Process of Incorporation of Liason Office In India

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	Blog Categories All Clarification on Nidhi Rejection (1) Precautions need to be taken by professionals whil (1) Provisions (11) Special for Professionals > Provisions Process of Incorporation of Liason Office In India Category: Provisions, Posted on: 08/12/2023 , Posted By: CS Divesh Goyal Visitor Count:267 Process of Incorporation of Liasion Office In India (07^th December 2023) SHORT SUMMARY: The author will cover the "*Process of Establishment of Liaison Office in India" in this column. A body corporate incorporated outside India (including a firm or other association of individuals), desirous of starting of business in India. They can conduct as followings: · Branch Office · Liaison Office* · Project Office For opening a Liaison Office (LO) in India have to obtain permission from the Reserve Bank under provisions of FEMA 1999. After approval from RBI these entities are required to register with Registrar of Companies. The process of the same discussed below. 'Foreign Company' means a body corporate incorporated outside India and includes a firm or other association of individuals. 'Liaison Office' means a place of business to act as a channel of communication between the principal place of business or Head Office or by whatever name called and entities in India but which does not undertake any commercial /trading/ industrial activity, directly or indirectly, and maintains itself out of inward remittances received from abroad through normal banking channel. A. PERMITTED ACTIVITY OF LIASION OFFICE IN INDIA: A Liaison Office (also known as Representative Office) can undertake only liaison activities, i.e. it can act as a channel of communication between Head Office abroad and parties in India. Such Liaison Offices undertake the following activities in India; A Liaison Office can undertake the following activities in India: i. Representing in India the parent company / group companies. ii. Promoting export / import from / to India. iii. Promoting technical/financial collaborations between parent/group companies and companies in India. iv. Acting as a communication channel between the parent company and Indian companies. Liaison Office of Foreign Insurance Companies / Banks v. Foreign Insurance companies can establish Liaison Offices in India only after obtaining approval from the Insurance Regulatory and Development Authority (IRDA). vi. Foreign banks can establish Liaison Offices in India only after obtaining approval from the Department of Banking Regulation (DBR), RBI. Prohibited activities by the Liasion Office – Liaison Office not allowed to undertake any business activity in India and cannot earn any income in India. B. Eligibility Criteria: A person resident outside India can establish a liaison office in India provided it meets the following criterion i.e. i. a profit-making track record during the immediately preceding three financial years in the home country and ii. net worth of 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 Note: Provided that a person resident outside India that is not financially sound and are subsidiaries of other companies may submit a Letter of Comfort (Annex A) from their parent company subject to the condition that the parent company satisfies the prescribed criterion for net worth and profit. Approval from RBI- Permission for setting up Liasion offices is granted by the Foreign Exchange Department, Reserve Bank of India, Central Office, Mumbai (note – Not by the RBI offices in respective state capitals) Track Record of the Company - Reserve Bank of India considers the track record of the applicant Company, the activity of the Company proposing to set up office in India as well as the financial position of the Company while scrutinizing the application.(note – for setting up a Company, there is no criteria of checking the track record or financial position of the parent Company) C. PROCEDURES FOR SETTING UP A BRANCH OFFICE IN INDIA BY A FOREIGN COMPANY: I. First the applicant Company have to select a Bank in India. Who will work as Authorized Dealer Bank. The authorized dealer means the various institution having banking licenses. II. FNC Form: A person resident outside India desiring to establish a branch office or a liaison office or a project office or any other place of business in India shall submit an application in Form FNC (Annex C) to an Authorised Dealer Category-I bank who may, subject to the provisions of Regulation 5, grant approval as per the directions and/or guidelines issued by the Reserve Bank in this regard. III. Information/ Document required FNC Form: i. Form FNC – Three copies ii. Letter from the principal officer of the Parent Company to RBI. iii. Letter of authority from the parent Company in favor of Local Representative. iv. Letter of authority/ Resolution from parent Company for setting up Liasion office in India. v. Comfort letter from the parent Company intending to support the operation in India. vi. Two copies of the English version of the Certificate of Incorporation, Memorandum & Articles of association (Charter Document) of the parent Company duly attested by the Indian embassy or notary public in the country of registration. vii. Certification of Incorporation - Translated & Duly Notarized and Certified by Indian Consulate viii. The Latest audited Balance sheet and annual accounts of parent Company duly Translated notarized for past Three years. & Certified by Indian Consulate & Directors ix. Name, Address, email ID and telephone number of the authorized person in Home Country. x. Details of Bankers of the Organization the Country of Origin along with the bank account number. xi. Commitment from the Organization to the effect that it will be open to report / opinion sought from its banker by the Government of India / Reserve Bank of India xii. Expected funding level for operations in India. xiii. Details Relating to address of the proposed local office, number of persons likely to be employed, number of Foreigners among such employees and address of the head of the Local office, if decided xiv. Details of Activity carried out in Home Country by the applicant organization in brief about the product and services of Company in Brief. xv. Bankers Certificate xvi. Latest Proof of identity of all the Directors - Certified by Consulate and Banker in Home Country xvii. Latest Proof of address all of Directors - Certified by Consulate and Banker in Home Country NOTE - The Above List Is Not Exhaustive and May Differ Depending Upon The Requirement From The Authorized Dealer. IV. PROCEDURE AFTER GETTING THE RBI APPROVAL Every Liaison office registered with RBI shall get itself registered with the Ministry of Corporate Affairs; it is a registration by the Liaison office as an establishment of foreign Company in India. On such registration a FCRN i.e. Foreign Company Registration Number is allotted by the Registrar of Companies. V. The following documents shall be filled with the Registrar of Companies: i. Form FC-1 (on MCA V3 portal) ii. Charter, statutes or memorandum and articles of association or other Instrument constituting or defining the constitution of the Company iii. If the above documents are not in English then the translated version of the documents. iv. Director(s) details – individuals v. Director(s) details - bodies corporate vi. Reserve bank of India approval letter vii. Secretary(s) details viii. Power of attorney or board resolution in favor of the authorized representative(s). ix. KYC of Director/ secretary of foreign Company x. KYC of Authorized Person in India xi. List of Director and Secretary as per Rule 3(2) xii. DSC of Authorized representative NOTE – All the documents of foreign individual and entity (including ID proofs, COI etc.) should be apostille and notarized in their home country. Further, The application in FC-1 is always dealt with by the Registrar of Companies, Delhi. As the power has been assigned to them by the Ministry. Author – CS Divesh Goyal, GOYAL DIVESH & ASSOCIATES Company Secretary in Practice from Delhi and can be contacted at csdiveshgoyal@gmail.com). Disclaimer: The entire contents of this document have been prepared based on relevant provisions and as per the information existing at the time of the preparation. Although care has been taken to ensure the accuracy, completeness, and reliability of the information provided, I assume no responsibility, therefore. Users of this information are expected to refer to the relevant existing provisions of applicable Laws. The user of the information agrees that the information is not professional advice and is subject to change without notice. I assume no responsibility for the consequences of the use of such information. IN NO EVENT SHALL I SHALL BE LIABLE FOR ANY DIRECT, INDIRECT, SPECIAL OR INCIDENTAL DAMAGE RESULTING FROM, ARISING OUT OF OR INCONNECTION WITH THE USE OF THE INFORMATION Disclaimer: The content of the blog does not create any responsibility of the firm / its authorized persons whose website is being accessed. The blog is not for legal use. Kindly verify the correctness of data/contents from your own sources. This is only for information purpose. Add a Comment Name: Your Comment: View Comments (0)

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