Setting up a Liaison Office in India

Foreign companies planning to set up their business operations in India need to start a liason office. The main purpose of starting a liason office is to explore possible business opportunities in India by gathering relevant business information.This helps the companies to develop a business strategy to tap the existing business potential in India. A liason office also acts as a marketing channel to provide business information about the parent company and their products to the prospective clientele in India.

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Documents Required for Liaison office Setup in India

Currently as per the RBI Requirement the application for the Liaison office and Liaison office is submitted through the Authorized dealer. The authorized dealer means the various institution having banking licenses. The applicant of the Branch/Liaison office has to opt for the any of the Authorized Dealer; it is always preferable for the company to opt for the same authorized dealer as it is dealing in the home country.

  • Form FNC – 1 – Three copies*
  • 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 Liaison 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 Notarised and Certified by Indian Consulate
  • The Latest audited Balance sheet and annual accounts of parent company duly Translated notarized for past Three years. & Certified by Indian Consulate & Directors
  • Latest Proof of identity of all the Directors - Certified by Consulate and Banker in Home Country
  • Latest Proof of address all of Directors - Certified by Consulate and Banker in Home Country
  • Operating history of the company worldwide, Proposed interests and activities in India.
  • 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 organisation in brief about the product and services of company in Brief.
  • Bankers Certificate
  • Details of the Individuals / Company holding more 10% of Equity
  • Organization Structure - 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.
  • Reasons for wanting to open a Liaison office &, any foreign exchange implications for such matters.

NOTE - The above list is not exhaustive and may differ depending upon the requirement from the Authorised Dealer.

Foreign Company can open Liaison office in India due to several reasons; Companies incorporated outside India and engaged in to test and understand the Indian market, as it does not allow the companies to do business but just to be in the market and understand the Indian market or carry out the Research & Development activities or to understand the problem of existing clients of the company and serve them better activities are allowed to set up Liaison office in India with specific approval of the Reserve Bank. Such Liaison office s are permitted to represent the parent / group companies and undertake the following activities in India subject to few Conditions:

Activities Allowed to Liaison Office

  • Representing in India the parent company / group companies.
  • Promoting export / import from / to India.
  • Promoting technical/financial collaborations between parent/group companies and companies in India.
  • Acting as a communication channel between the parent company and Indian companies.

Activities Allowed to Liaison Office

  • 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]
  • Retail trading activities of any nature is not allowed for a Liaison office in India.
  • A Liaison office is not allowed to carry out manufacturing or processing activities in India, directly or indirectly without Approval of RBI.
  • Profits earned by the Liaison offices are freely remittable from India, subject to payment of applicable taxes.

Simple Steps to Opening a Liaison Office in India Registration!

The application for Liaison office Licenses is approved by the RBI, but as per the recent changes the applications for Liaison office are routed through the Authorized Dealers (AD). Due to this the timeline for setting up the Liaison office has increased tremendously. Further the documentation required for the same has also increased to a great extent.

Application entity through a designated ad category – I bank 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:

  • Form FNC
  • 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.

These applications are considered on a case-to-case basis. The RBI generally gives permission in a time span of about 2 to 4 weeks. The application must include required document.

Procedure after getting the RBI licence, application submitted to with registrar of companies, Delhi

Every Liaison office registered with RBI shall get itself registered with the Ministry of Corporate Affairs; the foreign company is also required to obtain a Certificate of establishment of place of business in India from the Registrar of Companies (ROC. On such registration a CIN i.e. Corporate Identity Number is allotted by the Registrar of Companies. Which required following document including:

  • Form 44
  • 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.

These applications are considered on a case-to-case basis. The RBI generally gives permission in a time span of about 2 to 4 weeks. The application must include required document.

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Frequently Asked Questions (Faq)

  • What are the features of Liaison office of Foreign Company in India?

    Features of Liaison Office

    • The name of Indian liaison office shall be same as parent company.
    • The governing body for the Liaison office License is Reserve Bank of India.
    • It is suitable for foreign Companies looking to setup a temporary office in India to liaison its existing business with Indian clients.
    • The Liaison office does not have any ownership, it is just extension of the exiting company in the foreign country.
    • All the expenses of the Liaison office are met by the head office, hence the funds shall be received from head office account only.
    • The License for the Liaison office is given for three years and shall be renewed every 3 years.
  • What are the business licenses may require / applicable on a Liaison office of Foreign Company in India.

    Business Licenses Applicable To Liaison Office

    • Permanent Account Number (PAN)
    • Tax Deduction Number – Tan Number
    • Shop & Establishment Registration
  • What are the Compliances for Liaison office of a Foreign Company in India.

    Compliances to be Carried Out by Liaison Office of a Foreign Company in India

    After Establishment Of By Liaison Office

    • 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 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 report thus filed as above shall also be filed with AD by the Liaison office concerned.

    Annual Compliances

    • Maintenance of Books of Account for the activity carryout in India.
    • Getting Annual Accounts audited for the activity carryout in India.
    • File Annual Activity Certificates from the Auditors to be submitted to the Reserve Bank of India,
    • Audited Financial Statements including Receipts and Payments A/C shall be filed with the Directorate of Income Tax.
    • Filling of Annual Return Compliances and Balance sheet with the Registrar of Companies.
    • Intimating any change in constitution of Foreign Company to Reserve Bank of India & ROC
    • Intimating any change in Directors of Foreign Company to Reserve Bank of India & ROC
    • Intimating each and every change in the Liaison office to Reserve Bank of India & ROC
    • No additional place of business can be started unless approval is taken from Reserve Bank of India.
  • How to close a Liaison office of a Foreign Company inIndia?

    Activity for Closure Liaison Office of a Foreign Company in India

    • Overseas firms should conduct a formal due diligence process to evaluate the expectations and limitations of the Indian associate, to check the validity of the partners’ business operations, to review the validity of the documents produced by the prospective partners, and to evaluate any risk factors associated with the potential partners.

    Generally the Liaison office licenses is given for three years, if at any time the Company plans to close the Liaison office setup in India it shall file the necessary documents with the Authorized Dealer, and the application for the closure shall be forwarded by the Authorised Dealer.

    • Copy of the Reserve Bank's permission/ approval from the sectorial regulator(s) for establishing the Liaison office.
    • Auditor’s certificate- i) indicating the manner in which the remittable amount has been arrived at and supported by a statement of assets and liabilities of the applicant, and indicating the manner of disposal of assets; ii) confirming that all liabilities in India including arrears of gratuity and other benefits to employees, etc., of the Office have been either fully met or adequately provided for; and iii) confirming that no income accruing from sources outside India (including proceeds of exports) has remained un- repatriated to India.
    • No-objection / Tax Clearance Certificate from Income-Tax authority for the remittance/s.
    • Confirmation from the applicant/parent company that no legal proceedings in any Court in India are pending and there is no legal impediment to the remittance.
    • A report from the Registrar of Companies regarding compliance with the provisions of the Companies Act, 1956, in case of winding up of the Office in India.
    • Any other document/s, specified by the Reserve Bank while granting approval.

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