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A
foreign company or individual planning to set up
business operations in i
can do so in the following ways:
As
a Foreign Company
through a
- Liaison
/ Representative Office
- Project
Office
- Branch
Office
As
an Indian
Company
through a
·
Wholly
owned subsidiary
Foreign
Company is one, which has been incorporated
outside
India
and conducts business in
India
.
These companies are required to comply with the
provisions of the Companies Act, 1956.
Foreign
Company can set up Liaison, Project and Branch
Offices in
India
.
Such companies have to register themselves with
Registrar of Companies (ROC) within 30 days of
setting up a place of business in
India
.
Branch
Office :
- Government
has allowed foreign companies engaged in
manufacturing and trading activities abroad
to set up Branch Offices in
India
for the following purposes:
- To
represent the parent company/ other foreign
companies in various matters in
India
e.g. acting as buying/selling agents in
India
.
- To
conduct research work in the area in which
the parent company is engaged
- To
undertake export and import trading
activities
- To
promote possible technical and financial
collaborations between the Indian companies
and overseas companies.
- Rendering
professional or consultancy services
- Rendering
services in Information technology and
development of software in
India
.
- Rendering
technical support to the products supplied
by the parent/ Group companies.
A
branch office is not allowed to carry out
manufacturing, processing activities
directly/indirectly. Branch Office will have to
submit activity certificate from a Chartered
Accountant on an annual basis to Reserve Bank of
India
.
For annual remittance of profit Branch Office
may submit required documents to authorised
Bank. Permission for setting up branch offices
is granted by the Reserve Bank of
India
on a case-to-case basis. RBI normally, considers
the operating history of the applicant company
worldwide and its proposed activities in
India
for granting the approval.
Liaison
Office:
One
of the practices for foreign companies to enter
the Indian markets is the setting up of a
Liaison/Representative office. A Liaison office
is not allowed to undertake any business
activity in
India
and cannot therefore, earn any income in
India
.
The role of such offices is, therefore, limited
to collecting information about possible market
opportunities and providing information about
the company and its products to the prospective
Indian Customers.
The
opening and operation of such offices is
regulated by the Foreign Exchange Management
Act-1999 (FEMA). Approval from the Reserve Bank
of India (RBI) is required for opening such
offices. There are certain standard conditions
imposed for operations of such offices:
- Expenses
of such offices are to be met entirely
through inward remittances of foreign
exchange from the Head Office abroad.
- Such
offices should not undertake any trading or
commercial activities and their activities
should be limited to collecting and
transmitting information between the
overseas Head Office and potential Indian
customers.
- Such
offices should not charge any commission or
receive other income from Indian customers
for providing liaison services.
Liaison/representative
offices also have to file an annual activity
certificate etc. from a Chartered Accountant to
RBI.
Permission
to set up such offices is initially granted for
a period of 3 years and this may be extended
from time to time.
Project
Office : Foreign
Companies planning to execute specific projects
in
India
can set up temporary project/site offices in
India
.
For the purpose specific approval from the RBI
is required for setting up a project office.
Such approval is generally accorded in respect
of projects of approved by appropriate
authorities or where the projects are financed
by Indian bank/Financial Institution or a
multilateral/ bilateral international financial
institution.
.
Site
Office: means a sub-office of the Project
office established at the site of a project but
does not include a Liaison office.
Prohibition
against establishing branch or office in India
No person resident outside India shall,
without prior approval of the Reserve Bank,
establish in India a branch or a liaison office
or a project office or any other place of
business by whatever name called. However, no
approval shall be necessary for a banking
company, if such company has obtained necessary
approval under the provisions of the Banking
Regulations Act, 1949.
Application
to Reserve Bank for opening branch or liaison or
project office
- A
person resident outside India desiring to
establish a branch or liaison office in
India shall apply to the Reserve Bank in
Form FNC 1.
- Where
a person resident outside India has secured
from an Indian company a contract to execute
a project in India, and
- the
project is funded directly by inward
remittance from abroad; or
- the
project is funded directly by a bilateral
or multilateral International Financing
Agency (World Bank or the International
Monetary Fund or similar other body); or
- the
project has been cleared by an appropriate
authority; or
- a
company or entity in India awarding the
contract has been granted Term Loan by a
Public Financial Institution or a bank in
India for the Project,
such
person shall apply to the Reserve Bank in Form
FNC 1 for permission to establish a Project or
Site Office in India.
- The
Reserve Bank may grant permission subject to
such terms and condition as may be
considered necessary.
Activities
which may be undertaken by the branch or office
in India
A person resident outside India permitted by
the Reserve Bank to establish a branch in
India may carry out the following permitted
activities:
- Export/
Import of goods
- Rendering
professional or consultancy services
- Carrying
out research work, in which the parent
company is engaged
- Promoting
technical or financial collaborations
between Indian companies and parent or
overseas group company
- Representing
the parent company in India and acting as
buying/selling agent in India
- Rendering
services in the Information Technology and
development of software in India
- Rendering
technical support to the products supplied
by the parent/ group
companies
- Foreign
airline/ shipping company
A
person resident outside India permitted by the
Reserve Bank to establish a liaison office
in India may carry out the following permitted
activities:
- Representing
in India the parent company/ group companies
- Promoting
export import from/ to India
- Promoting
technical/financial collaborations between
parent/group companies and companies in
India
- Acting
as a communication channel between the
parent company and Indian companies
A
person resident outside India permitted by the
Reserve Bank to open a branch or a liaison
office in India shall not undertake or carry on
other activity unless specifically permitted by
the Reserve Bank.
A
person resident outside India permitted by the
Reserve Bank to establish a Project or Site
office in India shall not undertake or carry on
any activity other than the activity relating
and incidental to execution of the project.
Remittance
of profit or surplus
A person resident outside India permitted by
the Reserve Bank to open a branch or a project
office in India may remit outside India the
profit of the branch or surplus of the project
on its completion, net of the applicable Indian
taxes, on production of the following documents,
and establishing the net profit or surplus, as
the case may be, to the satisfaction of the
authorised dealer through whom the remittance is
remitted.
- For
remittance of profit of a branch
- certified
copy of the audited balance sheet and profit
and loss account for the relevant year
- a
Chartered Accountant’s certificate
certifying
- the
manner of arriving at the remittable
profit,
- that
the entire remittable profit has been
earned by undertaking the permitted
activities, and
- that
the profit does not include any profit
on revaluation of the assets of the
branch
- For
remittance of surplus on completion of the
Project:
- certified
copy of the final audited project accounts
- a
Chartered Accountant’s certificate showing
the manner of arriving at the remittable
surplus
- income-tax
assessment order or either documentary
evidence showing payment of income-tax and
other applicable taxes, or a Chartered
Accountant’s certificate stating that
sufficient funds have been set aside for
meeting all Indian tax liabilities; and
- auditor’s
certificate stating that no statutory
liabilities in respect of the Project are
outstanding.
Setting
up of Branch Office, of Liaison Office and of
Project / Site Office by persons resident
outside India for trading/commercial/industrial
activities, are governed by ' Foreign Exchange
Management (Establishment in India of Branch or
Office or other Place of Business) Regulations,
2000 as have been stated above.
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