If you are starting a company establishment in India.
For companies that are looking to establish a business presence in India, without incorporating a subsidiary, there are three ways to do it:
- Liaison Office or Representative Office
- Branch Office
- Project Office
Companies who are incorporated outside India can open Liaison Office- also known as representative office in India. It is a place of business to act as a channel of communication between the principal place of business aka Head Office. The Liaison office can initiate only liaison activities, it is not allowed to undertake any business activity in India and cannot earn any Income in India. The activity of the Liaison office can be better undertaken with the aforesaid figure. Liaison Office is also known as Representative Office. Expenses of this kind of offices are to be met entirely through inward remittances of foreign exchange from the Head Office outside India. To set up a Liaison office, you need to approach Foreign Exchange Department of the Reserve Bank of India (RBI) for approval.
Liaison Office, Branch Office and Project Office can undertake only the following activities: –
- 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.
Branch office implies an establishment set up by parent company to perform the similar business operations at different locations in India. Branch office can carry the same trading activities as carried out by their parent or group companies. BO not supposed to directly carry out manufacturing activities though it is permitted to sub-contract these services to an Indian manufacturer.
Branch Offices are permitted to represent the parent/group companies and undertake the following activities:
- Export/Import of goods
- Professional or consultancy services
- Performing research in areas in which the parent company is engaged
- Promoting technical /financial collaborations between Indian companies & parent or overseas group company
- Acting as a buying/selling agent in India on behalf of the parent company
- Rendition of services in IT and development of software in India
- Rendition of technical support to the products supplied by parent/group companies
- Foreign airline/shipping company
To set up a Branch office, you need to approach Foreign Exchange Department in Reserve Bank of India for approval.
Project Office termed as a place of business in India to represent the interests of the foreign company executing a project in India but excludes a Liaison Office.
The RBI has acknowledged general permission to foreign companies to establish their PO (Project Offices) in India, provided they have secured a contract from an Indian company to execute a project in India, and at least one of the following criteria is met:
- The project is funded directly by inward remittance from abroad
- The project is funded by a bilateral or multilateral International Financing Agency
- The project has been cleared by a pertinent authority
A company in India awarding the contract has been granted term loan by a bank in India for the project
If you meet the above criteria, you can approach your bank for opening an account.
- A foreign Company may be permitted to open a Project Office/s in India provided it has secured from an Indian company, a contract to execute a project in India.
- Project Office shall not undertake or carry on any other activity other than the activity relating and incidental to execution of the project
What can you do?
You can contact your local attorney or consultant to help you with the process of seeking approvals with RBI. Your attorney or consultant can provide you with a better understanding of the relevant regulations for setting up a Liaison, Branch or Project office.