A company that is settled abroad has the option to have offices within the Indian Territory that are not primarily subsidiary entities. Subject to the RBI’s norms, an overseas entity can have a liaison office, project office, our branch office. The obligations of such an office are limited as they are bound to perform certain prescribed tasks. This write-up will unveil the legalities related to liaison office registration along with some fundamental aspects.
What is the role of Liaison Office?
A liaison office refers to a business place that fosters close working relationships between the main organization situated & the business entities in India.
The liaison office is commonly known as Representative Office. Liaison offices lack the rights to generate income in India as they are not legally permitted to undertake any sort of business activity.
At present, liaison offices are only allowed to perform the following undertakings
- Represent the overseas organization in India.
- Incentivize export from or import to India.
- Foster financial/ technical collaboration between primary companies and Indian entities.
- Act as a viable source of communication for Indian entities and parent companies
What is the role of Branch Office?
A branch office replicates the undertaking performed by the patent offices. Such offices are meant to undertake identical business operations as the overseas parent entity at different locations in India.
Unlike liaison offices, branch offices can perform similar business activities as the parent company. They can perform the trading related undertaking that a parent company does.
The prominent limitation being carrying out manufacturing tasks; however, the same can be sub-contracted to third-party manufacturers.
Read our article:The Complete Guide for Registering a Foreign Company In India
The branch offices are allowed to perform the given undertakings in India:
- Facilitating consultancy or professional services
- Incentivize export from or Import to India
- Conducting research in the concerned field
- Incentivize financial/ technical collaboration between primary or group entities and Indian companies
- Representing the entity in India & acting as a mediator for trading
- Facilitating services in IT & software development in India
- Facilitating technical bolster for the products rendered by the parent organization
- Function as an overseas airline or shipping corporation
What is the role of Project Office?
The Reserve Bank permits the foreign parent organization to have project offices in India to represent the intention of the primary entity executing projects in India, excluding the Liaison Office.
The project office can only perform the undertaking relating to the project. The fundamental obligation for opening a project office in India is that the primary organization must have availed a contract from an Indian entity.
The table below manifest the scenario in which the aforesaid offices can undertake inward remittances:
| Liaison Office | Only receive inward remittances from the main entity via conventional banking platforms. |
| Branch Office | All the expenditures of the branch office will be addressed using the funds coming from foreign parent company or available source of the income of the branch. |
| Project Office | Only receive inward remittances from the main company via conventional banking platforms. |
Prerequisites to be addressed for the Establishment of a liaison office in India
The parent organization seeking to open a Liaison or Branch Office in India must avail mandatory consent from RBI under the provision of FEMA Act, 1999
For this purpose, the RBI mandates the submission of applications in Form FNC under two routes:
Reserve Bank Route
If the core business of the overseas parent entity falls under the 100 sectors where 100% FDI is allowed under the automatic route, the Reserve Bank will consider the application.
Government Route
If the principal business of the overseas parent entity does not come under the 100 sectors where 100% FDI is allowed under the automatic router or the application is from entities that are functioning as NPO /NGOs / Government forums /departments, the Reserve Bank shall consider such application in consultation with the Finance Ministry, GOI.
In addition to that, the Reserve Bank[1] will also consider the below-mentioned criteria while legalizing the liaison or branch office of a parent company.
| Overall Worth | Track Record | |
| Liaison Office | Higher than or equal to US dollar 50,000 or its equivalent | A track record manifesting the profit during the last preceding three financial years in the home country. |
| Branch Office | Higher than or equal to US dollar 100000or its equivalent | A track record manifesting profit during the last 5 years in the home country. |
Upon meeting the eligibility criteria, the parent entity must furnish a form FNC (according to Annex B of Foreign Exchange Management Regulations, 2016) for setting up a Liaison Office in India.
Mandatory Documents for establishing Liaison Office in India
- Certificate of Incorporation, MOA, AOA copy authenticated by the Notary public in the nation of Registration. The documents should be in the English language; if not, then the same ought to be translated, notarized, & validated by the Consulate in the home country.
- The audited balance sheet for the last three years or account statement authenticated by any Certified Public Accountant (CPA) or Registered Accounts Practitioner manifesting the net worth.
- Bank report manifesting the numbers of years of services availed by the applicant as well as the track record.
- Power of Attorney drafted in favour of the Form FNC’s signatory in case of the head of the foreign Establishment is not enclosing the signature in Form FNC.
- All details of the undertaking are performed on the project office situated in India.
- Residence’s proof of the authorized personnel
- Copy of passport manifesting the detail of the authorized personnel
- A letter declaring that the entity will open an account in the designated bank of India
The below-mentioned table highlights the validity and time frame for registration:
| Particulars | Time frame for Registration | Registration’s validity | Validity of Approval for setting up in Office |
| Liaison Office | 40-45 Days | Three Years Exception – Non-banking Financial Company & Construction Development– Two Years | 6 months starting from approval’s date |
| Branch Office | 40-45 Days | No Specific timeline, generally 2-3 years | 6 months starting from approval’s date |
| Project Office | 10-15 Days | Depends on timeline of the project | 6 months starting from approval’s date |
Conclusion
It could be a daunting affair for any global business to thrive seamlessly without the presence of a liaison office. Despite their limited scope of work, they play a vital role in the development of an organization. Indeed, just like other entities in India, these firms are bound to align themselves with certain rules and regulations underpinned by the respective regulatory authority.
Read our article:Norms to Establishment a Foreign Company in India
