If you are one foreign entity, willing to enter the Indian market by opening a branch office in India, you are likely to make an FDI investment. It means, there is even more assistance given to you when compared to usual domestic business firms, willing to expand their operations across this said country. The process involving opening a branch office over here is a bit different. Learning about the differences beforehand can help you big time in establishing a strong hold over the Indian market.
Eligible criteria and more:
Companies, which are registered outside India and willing to launch their business or open a branch at a location within the country can do so after procuring an approved application from Reserve Bank of India. Moreover, before you head towards business setup in India, you better check out the eligibility criteria for the foreign entities.
The regulations and laws governing the registration of branch office in India or project or liaison will include Companies Act 2013, Companies Act 1956 and Foreign Exchange Management Act 1999. The eligible companies’ net worth needs to be minimum $100,000 or more or even equivalent. Moreover, there should be a financial track record of the annual profits of the last 5 years in the original registered country.
Application form-based information covered:
Before setting up a company in India as a foreign investor, you need to fill up the FNC form under Annex 1. Your given application to open a new branch office in India will then be considered by RBI directly, only if it falls under one of the notified sectors where 100% FDI investment is permitted. For the other sectors out there, the application needs to get approved by the Ministry of Finance along with RBI team of officers. It can help to kick start your first business setup in India.
Documents for the Indian Branch Office application:
You must submit the application form through designated AD Category – I Bank. It should be addressed to the General Manager of the Foreign Exchange Department. Now, you better get a good grip over documents, required for the Indian branch office application. Alongside Form FNC, you need to attach some necessary documents. The first one has to be a business registration or incorporation certificate.
You can even attach Articles of Memorandum, only after attested by the Indian Embassy or a Notary Public of the country. You better attach the audited balance sheet with the FNC form as well. Apart from that, the banks might ask for verification documents like funding sources, KYC, address and more.
Permissible activities of foreign entity:
The Government of India and RBI has widely issued some regulations that will govern what branch office of a foreign entity might be able to do. You can contact a trained chartered accountant in India to learn about those regulations.
Branch offices are not allowed to undertake processing or manufacturing activities, except in SEZs. Some of the permissible activities for the branch offices are export and import of goods, professional and consultancy services, offering technical support for the parent companies’ customers in India and acting as a seller or buyer representative of the overseas company. They can further research to see that the parent overseas company is properly engaged with the functionalities of the Indian branch office.
Special economic zone
In case, you hold the position of a foreign entity, ready to open one branch office in India for procuring manufacturing activities, then it needs to be located in Special Economic Zone. This section needs to be in compliant with the Companies Act 1956, Section 6. It should further be able to function as a standalone unit in the sector, where 100% FDI is well allowed. For additional details, visiting RBI official will help.
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