Setting up Liaison office in India-New Delhi|Noida|Gurgaon|Mumbai

Setting up a Liaison office in India

About us

We are the Group of Professionals compromising Chartered Accountants, Company Secretary and other professional Consultants providing Corporate law services, Company Registration and Incorporation Services in India. Our Team helps Foreign Company or entities to setup there business in India. We are specialise in opening and registering the Wholly owned Subsidiary, Liaison office, Branch office or Joint Venture in India. We can helps the foreign company to setup their Wholly owned subsidiary or any Indian Venture in almost every metro city in India. We have our offices in Noida, Gurgaon, New Delhi, Mumbai.

What is Liaison office

Foreign Company can open Liaison office in India for several reasons but have some restriction:

• Represents the foreign parents company in India.

• Liaison office acts as a channel of communication between the principal place of business or head office and entities in India.

• Liaison office cannot undertake any commercial activity directly or indirectly and cannot, therefore, earn any income in India. Its role is limited to collecting information about possible market opportunities, doing market research and providing information about the company and its products to prospective Indian customers.

• It can promote export/import from/to India and also facilitate technical/financial collaboration between parent company and companies in India.

• It has to meet all its expenses of Indian office through remittances from the Head office. The Liaison office is not allowed to earn any income in the India

• At the time of closure of the Liaison Office, the RBI grants permission to repatriate the balance in the Indian bank account to the parent company.

• Approval for establishing a liaison office in India is granted by Reserve Bank of India (RBI).

• It must maintain a QA22C account with the bank. This is a special account that only allows inflows from abroad.

• However, the office must file regular returns to the RBI. Such returns must include Audited Annual accounts and an activity report for the year.

Registration Process for opening a Liaison office in India

• To open a Liaison office, the foreign parent company has to apply to the Reserve Bank of India and is generally granted permission within 2 to 4 weeks.
• Approval is usually granted for three years and can be renewed on expiry thereof.
• The companies desirous of opening a liaison office in India may make an application in form FNC-1 along with the documents mentioned therein to Foreign Investment Division,Foreign Exchange Department, Reserve Bank of India, Central Office, Mumbai.
• In addition to this, the foreign company is also required to obtain a Certificate of establishment of place of business in India from the Registrar of Companies (ROC).

General Criteria for open a Branch office in India

Application in Form FNC (Annex-1) will be considered by Reserve Bank in two routes:

Reserve Bank Route – Where principal business of the foreign entity falls under sectors where 100 per cent Foreign Direct Investment (FDI) is permissible under the automatic route.

Government Route – Where principal business of the foreign entity falls under the sectors where 100 per cent FDI is not permissible under the automatic route. Applications from entities falling under this category and those from Non – Government Organisations / Non – Profit Organisations / Government Bodies / Departments are considered by the Reserve Bank in consultation with the Ministry of Finance, Government of India.

The following additional criteria are also considered by the Reserve Bank while sanctioning Liaison/Branch Offices of foreign entities:

• A profit making track record during the immediately preceding 3 financial years in the home country i.e Foreign Country.

• Net Worth not less than USD 50,000 or its equivalent [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]

The Liaison shall also obtain Permanent Account Number (PAN) from the Income Tax Authorities on setting up the offices in India.

Application for Setup a Liaison office in India

The application for establishing Liaison Office in India should be forwarded by the foreign entity through a designated AD Category – I bank to the Chief General Manager-in-Charge, Reserve Bank of India, Foreign Exchange Department, Foreign Investment Division, Central Office, Fort, Mumbai-400 001, along with the prescribed documents including:

• English version of the Certificate of Incorporation / Registration or Memorandum & Articles of Association attested by Indian Embassy / Notary Public in the Country of Registration.

• Latest Audited Balance Sheet of the applicant entity.

• Other details like the profile of the applicant, nature and location of activities and source of funds etc.

• A KYC of the parent Company in a prescribed format

• Besides the above, certain Authorized Dealers may ask for certain information or documents or certifications to convince themselves of the credibility of the applicant.

Information to be filed with Registrar of Companies, Delhi.

• Form FC-1
• A certified copy of the charter, statutes or memorandum and articles, of the company or other instrument constituting or defining the constitution of the company and, if the instrument is not in the English language, a certified translation thereof in the English language
• The full address of the registered or principal office of the company;
• The full address of the office of the company in India which is deemed to be its principal place of business in India;
• List of directors and secretary of the foreign company.
• Reserve bank of India approval letter.
• Power of Attorney for Authorised Representative in India.

Reporting with the Directorate General of Police

In September 2012, RBI came out with a new circular which enlarged the reporting requirement for a Liaison Office. The Circular mandated that:
• A Liaison Office shall submit a report containing information in a prescribed form within five working days of the Liaison Office becoming functional to the Director General of Police (DGP) of the state concerned in which Liaison Office/BO/PO has established its office; if there are more than one office of such a foreign entity, in such cases to each of the DGP concerned of the state where it has established office in India;
• A copy of the report as per Annex shall also be filed with the DGP concerned on annual basis along with a copy of the Annual Activity Certificate/Annual report required to be submitted by the Liaison Office concerned, as the case may be.
• A copy of report thus filed as above shall also be filed with AD by the Liaison Office concerned.

Annual Compliances to be undertaken by Liaison office

• File Annual Activity Certificates from the Auditors to be submitted to the RBI, The DGP and the Directorate of Income Tax within 6 months i.e 30th September of the Balance Sheet date, i.e 31st March.

• Audited Financial Statements including Receipts and Payments A/C shall be filed with the Directorate of Income Tax.

• Annual Compliances and Filing with the Registrar of Companies.