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Procedure for Setting up Branch Office(BO), Project Office (PO) and Liaison Office (LO) in India

Foreign Companies Setting up Branch Office(BO), Project Office (PO) and Liaison Office (LO) in India is required to make application to AD category Banks through which it wishes to peruse Banking Operations  

Eligibility Criteria for Setting up Branch Office / Project Office or Liaison Office in India 

  • The Applicant Company Should be Body Corporate Incorporated Outside India 
  • For Branch Office — a profit making track record during the immediately preceding five financial years in the home country and net worth of not less than USD 100,000 or its equivalent.
  • For Liaison Office — a profit making track record during the immediately preceding three financial years in the home country and net worth of not less than USD 50,000 or its equivalent.

Note: 
An applicant that is not financially sound and is a subsidiary of another company may submit a Letter of Comfort (LOC) (Annex A) from its parent/ group company, subject to the condition that the parent/ group company satisfies the prescribed criteria for net worth and profit.

Net worth : 

Net Worth [total of paid-up capital and free reserves, less intangible assets as per the latest Audited Balance Sheet or Account Statement certified by a Certified Public Accountant or any Registered Accounts Practitioner by whatever name called].

Cases in Which RBI Approval is required for Setting up Branch Office(BO), Project Office (PO) and Liaison Office (LO) in India

  • The applicant is a citizen of or is registered/incorporated in Pakistan;
  • The applicant is a citizen of or is registered/incorporated in Bangladesh, Sri Lanka, Afghanistan, Iran, China, Hong Kong or Macau and the application is for opening a BO/LO/PO in Jammu and Kashmir, North East region and Andaman and Nicobar Islands;
  • The principal business of the applicant falls in the four sectors namely Defence, Telecom, Private Security and Information and Broadcasting.
  • The applicant is a Non-Government Organisation (NGO), Non-Profit Organisation, Body/ Agency/ Department of a foreign government.

Procedure for making Application to AD-Category Bank for Setting up Branch Office(BO), Project Office (PO) and Liaison Office (LO) in India

If the Applicant Company fulfills the above mentioned eligibility Criteria , the Application can be made to AD category Bank through which applicant company wishes to peruse Banking Relations 

  1. The Application shall be made in Form Form FNC  to a designated AD Category – I bank along with Following Documents : 
  • Copy of the Certificate of Incorporation / Registration; Memorandum of Association and Articles of Association attested by the Notary Public in the country of registration.

    [If the original Certificate is in a language other than in English, the same may be translated into English and notarized as above and cross verified/attested by the Indian Embassy/ Consulate in the home country].
  • Audited Balance sheet of the applicant company for the last three/ five years in case of branch office/liaison office respectively.

    [If the applicants’ home country laws/regulations do not insist on auditing of accounts, an Account Statement certified by a Certified Public Accountant (CPA) or any Registered Accounts Practitioner by any name, clearly showing the net worth may be submitted]
  • Bankers’ 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.
  • Power of Attorney in favor of signatory of Form FNC in case the Head of the overseas entity is not signing the Form FNC.

The AD Category-I bank shall after exercising due diligence in respect of the applicant’s background, and satisfying itself as regards adherence to the eligibility criteria for establishing BO/LO/PO, antecedents of the promoter, nature and location of activity of the applicant, sources of funds, etc., and compliance with the extant KYC norms grant approval to the foreign entity for establishing BO/LO/PO in India. The AD Category-I banks may frame appropriate policy for dealing with these applications in conformity with the FEMA Regulations and Directions, However RBI will issue LIN to every BO/LO.

The validity period of an LO is generally for three years, except in the case of Non-Banking Finance Companies (NBFCs) and those entities engaged in construction and development sectors, for whom the validity period is two years only. The validity period of the project office is for the tenure of the project.

Once  applicant that has received a permission for setting up of a BO/LO/PO shall inform the designated AD Category I bank as to the date on which the BO/LO/PO has been set up. The AD Category I bank in turn shall inform Reserve Bank accordingly. In case an approval granted by the AD bank has either been surrendered by the applicant or has expired without any BO/LO/PO being set up, the AD Category I bank shall inform RBI accordingly.

Fastllegal provides Business setup Services for foreign Entities in India , companies may contact at [email protected] or Place a request at https://fastlegal.in/place-your-request.html

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How Indian company can an receive foreign investment

The routes under which foreign investment can be made is as under:

  1. Automatic Route: Foreign Investment is allowed under the automatic route without prior approval of the Government or the Reserve Bank of India, in all activities/ sectors as specified in the Regulation 16 of FEMA 20 (R).
  2. Government Route: Foreign investment in activities not covered under the automatic route requires prior approval of the Government. Procedure for applying for Government approval is given at http://fifp.gov.in/Forms/SOP.pdf


What are the Capital instruments permitted for receiving foreign investment in an Indian company

‘Capital Instruments’ means equity shares, debentures, preference shares and share warrants issued by the Indian company.

Equity shares: Equity shares are those issued in accordance with the provisions of the Companies Act, 2013 and will include partly paid equity shares issued on or after July 8, 2014.

Share warrants: Share warrants issued on or after July 8, 2014 will be considered as capital instruments.

Debentures: ‘Debentures’ means fully, compulsorily and mandatorily convertible debentures.

Preference shares: ‘Preference’ shares means fully, compulsorily and mandatorily convertible preference shares.

Non-convertible/ optionally convertible/ partially convertible preference shares issued as on and up to April 30, 2007 and optionally convertible/ partially convertible debentures issued up to June 7, 2007 till their original maturity are reckoned to be FDI compliant capital instruments. Non-convertible/ optionally convertible/ partially convertible preference shares issued after April 30, 2007 and optionally convertible/ partially convertible debentures issued after June 7, 2007 shall be treated as debt and shall require conforming to External Commercial Borrowings guidelines regulated under Foreign Exchange Management (Borrowing and Lending in Foreign Exchange Regulations), 2000, as amended from time to time.


What is meant by Foreign Investment, Foreign Direct Investment and Foreign Portfolio Investment?

Foreign Investment means any investment made by a person resident outside India on a repatriable basis in capital instruments of an Indian company or to the capital of an LLP.

Foreign Direct Investment (FDI) is the investment through capital instruments by a person resident outside India (a) in an unlisted Indian company; or (b) in 10 percent or more of the post issue paid-up equity capital on a fully diluted basis of a listed Indian company.

Foreign Portfolio Investment is any investment made by a person resident outside India in capital instruments where such investment is (a) less than 10 percent of the post issue paid-up equity capital on a fully diluted basis of a listed Indian company or (b) less than 10 percent of the paid up value of each series of capital instruments of a listed Indian company.

Source : https://www.rbi.org.in  (FAQ issued by RBI )

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How to Register Foreign Subsidiary Company in India

India is among the best markets to Invest in world, during the last two decades India has seen significant improvement of foreign capital in India. Many foreign entities wants to start operations in India due to high market demand and ease of doing business.

 

Following things are to be considered while setting up Business in India by foreign entities :

  • Setting up Subsidiary Company :  Foreign Subsidiary will be formed as Private Limited/Public Limited Company and the holding foreign holding company will fund  the shareholding. It may be noted that holding company can have 100% to have wholly owned subsidiary including shareholding of nominee shareholders who will be beneficial shareholder of the company. The investment limit will be in accordance with the FDI Policy of Government of India , where most of sectors are under automatic route.
  • Requirements for  Appointment of Resident Director : As par the requirements of the Companies Act, 2013 every Indian Company should have resident Director.
  • Documents Requirements :  Apostle and Notarized Signed Documents are required for foriegn Shareholders and Directors. For companies it will be :
    • Certificate of Incorporation,
    • Memorandum of Association ,
    • Artiles of Association,
    • Board Resolution duly passed for entering and forming Company in India and in case of Individuals
    • Passport Copy,
    • Driving Licence and
    • Current Address proof in the form of Bank Statement is required.
  •  Obtaining Digital Signature of Directors
  • Obtaining Director Identification Number of Director
  • Application for Approval of Name of Company , this must be unique
  • Preparation of Incorporation Documents
  • Signing of Incorporation Documents , this too should be noterised and apostled
  • Application for Incorporation of Company to Registrar of Companies .

Once this application is approved by registrar we get Certificate of Incorporation along with PAN and TAN (Tax Number in India )

Opening of Bank Account  : Now bank Account is required to be opened in the name of Company.

Infusion of Capital into Company : Now the Capital is required to be remitted to the bank account of the Company.

Intimation to RBI : Intimation to RBI is required to be given as par FDI policy.

GST Registration : GST Registration is required to be obtained afterwards.

Trademark Application : If Company has its own product or brands trademark registration application is required to be applied for securing Companies Intellectual Property.

 

 

Read more :

Frequently Asked Questions on Private Limited Company Registration in India with Foreign Directors & Members