BRANCH office is suitable for a foreign company who wants to research and understand the Indian markets.
The foreign company can have any revenue from the Indian Branch office, but only from the activity allowed by the Reserve Bank of India. It has to meet all its expenses of Indian office through remittances from the Head office or through the revenue generated from the Indian operation permitted by the Reserve Bank of India.
It is suitable for foreign Companies looking to setup a temporary office in India and not planning to have long term plans for the Indian operations.
GENERAL FEATURES OF BRANCH OFFICE
- The name of Indian Branch office shall be same as parent company.
- The governing body for the Branch office License is Reserve Bank of India.
- The Branch office does not have any ownership; it is just an extension of the existing company in the foreign country.
ACTIVITIES ALLOWED TO BRANCH OFFICE IN INDIA
- Export/Import of goods.
- Rendering Professional or Consultancy services.
- Carrying out research work, in which the parent company is engaged.
- Promoting technical or financial collaborations between Indian companies and Parent or Overseas Group Company.
- Representing the Parent Company in India and acting as buying/selling agent in India.
- Rendering services in Information Technology and development of software in India.
- Rendering technical support to the products supplied by parent/group companies.
- Foreign Airline/Shipping Company.
CONDITION FOR SETTING UP BRANCH OFFICE
- The Company looking to start a Branch office in India should have a profitable track record during immediately preceding five years in the home country.
- The Net Worth of the Company i.e. Total of paid-up capital and free reserves, less the intangible assets as per the latest Audited Balance Sheet or Account Statement certified by a Certified Public Accountant or any Registered Accounts Practitioner] shall be not less than or equal to USD 1,00,000/-
REGISTRATION OF BRANCH OFFICE
- The application for Branch office License is approved by the RBI, but as per the latest circular the application for Branch office is routed through the Authorized Dealers (AD). The authorized dealer means the various institutions having banking licenses in India.
- It is always preferable for the Company to opt for the same authorized dealer as it is dealing in the home country.
- Due to this the timeline for setting up the Branch office has increased tremendously. Further the documentation required for the same has also increased to a great extent.
BRIEF SUMMARY OF STEPS TO GET RBI LICENSE
- Selection of Authorized Dealer (AD) by the company, where the company will maintain its bank account in India.
- Preparing documentation as required by the Authorized Dealer for Branch office.
- Submission of documents to the AD.
- Scrutiny of documents by the AD.
- Providing clarification and additional documents to AD.
- Submission of final application to RBI by the AD.
- Follow up and getting the Licenses from AD.
DOCUMENTS REQUIRED FOR BRANCH OFFICE SETUP
- Form FNC1 – Three copies*
- Letter from the Principal Officer of the Parent company to RBI. *
- Letter of authority from the Parent Company in favor of Local Representative of the Company in India.
- Letter of authority/ Resolution from Parent company for setting up Branch office in India.
- 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 translated & attested by the Indian embassy or notary public in the country of registration.
- The latest audited Balance sheet and annual accounts of parent company duly translated, Certified by Indian Consulate & Directors & notarized by the local notary for past three years.
- Name, address, email ID and telephone number of the authorized person in Home Country.
- Details of Bankers to the Foreign Company in the Country of Origin along with the bank account number.
- Commitment from the Foreign Company to the effect that it will be open to report / opinion sought from its bankers by the Government of India / Reserve Bank of India
- Expected funding for operations in India.
- Details relating to address of the proposed local office, number of persons likely to be employed, number of foreigners among such employees and address of the head of the Local office, if decided
- Details of activity carried out and product and services in Home Country by the applicant Foreign Company in brief.
- Bankers Certificate
- Latest Proof of identity of all the Directors – Certified by Consulate and Banker in Home Country
- Latest Proof of address all of Directors – Certified by Consulate and Banker in Home Country
- Details of the Individuals / Company holding more 10% of equity in the foreign company
- Structure of the foreign company (w.r.t Shareholding pattern)
- Complete KYC of Shareholders holding more than 10% Equity in the Applicant Company
- Resolution for Opening up Bank Account with the AD in India.
- Duly Signed Bank Account Opening Form for Indian Bank.
PROCEDURE AFTER GETTING THE RBI LICENSE
Every Branch office once registered with RBI shall get itself registered with the Ministry of Corporate Affairs (MCA). The Foreign Company has to acquire a registration no. (CIN-Corporate Identity Number) from Registrar of Companies.
DOCUMENTS TO BE PREPARED AND FILED WITH ROC
- Filing of Form 44 to register with Roc and attachment of the required documents
- Charter, Statutes or Memorandum and Articles of Association or other Instrument constituting or defining the Constitution of the Company (as provided under Rule 16, 17 of the Companies (Central Government’s) General Rules and Forms, 1956).
If the above documents are not in English then the translated version of the documents.
- Director(s) details – individuals
- Director(s) details – bodies corporate
- Reserve bank of India approval letter
- Secretary(s) details
- Power of attorney or board resolution in favor of the Authorized Representative(s)
OTHER BUSINESS LICENSES APPLICABLE TO BRANCH OFFICE
- Permanent account number – pan number
- Tax deduction number – tan number
- Shop & establishment license from Local Municipal body
- Service Tax Registration – if the Branch provides any services in India
- VAT & CST Registration – If the Branch carries out trading activities in India
ANNUAL ACTIVITY TO BE CARRIED OUT BY BRANCH OFFICE
- Maintenance of Books of Account
- Getting Annual Accounts audited
- Filling of Annual Activity Certificate with RBI
- Filling of Annual Return and Balance sheet with Registrar of Companies
- Intimating any change in constitution of Foreign Company to RBI & ROC
- Intimating any change in Directors of Foreign Company to RBI & ROC
- Intimating each and every change in the BRANCH office to RBI & ROC
- No additional place of business can be started unless approval is taken from RBI.
CLOSURE OF BRANCH OFFICE
Generally the Branch office licenses is given for three years, if at any time the Company plans to close the Branch office setup in India it shall file the necessary documents with the Authorized Dealer, and the application for the closure shall be forwarded by the Authorized Dealer.
- Copy of the Reserve Bank’s permission/ approval from the Sectoral Regulator(s) for establishing the BO / LO.
- Auditor Certificate
No-objection/Tax Clearance Certificate from Income-Tax authority for the remittances.
Confirmation from the applicant/parent company that no legal proceedings in any Court in India are pending and there is no legal impediment 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, specified by the Reserve Bank while granting approval for closure.
- 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
- confirming that all liabilities in India including arrears of gratuity and other benefits to employees, etc., of the Branch office have been either fully met or adequately provided for
- confirming that no income accruing from sources outside India (including proceeds of exports) has remained un-repatriated to India.