Procedure to Establish a Liaison Office in India by a Foreign Company: India Business Entry

Repatriation of Funds by Foreign Investors from India | Corporate Lawyer in Delhi NCR | Corporate Lawyer in Delhi | Corporate Lawyer in Noida | Corporate Lawyer in Gurugram | FDI Attorney in Delhi NCR | FDI Attorney in Delhi | FDI Attorney in Noida | FDI Attorney in Gurugram | FDI Attorney in India | FDI in India | Foreign Direct Investments in India | FDI Legal Services in Delhi | FDI Legal Services in Noida | FDI Legal Services in Gurugram | FDI Legal Services in India | India Business Entry | Setup Business in India | Setting up Business in India |

Introduction for Setting up of Liaison Office in India through Foreign Direct Investments in India or FDI in India
Formation of a company in India can be done by setting up a liaison office is a common choice for foreign companies looking to set up a business in India. The liaison office is the representative office. The article will explain how to establish a liaison office in India, including legal requirements, compliances, necessary documents, and special approvals for setting up a Business in India.

Establishment of a liaison office in India
Establishing a liaison office under the Foreign Exchange Management Act, of 1999, with the Reserve Bank of India’s clearance, enables a foreign firm that was formed outside of India to grow its operations in India.
They can set the Liaison office in two ways
• Reserve bank
• Government Route
The liaison office plays a major role as a channel of communication between the head office located outside India and business entities in India. The permission for a foreign entity is granted only for three financial years, and it can extend the initial time limit of such an office within the authorized category, and the minimum net worth it should have of USD 50,000.

Procedure for Establishing a Liaison Office in India: India Business Entry
As per Rule 3 (3) of Companies (Registration of Foreign Company Rules, 2014) and Chapter XXII of the Companies Act 2013, the foreign company shall file Form FC-1 within 50 days of the establishment of the place of business in India.
We shall also support the application with an attested copy of the RBI approval under FEMA as per Section 380, subsection (1). According to the Reserve Bank of India, an AD Category-I bank must evaluate a foreign company wanting to expand in India.

Procedure for Establishing the Liaison Office for Residents Outside India
An application from a person residing outside of India to open a liaison office in India must first receive Reserve Bank of India approval, after which the general manager of an AD category-I bank will process the application and consult with the Indian government. The following circumstances.
1. The applicant wishes to establish the liaison office in Jammu and Kashmir, the North-East region, or the Andaman and Nicobar Islands. The applicant is a national of Sri Lanka, Afghanistan, Iran, China, Hong Kong, Bangladesh, or Macau, or a firm that was established in one of those countries.
2. The applicant is a citizen or registered with the company in Pakistan.

Prior approval of the Reserve Bank of India is not required when the applicant’s main lines of operation are in the following four industries: private security, information and broadcasting, defense, and telecommunications. Prior approval is not necessary if the relevant ministry has already given it. And if the applicant is a non-Government organization (NGO), they shall obtain permission and a certificate under the Foreign Contribution Act 2010.

Criteria for Approval of Setting-Up of Liaison Office in India by an NRI
For a liaison office, a track record of profitability over the previous three fiscal years in the home nation and a minimum net worth of USD 50,000 or its equivalent are required. A subsidiary of a non-financially sound applicant may submit a letter of comfort (LOC) (Annex A) from the parent company, provided that the parent company satisfies the requirements for net worth and profit.

Step wise Procedure for Setting-Up Liaison Office in India
• The application for establishing a Liaison office in India may be submitted by the non-resident entity in form FNC (Annex B) To a designated AD category one bank along with the prescribed documents mentioned in the form and the LOC.
• The AD-category-1 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 the liaison office.
• After compliance with the extent of KYC, Norms grants approval to the foreign entity for establishing the liaison office in India.
• The AD category banks will frame appropriate policies for dealing with this application in conformity with FEMA regulations and directions.
• However, before issuing the approval letter to the applicant, the AD category-1 bank shall forward a company of the Form FNX along with the details of the approval proposed to be granted by it to the general manager, RBI for the allotment of Unique Identification Number (UIN) to each liaison office.
• Except in the case of non-banking financing companies (NBFC) and those firms involved in the building and development industries, the Liaison office normally has a three-year validity period. who only have a two-year validity span.
• The applicant shall inform the designated AD category I bank of the date on which it has set the liaison office.
• All applications for establishing a Liaison office in India by foreign banks and insurance companies will be directly received and examined by the Department of banking regulation (DBR), the Reserve Bank of India, the central office, and the Insurance Regulatory and Development Authority (IRDA) respectively. No UIN is required for such representative offices from the Reserve Bank of India foreign exchange department.

Opening Bank Account to establish Liaison Office in India
To open the account, you have to approach the AD Category I bank in India to open an account to receive remittances from its head office outside India. At the liaison office, you can opt for only one bank account without prior permission from the Reserve Bank of India.

Conditions for establishing a Liaison Office in India
• RBI approval is required for organizations from Pakistan, Bangladesh, Sri Lanka, Afghanistan, Iran, China, Hong Kong, Macau, Nepal, Bhutan, or China to buy property in India.
• BO/LO may conduct their authorized activities from any leased property for a maximum of five years.
• The BO/LO of a person who resides outside of India is permitted to make a term deposit for a maximum of six months.
• The firms might establish only the LO in India registered in Nepal. The establishment of the Branch Office was not permitted.
• Foreign Entities may purchase any transportable property for their use and engage in permitted activities.
• Any individual who is a citizen of or who has registered pin Pakistan, Bangladesh, Sri Lanka, Afghanistan, Iran, China, Hong Kong Macau must take prior permission from the Reserve Bank of India.

Conclusion
The RBI and the Department of Industrial Policy and Promotion (DIPP) must both give their approval before a foreign company can open a liaison office in India. Opening a bank account, selecting a local agent, submitting the required paperwork, and registering with other agencies including the Registrar of Companies and tax authorities are all part of the procedure. It is crucial to adhere to reporting requirements and applicable laws during the formation of the liaison office.
Authored By: Adv. Anant Sharma & Chandana Surthi

 

#anantsharma #mylawyersadvice #fdiinindia #foreigndirectinvestmentsindia #makeinindia #startupindia #corporateattorneyindia #corporatelawsindia #businesslawsindia #fdiinindia #businessattorneyindia #investmentsinindia #manufacturinginindia #exportsfromindia #importsfromindia #India