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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
Foreign company |
·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 |
Indian Company |
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.
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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-