Foreign companies who are engaged in manufacturing and trading activities outside India are allowed, by Indian law, to set up branch offices in India for the following purposes:
The branch office is not allowed to carry out manufacturing activities on its own but is permitted to subcontract these to an Indian manufacturer.
Branch offices, which are established with the approval of RBI, may remit part of the profit of the branch outside India, after deducting applicable Indian taxes and subject to RBI guidelines. Permission for setting up branch offices is granted by the Reserve Bank of India (RBI).
For obtaining approval from RBI and to register with the Registrar of Companies, the following documents are required for opening a branch in India:
All the documents are required in duplicate.
Branch office on ‘Stand Alone basis” in India
Stand Alone Branch Offices are isolated and restricted to the Special Economic Zone (SEZ) alone and no business activity/transaction is allowed outside the SEZs in India, which include branches/subsidiaries of its parent office in India.
No approval is necessary from RBI for a company to establish a branch/unit in SEZs to undertake manufacturing and service activities subject to specified conditions.
Liaison Office/Representative Office
A Liaison Office could be established with the approval of the government of India. The role of Liaison Office is limited to collection of information, promotion of exports/imports and facilitate technical/financial collaborations.
Liaison office cannot undertake any commercial activity directly or indirectly.
Foreign companies planning to execute specific projects in India can set up a temporary project/site offices in India for carrying out activities only relating to that project. The Government of India has now granted general permission to foreign entities to establish project offices subject to specified conditions.
Limited Liability Partnership (LLP)
A law to allow “Limited Liability Partnership” (LLP) in India has been enacted by the Parliament of India recently. (Limited Liability Partnership (LLP) Act of 2008).
LLP is an alternative corporate business entity that provides the benefits of limited liability of a company but allows its members the flexibility of organizing their internal management on the basis of a mutually-arrived agreement, as is the case in a partnership firm.
This format would be quite useful for small and medium enterprises in general and for the enterprises in services sector in particular, including professionals and knowledge based enterprises.
As proposed in the Bill, LLP shall be a body corporate and a legal entity separate from its partners. It will have perpetual succession. While the LLP will be a separate legal entity, liable to the full extent of its assets, the liability of the partners would be limited to their agreed contribution in the LLP.
Further, no partner would be liable on account of the independent or unauthorized actions of other partners, thus allowing individual partners to be shielded from joint liability created by another partner’s wrongful business decisions or misconduct.