Complete understanding of setting up a Branch Office in India

Complete understanding of setting up a Branch Office in India 

Complete understanding of Global Companies Preferences and Needs for open up operation setting up a Division or branch in India. a foreign company for setting up an office in India

  • Branch office in India
  • The liaison office in India or
  • Setting up a Private limited company in India or
  • Project office by a foreign company.
www.carajput.com;Foreign Company

www.carajput.com; Foreign Company

There are few requirements for a foreign corporation to open its branch in India. A subsidiary should be established for different reasons and the establishment of a head office in India’s requirements and needs.

The Reasons for set up Branch Office in India

For the following reasons, international firms, including US corporations, are allowed to set up branch offices in India:

  • Import and Export of supply of goods
  • Provision for Professional or advisory facilities
  • Start the research work which includes the parent company is already doing.
  • for enlarge the Promoting technical or financial collaborations between Indian businesses and a foreign parent or group of companies worldwide.
  • To provide the services to the parent company in India and to act as purchasing/selling representatives in India.
  • for initiate information technology services, and software development in India.
  • for the starting technological assistance to parent/group business provided goods.
  • open up Shipping / Foreign Airline operation
  • Global Banks opening

A Branch office is not allowed to conduct production operations of its own but is authorized to subcontract them to an Indian company. Branch offices founded with RBI approval may remit branch income outside India, net of relevant Indian taxes, and subject to RBI guidelines subjected to the condition of RBI grants permission to set up branch offices.

Specifications and conditions of an establishing  Branch office in India

www.carajput.com;procedure to establish a foreign entity

www.carajput.com; procedure to establish a foreign entity

  • Indian branch office name will be the same as the parent business name.
  • The Branch Office has no control, it is just an extension of an Existing company foreign world market.
  • All branch office costs are borne by the Principal /head office because it has Indian activities revenue does not have revenue.
  • Over the immediately intervening five years in the homeworld, the international parent corporation planning to open a branch office in India would have a successful track record.
  • The company must have The Net Worth, i.e., amount of paid-up capital and free deposits, less intangible assets as specified in the latest Audited Balance Sheet or Financial Report accredited by a Certified Public Accountant or other Registered Financial Practitioner of that name shall not be less than or equivalent to USD 100,000.

A branch office is ideal for international firms looking to set up a temporary office in India and not involved or intending to make long-term plans for Indian operations; except for the above-listed finance, shipping and airlines, etc.

Necessary document required to establish a branch office in India

www.carajput.com; Branch Office

www.carajput.com; Branch Office

Presently, the application for the branch office and BRANCH office is sent through the AD according to the Reserve Bank of India conditions. The approved dealer implies obtaining banking licenses for a different entity.

To start a branch office in India the following filings are required:

  • Certification of Incorporation – Translated & duly notarized and properly authenticated.
  • The Latest audited Balance sheet and annual accounts of the parent company duly Translated notarized for the past 3 years and properly authenticated.
  • The expected funding level for operations in India.
  • Details Relating to address of the proposed local office, the number of persons likely to be employed, the 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 the company in Brief.
  • Bankers Certificate
  • Name, Address, email ID, and telephone number of the authorized person in Home
  • 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 the parent company for setting up BRANCH office in
  • 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.
  • 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
  • Form FNC 1 (Three copies)
  • Latest Proof of identity of all the Directors – Properly Certified by Banker in Home Country and duly authenticated
  • Latest Proof of address all of the 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
  • Note: We can assist in getting all these documents, wherever required prepared and advice on the various issue relating to this. Please feel free for clarification, if any required in this regard.

The RBI accepts the application for BRANCH office licenses but the Approved Dealers (AD) route the applications for BRANCH office as per the recent changes. Despite that, the timeframe for creating the BRANCH office has significantly expanded. Even the paperwork needed for the same has significantly increased.

Other criteria for Incorporation of Branch Office

That RBI-licensed branch office shall be licensed with the Ministry of Corporate Affairs, it is a branch office registration as a foreign business establishment in India. On such registration, the business registrar allocates a CIN i.e. Corporate Identification Code. The following forms must be filled out with the Companies Registrar:

  • Form 44
  • Charter, laws or document and articles of agreement or other act constituting or establishing the creation of a company(In the manner provided for in Rule 16, General Rules and Functions of the Companies (Central Government), 1956)
  • Unless the records alluded to above are not in English instead of the original edition of the papers.
  • Information Director(s)-Persons
  • Information Director(s)-Public bodies
  • Reserve Bank of India letter of approval
  • Information Secretary(s)
  • Resolution of control of attorney or board in lieu of designated representative(s)

Procedural criteria for post-incorporation

The below few more criteria for a branch office are also required after Incorporation:

  • PAN of company.
  • TAN (Tax-deductible Number) -Shop and Establishment certificate details
  • certificate of GST Registering if  Branch provides services in India or provide  facilities in India

Annual enforcement practices a Branch Office needs

www.carajput.com; Branch Office

www.carajput.com; Branch Office

Every branch office is required each year to do the following activities:

  • To be maintaining complete record Files
  • To audited Financial Report
  • To be Filling with RBI Annual Operation Certificate
  • To be Completion of the regular report and balance sheet for business registrar
  • to timely inform about some shift in the world Business constitution of RBI & ROC
  • to timely information about any change of Foreign Company Directors to RBI & ROC
  • to timely information about all change or shift to RBI & ROC at the BRANCH office
  • No additional place of business may be established until RBI intimation and approval.

Regarding company management standards in India see also Annual Corporate Filings in India.

How to close a Branch office actives in India

www.carajput.com; Branch Office

www.carajput.com; Branch Office

A branch office license is usually issued for three years. If a business decides to close the branch office set up in India at any time, it must file with the RBI via its Registered Dealer the required documentation. Liaison offices cannot able closed without Properly compliance made with ROC,

The specification for the termination usually contains the followings:

DOCUMENTS REQUIRED FOR CLOSING OF LIAISON OFFICE: – For processing the Closing of Liaison Office, it shall file the necessary documents with the  AD, and the application for the closure shall be forwarded by the Authorized Dealer. following documents are required

  •   Copy of the Reserve Bank’s permission/ approval from the sectoral regulator(s) for establishing the BO / LO.
  •   Auditor’s certificate-
  1. 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;
  2. 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.
  • NOC / Tax Clearance Certification for the remittances from the Income-Tax department.
  • Confirmation from the applicant/parent corporation that no civil proceedings are pending at any court in India and that there is no procedural barrier 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.
  • Copy of the authorization/approval by the Sectoral Regulator(s) of the Reserve Bank to create the BO / LO.

Note: We can assist in getting all these documents, wherever required prepared and advice on a various issues relating to this. Please feel free for clarification, if any required in this regard.

The branch must be on “Stand Alone basis” in India 

Stand-alone branch offices are segregated and restricted to the Special Economic Zone ( SEZ) only, and no commercial activity/transaction is allowed beyond India’s SEZs, which involve branches/subsidiary offices of the parent company.

For a business to create a branch/unit in SEZs to conduct manufacturing and service activities under prescribed conditions, no approval is needed from RBI.

Liaison Office /Representatives office 

www.carajput.com; Branch Office

www.carajput.com; Branch Office

With the approval of the Indian government, a liaison office could be created or started. The Liaison Office’s function is limited to knowledge collection, export/import promotion, and promoting technical/financial partnerships.

The Liaison Office can not do any commercial operation explicitly or implicitly for business operations in India. For  processing the Liaison Office application of Stand Partners, the following fresh documents are required:

  • Duly signed & stamped detailed covering application ;
  • Financial projections of the proposed liaison office duly certified from its auditors ;
  • Signed & stamped new form FNC in quadruplicate ;
  • Fresh notarised & apostle Certificate of Incorporation of the applicant company along with Memorandum & Articles of Association ;
  • Signed & stamped Audited Financials of last 3 year from the auditors of the company duly signed from directors of the applicant company;
  • Fresh notarised & apostle POA along with duly signed & stamped board resolution of the applicant company
  • Signed & stamped letter of authority in our favor;
  • Signed & stamped details of activities carried on by the applicant company and to be carried on by the proposed liaison office ;
  • Signed & stamped details of Companies banker along with a report from the respective bank  about its tenure of operation of account & relations with the applicant company ;
  • Signed & stamped details of the state;
  • Signed & stamped details of directors of the applicant company;
  • A letter of comfort is not required in case if the applicant company provides audited financials of last year;

Should you require any further clarification/explanation in this regard, please feel free to revert.

Project Office in India 

www.carajput.com; Branch Office

www.carajput.com; Branch Office

Foreign companies intending to carry out unique projects in India will create temporary project/site offices in India to carry out activities relevant to that project only. The Indian Government has now given foreign companies normal permission to create project offices subject to defined conditions.

S.No. Particulars
A. SET-UP OF PROJECT OFFICE
1. GENERAL PERMISSION
Reserve Bank has granted general permission to foreign companies to establish Project Offices in India,

provided they have secured a contract form an Indian company to execute a project in India, and

(a) the project is funded directly by inward remittance from abroad; or

(b) the project is funded by bilateral or multilateral International Financing Agency; or

(c) the project has been cleared by an appropriate authority, or (d) a company or entity in India awarding the contract has been granted Term Loan by a Public Financial Institution or a bank in India for the project.

2. SPECIFIC PERMISSION
However, if the above criteria are not met, or if the parent entity is established in Pakistan, Bangladesh, Sri Lanka, Afghanistan, Iran or China, such applications have to be forwarded to the Central Office of the Foreign Exchange Department of the Reserve Bank at Mumbai for approval.
Procedure for Opening Project Office by Foreign Companies in India:

·        The foreign company has to apply in the form FNC 1 to the Reserve Bank of India in order to open a project office in the country

·        The foreign company has to secure a contract for a project from an Indian firm that will be executed in India

·        The project, that the foreign company has secured, has to be approved by the appropriate authority or

·        The project, that the foreign company has secured, has to receive funding directly from abroad in the form of inward remittance or

·        The project that the foreign company has secured has to receive funding from the Agency of International Financing or

·        The Indian firm that has given the contract to the foreign company has been granted by a bank or Financial Public Institution a term loan in the country for the project

 
Documents/Information Required:

·        Duly filled application form by Foreign Company

·        Copy of Memorandum / Charter of incorporation of a foreign company

·        Certificate of Incorporation of a foreign company

·        KYC of a foreign company

·        Name and address of Foreign Company

·        Reference No. and date of letter awarding the contract along with a copy of the contract, if any

·        Particulars of authority awarding the contract

·        Total amount of contract

·        Address of proposed project office

 

Note: It is really necessary to select the right form of company or corporate body for a foreign investor in India that better fits its interests and takes care of the issues of liability and tax planning. Foreign firms seeking to do business in India will pay careful attention to Foreign Investors Entry Strategies & Tax Preparation and corporate structuring to save taxes to the maximum possible degree permitted by laws and international tax treaties.

Disclaimer: The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances; before making any decisions do consult your Professional / tax advisor. For misrepresentation or interpretation of act or rules Author does not take any responsibility. Neither the author nor the firm accepts any liability for the loss or damage of any kind arising out of information in this document or for any action taken in reliance there on. carajput.com is committed to helping entrepreneurs and small business owners to start, manage and grow their business with peace of mind. Our goal is to support the entrepreneur on legal and regulatory requirements and to be a partner throughout the entire business life cycle, offering support to the company at every stage to ensure that it is compliant and consistently growing. Hope the information will assist you in your Professional endeavors. For query or help, contact: info@carajput.com or call at 09811322785/4 9555 5555 480)

A FORIGN COMPANY OPEN A BRANCH OFFICE IN INDIA

www.carajput.com; Foregin Company

www.carajput.com; Foreign Company

REQUIRED CONDITIONS OF A FOREIGN COMPANY OPEN A BRANCH OFFICE IN INDIA,

  • The name of the Indian Branch office shall be the same as the parent company.
  • The Branch office does not have any ownership, it is just an extension of the exiting company in a foreign country.
  • All the expenses of the BRANCH office are met by the head office if it does not have the revenue from Indian
  • The foreign parent company looking to start a Branch office in India shall have a profitable track record during immediately preceding five years in the home country.
  • The Net Worth i.e. 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 shall be not less than or equal to USD 100,000.
  • A branch office is suitable for foreign companies looking to set up a temporary office in India and not interested or not planning to have long term plans for the Indian operations; except banking, shipping and airlines, etc. mentioned above.

PROCEDURES FOR SETTING UP A BRANCH OFFICE IN INDIA BY A FOREIGN COMPANY:

  • Approval from RBI– Permission for setting up branch 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 an office in India as well as the financial position of the company while scrutinizing the application. (note – for setting up a company, there are no criteria for checking the track record or the financial position of the parent company)
  • The applications from such entities in Form FNC (Annex-1) will be considered by Reserve Bank under two routes: The application in the prescribed form (Form FNC)should be submitted to the RBI through the Authorized Dealer bank.
  • Reserve Bank Route— where principal business of the foreign entity falls under sectors where 100 percent
  • 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 percent
  • FDI is not permissible under the automatic route. Applications from entities falling under this category and those from Non – Government Organizations / Non – Profit Organizations / Government Bodies / Departments are considered by the Reserve Bank in consultation with the Ministry of Finance, Government of India.
  • Procedure for Approval from RBI:

  1. Currently, as per the RBI Requirement, the application for the branch office and BRANCH office is
  2. submitted through the Authorized dealer. The authorized dealer means the various institution having
  3. banking licenses.
  4. The application in the prescribed form (Form FNC) should be submitted to the RBI.

Disclaimer: The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances; before making any decisions do consult your Professional / tax advisor. For misrepresentation or interpretation of act or rules Author does not take any responsibility. Neither the author nor the firm accepts any liability for the loss or damage of any kind arising out of information in this document or for any action taken in reliance there on. carajput.com is committed to helping entrepreneurs and small business owners to start, manage and grow their business with peace of mind. Our goal is to support the entrepreneur on legal and regulatory requirements and to be a partner throughout the entire business life cycle, offering support to the company at every stage to ensure that it is compliant and consistently growing. Hope the information will assist you in your Professional endeavors. For query or help, contact: info@carajput.com or call at 09811322785/4 9555 5555 480)

REPORTING OF FORM FC-TRS TO RBI

REPORTING OF FORM FC-TRS TO RBI

www.carajput.com FC-TRS

www.carajput.com FC-TRS

RBI Circular No. 40 dated 1st February 2016; RBI has made it mandatory to report any transactions and filing of forms online in respect of issue and transfer of shares from an Indian Entity to outside India.

What is RBI Compliance under FORM-FC-TRS? 

  • Foreign currency transfer is the absolute full form of the Form FC-TRS.
  • It is a process used by shareholders residing outside India who are residing in India or vice versa when transferring their shares.
  • The FC-TRS form, together with the FC-GPR form, will be uploaded to its authorized dealer bank, which will send the very same form to the Reserve Bank Of India.
  • Foreign investors can invest in Indian companies by purchasing/acquiring existing shares from Indian shareholders or from other non-resident shareholders.
  • General permission has been granted to non-residents / NRIs for the acquisition of shares by way of transfer.
  • Any transfer of shares takes place between a resident and a non-resident, the resident individual or the entity has to report the transaction to RBI by filing of Form FC-TRS online at https://www.ebiz.gov.in. The reporting of Form FC-TRS should be submitted to the AD category bank within a period of 60 days from the date of receiving the money.

What is the process of Form FC-TRS 

a) Download form from Pre-filled Form FC-TRS from https://www.ebiz.gov.in

b)Fill the required details of the Investee Company

(i) Name of the Company

(ii) PAN of the Company

(iii) Address of the Company

(iv)Telephone Number of the Company

(v) Fax Number of the Company

(vi) Email ID of the Company

(vii) Main Business Activity of the Company as per the NIC Code  2008 series

c)Enter the details of the Buyer

(i) Name of the Buyer

(ii) Address of the Buyer

(iii) Telephone Number of the Buyer

(iv) Email ID of the Buyer

(v) Nature of the Investing Entity

(vi) Date and Place of Incorporation of the Investing Entity

d)Details of the Seller

(i) Address of the Seller

(ii) Telephone Number of the Seller

(iii) Email of the Seller

(iv) Name of the Disinvesting Entity

e)Enter the details of the Foreign Investment in the Company.

f)Mandatory Attachments

(i) Declaration by the Non-resident Buyer

(ii) KYC Form in respect of Non-resident Investor

(iii) Copy of FIRC (To be procured from Bank receiving the remittance)

(iv) Valuation Report by a Chartered Accountant or SEBI registered Merchant Banker

g)Once the form is completed in all respects without any error; the Name, Designation, Place, and Digital Signature of the Declarant is to be attached

After following all the above steps the form is now ready to be uploaded on the Ebiz portal. Upon uploading the Form an “Application Number” is generated instantly and it can be used to keep a track of the status of the Form.

It has to be well kept in mind that merely uploading the Form does not mean that all the compliances have been fulfilled, the compliance shall deem to be complete only after approval by the Reserve Bank of India (RBI).

General Instructions for filling the FC-TRS 

  • The electronic form (Form) can be accessed from service landing page and can be filled offline
  • If you choose “Load prefill data” option while opening the form, then some fields may get prefilled with data you have filled previously while applying for this service. You may change this data if you wish.
  • The saved draft can be accessed later from “My Saved Drafts” section in Menu options. This draft is available for 3 months or until the form is submitted.
  • Field marked with * are mandatory and needs to be filled in before a form can be submitted on e-Biz portal. You may not be able to leave some of the field’s blank in the e-Form. In case you wish not to enter data in a field, please input “NA” if it is a text/description field or a 0, if it is a numeric field.
  • The e-form needs to be digitally signed using a digital signature by the applicant. If an applicant wishes to make any modifications to an already signed e-Form, right-clicking on the signature field and choosing “Clear signature” will enable editing of the form and any modifications can be made to the form

Electronic Attachments required for FORM FC-TRS :

Upload the file using the attached link and if you wish to remove any file, use the remove link.

  • Reason for delay in submission: this attachment is required if the form is submitted after 30 days from the date of receipt of funds
  • CS Certificate
  • Certificate from SEBI registered Merchant Banker / Chartered Accountant indicating the manner of arriving at the price of the shares issued to the persons resident outside India.
  • Disclaimer certificate
  • Statutory Auditor Certificate
  • Board resolution
  • LRN(Loan Registration Number) allotted
  • Copy of FIPB approval (if required)
  • Transfer of shares details, if applicable

If the investor and remitter are separate entities, Than Give the following documents:

  • No objection certificate from the remitter for  the shares being allotted to the third party mentioning their relationship
  • Letter from the foreign investor explaining the reason for making a subscription to shares by the remitter on his behalf
  • Copy of agreement/Board resolution from the investee company for issue and allotment of shares to the foreign investor, other than the remitter
  • KYC report for the beneficiary

Any other attachments: Add any other document if required.

Step Required for Form FC-TRS

Following below step required for filling FC-TRS following below actions:

Step 1: Apply the registration for Business Users

Step 2: Logging in to the FIRM USER

Step 3: Signing in to the SMF and connecting to your workplace.

Step 4: Choose the type of return.

Step 5: Details of Selected common investment

Step 6: Specific information or details to be filed as required

Step 7: Details of particular Transfer as specified

Step 8: Complete details of Remittal as per specified required.

Step 9: Complete details of Shareholding pattern to be enter

Step 10: Submit an Online form

Verification required for FORM FC-TRS:

Enter the following details in this section:

  1. Name of the Person
  2. Name of the Place
  3. Date of signing the electronic form
  4. Designation.
  5. Digital Signature of Authorized signatory of the investee company.

Disclaimer: The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances; before making any decisions do consult your Professional / tax advisor. For misrepresentation or interpretation of act or rules Author does not take any responsibility. Neither the author nor the firm accepts any liability for the loss or damage of any kind arising out of information in this document or for any action taken in reliance there on. carajput.com is committed to helping entrepreneurs and small business owners to start, manage and grow their business with peace of mind. Our goal is to support the entrepreneur on legal and regulatory requirements and to be a partner throughout the entire business life cycle, offering support to the company at every stage to ensure that it is compliant and consistently growing. Hope the information will assist you in your Professional endeavors. For query or help, contact: info@carajput.com or call at 09811322785/4 9555 5555 480)