directly/ indirectly. A Branch office is further not allowed to undertake any Retail Trading activities of any nature in India. Branch Offices have to submit Activity Certificate from a Chartered Accountant on an annual basis.
Closure of branch office (BO) and remittance of winding up is a lengthy task and therefore it is advised to seek support from Compliance Calendar who can make compliances easy.
Step-1: Application to AD Bank along with supporting documents
Step-2: Parent Company Confirmation
Step-3: MCA NOC
Step-3: Other details and documents
Step-4: Remittance of funds while winding up Procedure
Step-5: Intimation to the RBI
Yes, A ROC report is required from the Registrar of Companies in which jurisdiction branch office situated in relation to compliance with the provisions of the Companies Act, 2013, in case of winding up of the Office in India;
MCA Form FC-2 need to be filed along with the attachments :-
Yes, if you change the office of Branch Office to another place within the city, you shall intimate the designated AD Category - I bank. In the event of shifting the office to any other city in India, prior approval of the AD Category-I bank is required to be obtained.