Opening a Branch Office

SETTING UP BRANCH OFFICE

‘Branch Office’ in relation to a company, means any establishment described as such by the company.

As per  Notification No. FEMA 22(R) /RB-2016  dated 31.3.2016, No person resident outside India shall without prior approval of the Reserve Bank open in India a branch office or a liaison office or a project office or any other place of business by whatever name called except as laid down in these Regulations.

Eligibility for opening Branch office in India:

A person resident outside India can establish a branch office in India provided it meets the following criterion:

1. a profit making track record during the immediately preceding five financial years in the home country and
2. net worth of not less than USD 100,000 or its equivalent.

Provided that a person resident outside India that is not financially sound and are subsidiaries of other companies may submit a Letter of Comfort ( as prescribed) from their parent company subject to the condition that the parent company satisfies the prescribed criterion for net worth and profit.

Permissible activities:

A person resident outside India permitted by the Reserve Bank under these Regulations to establish a branch or liaison office in India may undertake or carry on any activity specified in Schedule I, but shall not undertake or carry on any other activity unless otherwise specifically permitted by the Reserve Bank.

1. Export/import of goods.
2. Rendering professional or consultancy services.

• Carrying out research work in which the parent company is engaged.

1. Promoting technical or financial collaborations between Indian companies and parent or overseas group company.
2. Representing the parent company in India and acting as buying/ selling agent in India.
3. Rendering services in Information Technology and development of software in India.

• Rendering technical support to the products supplied by parent/group companies.
• Representing a foreign airline/shipping company.

Application form:  A person resident outside India desiring to establish a branch office or any other place of business in India shall submit an application in Form FNC to an Authorised Dealer Category-I bank.

In case no office is opened by the person resident outside India within six months from the date of approval letter, the approval for establishing the office in India shall be cancelled. In cases where the person resident outside India is not able to open the office within the stipulated time frame due to reasons beyond their control, the Authorised Dealer Category-I bank may consider granting extension of time for setting up the office by a further period of six months. Any further extension of time shall require the prior approval of the Reserve Bank in this regard.

Documents required for forming a Branch Office in India

Currently as per the RBI Requirement the application for the branch office and BRANCH office is submitted through the Authorized dealer. The authorized dealer means the various institution having banking licenses.

The following filings are required to open a branch office in India:

• Form FNC 1
• Letter from the principal officer of the Parent company to RBI.
• Letter of authority from the parent company in favor of Local Representative.
• Letter of authority/ Resolution from parent company for setting up BRANCH office in India.
• Comfort letter from the parent company intending to support the operation in India.
• 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.
• Certification of Incorporation – Translated & Duly Notarized and properly authenticated.
• The Latest audited Balance sheet and annual accounts of parent company duly Translated notarized for past Three years and properly authenticated
• Name, Address, email ID and telephone number of the authorized person in Home Country.
• Details of Bankers of the Organization the Country of Origin along with the bank account number
• 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
• Expected funding level for operations in India.
• 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
• Details of Activity carried out in Home Country by the applicant organization in brief about the product and services of company in Brief.
• Bankers Certificate
• Latest Proof of identity of all the Directors – Properly Certified by Banker in Home Country and duly authenticated
• Latest Proof of address all of Directors – Properly Certified by Banker in Home Country and duly authenticated
• Details of the Individuals / Company holding more 10% of Equity
• Structure of the Organization and its Shareholding pattern
• Complete KYC of Shareholders holding more than 10% Equity in the Applicant Company
• Resolution for Opening up Bank Account with the Banker
• Duly Signed Bank Account Opening Form for Indian Bank

Registration with State Police Authorities:

A person from Bangladesh, Sri Lanka, Afghanistan, Iran, China, Hong Kong or Macau opening a branch office or any other place of business in India shall have to register with the concerned State Police Authorities. Copy of approval letter for ‘persons’ from these countries shall be marked by the AD Category-I bank to the Ministry of Home Affairs, Internal Security Division-I, Government of India, New Delhi.

Remittance of profit or surplus:

Branch office may remit outside India profit of the branch net of applicable Indian taxes, on production of the following documents to the satisfaction of the Authorized Dealer Category-I bank through whom the remittance is effected:

1. A certified copy of the audited Balance Sheet and Profit and Loss account for the relevant year.
2. A Chartered Accountant’s certificate certifying 1. the manner of arriving at the remittable profit; 2. that the entire remittable profit has been earned by undertaking the permitted activities and 3. that the profit does not include any profit on revaluation of the assets of the branch.

Acquisition of property Acquisition of property by branch office shall be governed by the guidelines issued under Foreign Exchange Management (Acquisition and transfer of immovable property outside India) Regulations.

Transfer of assets: A person resident outside India permitted under these Regulations to establish a branch office may apply to the concerned Authorised Dealer Category-I bank for transfer of its assets to a Joint Venture/Wholly Owned Subsidiary or any other entity in India. Authorised Dealer Category-I bank shall be guided by the instructions laid down by Reserve Bank in this regard.

Approval of the Reserve Bank in certain cases for establishment:

Any application from a person resident outside for opening of a branch office or any other place of business in India shall require prior approval of Reserve Bank in the following cases where

1. the applicant is a citizen of or is registered/incorporated in Pakistan;
2. 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 branch in Jammu and Kashmir, North East region and Andaman and Nicobar Islands;
3. the principal business of the applicant falls in the four sectors namely Defence, Telecom, Private Security and Information and Broadcasting:

Provided that in the case of proposal for opening a project office relating to defence sector, no separate reference or approval of Government of India shall be required if the said non-resident applicant has been awarded a contract by/ entered into an agreement with the Ministry of Defence or Service Headquarters or Defence Public Sector Undertakings.

1. The applicant is a Non-Government Organisation, Non-Profit Organisation, Body/ Agency/ Department of a foreign government. Such applications shall be forwarded to the Reserve Bank, Foreign Exchange Department, Central Office Cell, New Delhi by the Authorised Dealer Category-I bank and be considered in consultation with the Government of India.

Incorporation Requirements for Branch Office under ROC

A foreign company shall, within a period of thirty days of the establishment of its place of business in India, file with the registrar Form FC-1

• Certified copy of the charter, statutes, or memorandum and articles of the company or other instrument constituting or defining the constitution of the company (Mandatory).
• List of directors and secretary of the foreign company (Mandatory).
• Power of attorney or board resolution in favor of the authorized representative(s) (Mandatory).
• Reserve bank of India approval letter (It is mandatory to attach attested copy of such approval).
• Copy of permission letter of other Authority(s)/Regulator(s), if any is required to be attached.

Post Incorporation Procedural Requirements

After Incorporation, the following requirements are also necessary for a branch office:

• Permanent account number – PAN
• Tax deduction number – tan number Shop & establishment
• Registration Service Tax Registration if the Branch provides any services in India
  • VAT & CST Registration , If the Branch carries out trading activities in India

Annual Compliance Activities required for a Branch Office

Every year a branch office is required to undertake the following activities:

• Maintenance of Books of Account
• Getting Annual Accounts audited
• Filling of Annual Activity Certificate with RBI
• Filling of Annual Return and Balance sheet with Registrar of Companies in FC 4 & FC 3
• Intimating any change in constitution of Foreign Company to RBI & ROC (FC 2)
• Intimating any change in Directors of Foreign Company to RBI & ROC
• Intimating each and every change in the BRANCH office to RBI & ROC
• No additional place of business can be started unless approval is taken from RBI.

Application for Grant of Certificate as Venture capitalist under SEBI Regulation.

Any company or trust or a body corporate proposing to carry on any activity as a venture capital fund on or after the commencement of these regulations shall make an application to the Board for grant of a certificate an application  shall be made to the Board in Form A and shall be accompanied by a nonrefundable application fee as specified in Part A of the Second Schedule to be paid in the manner specified in Part B thereof.

Eligibility Criteria:

For the purpose of the grant of a certificate by the Board the applicant shall have to fulfill in particular the following conditions, namely

(a) if the application is made by a company :—

(i) memorandum of association as has its main objective, the carrying on of the activity of a venture capital fund;

(ii) it is prohibited by its memorandum and articles of association from making an invitation to the public to subscribe to its securities;

(iii) its director or principal officer or employee is not involved in any litigation connected with the securities market which may have an adverse bearing on the business of the applicant;

(iv) its director, principal officer or employee has not at any time been convicted of any offence involving moral turpitude or any economic offence; it is a fit and proper person;

2 [(v)the applicant is a fit and proper person;

(c) if the application is made by a body corporate—

(i) it is set up or established under the laws of the Central or State Legislature

(ii) the applicant is permitted to carry on the activities of a venture capital fund.

(iii) the applicant is a fit and proper person.

(iv) the directors or the trustees, as the case may be, of such body corporate have not been convicted of any offence involving moral turpitude or of any economic offence.

(v) the directors or the trustees, as the case may be, of such body corporate, if any, is not involved in any litigation connected with the securities market which may have an adverse bearing on the business of the applicant.