Generally foreign Companies enter the Indian market and start a business by incorporating the subsidiary Company or establishing a project/liaison office. In addition to this, another mode of starting a business is establishment of Branch Office (BO). The Branch Office is one of the suitable business mode for foreign Companies to enter the Indian market and carry on its business. The Branch Office may be called as extension of activities of parent Company in India. In India, establishment of Brach Office is governed by Section 6 (6) of FEMA, 1999 read with Rule 3 (3) of Companies (Registration of Foreign Company) Rules, 2014 and Chapter XXII of the Companies Act, 2013
- ELIGIBILITY CRITERIA:
A Branch Office of Foreign Company can be established in India subject to following requirements-
1. The Foreign Company must have net worth of USD 1,00,000 or equivalent;
2. The Foreign Company must have profit making track record for immediately preceding 5 financial
- PROCEDURE:
If applicant Company fulfills the above mentioned criteria, it shall make an application in Form FNC to Authorized Category-I Bank (AD Category-I) along with following documents and information-
1. Copy of Certificate of Incorporation attested by Notary Public [If original certificate is not in English language, same to be translated in English and to be attested by the Indian Embassy in the home country];
2. Copy of MOA/AOA attested by Notary Public [If original certificate is not in English language, same to be translated in English and to be attested by the Indian Embassy in the home country];
3. Audited balance sheet for last three financial years;
4. Bankers Report from the applicant’s banker in the home country showing the number of years the applicant has/had banking relations with that Bank;
5. POA in favor of signatory of Form FNC in case head of the overseas entity is not signing the Form
The AD Category-I Bank after scrutiny of documents, information provided, due diligence shall grant approval for setting up of Branch office in India. However, before issuing approval letter, AD Category-I Bank shall forward copy of Form FNC along with details provided to the RBI for allotment of UNIQUE IDENTIFICATION NUMBER (UIN). Upon receipt of UIN from RBI, AD Category-I Bank shall issue approval letter to the applicant.
- TIME LIMIT:
In case of Branch Office, renewal of approval is generally not required. However, in some cases, RBI gives approval for 2-3 years after which fresh renewal is mandatory.
- VALIDITY OF APPROVAL:
After approval, the entity shall establish Branch Office within a period of Six months. In case of failure, approval shall lapse & fresh application for approval to be made.
- ACTIVITIES PERMITTED UNDER BRANCH OFFICE:
1. Import/Export of goods;
2. Rendering professional/consultancy services;
3. Research work in which parent Company is engaged;
4. Technical/financial collaboration between Indian Companies and parent Company;
5. Rendering IT services;
- PRIOR RBI APPROVAL:
In some cases, prior approval of RBI is necessary. These cases are-
1. Applicant is a citizen or entity of Pakistan/Bangladesh/Sri Lanka/Iran/Afghanistan;
2. The principal business of the applicant falls under prohibited sectors i.e. Defence/telecom/Atomic Energy etc;
3. The applicant is Non-profit Organization, Dept of foreign Govt.
- OPENING OF BANK ACCOUNT:
The Branch office shall approach AD Category-I Bank in India to open an account for carrying out its operations in India. Credit to the account should represent the funds received from Head Office through normal banking channels for meeting the expenses of the office and debits to this account shall be for the expenses incurred by the BO and towards remittance of profit/winding up proceeds.
- SUBMSSION OF ANNUAL ACTIVITY CERTIFICATE:
Every Branch Office needs to submit Annual Activity Certificate (AAC) in Form FNC as at 31st March of every year to AD Category-I Bank and Director General of Taxation (International Taxation). AD Category-I Bank shall ensure that the activities of Branch Office are carried out in accordance with the T&C of approval. AAC to be submitted-
1. On or before September 30 along with the audited financial statements including receipt and payment account, in case the annual accounts of the office are finalized with reference to March 31 OR
2. Within 6 months from the close of the Balance Sheets in case the annual accounts of the office are finalized with reference to a date other than March 31, the AAC along with the audited financial
- COMPLIANCE UNDER COMPANIES ACT, 2013:
Any foreign entity establishing its place of business in India by way of Branch office shall be treated as foreign company as defined under section 2(42) of the Companies Act, 2013. As per Rule 3 (3) of Companies (Registration of Foreign Company) Rules, 2014, every Foreign Company shall file e-Form FC-1 within a period of 30 days of establishing Branch Office. Further, in case of any alteration, Foreign Company needs to file e-Form FC-2 within a period of 30 days of alteration.
1. Every Foreign Company is required to file its financial statements in accordance with Schedule-III of Companies Act within a period of Six months from the end of relevant financial year;
2. Every Foreign Company is required to file its annual return in e-Form FC-4 within a period of 60 days from the end of relevant financial
- INFORMATION REQUIRED UNDER COMPANIES ACT, 2013:
1. A certified copy of the Charter, Statutes or Memorandum and Articles of the Company or other instrument constituting or defining the Constitution of the [If the instrument is not in the English language, a certified translation thereof in the English language];
2. Address of Principal place of the Company;
3. List of Directors and Secretary of the Company;
4. The name and address of one or more persons resident in India authorized to accept on behalf of the Company service of process and any notices or other documents required to be served on the Company;
5. The full address of the branch office of the Company in India which is deemed to be its principal place of business in India;
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