Today, we will be beginning a new topic, which is rather vast and this entails the different types of foreign company entities that can set up office in India and the processes followed.

First in this series will be a FOREIGN COMPANY WITH BRANCH OFFICE IN INDIA.

Foreign companies can opt to open branches in India if they are allowed to function in the prescribed limits, which are discussed here below. A foreign company opening a branch in India needs to know the activities that are allowed to perform as a branch. A branch office is set up by a foreign company to carry out the branch activity. The foreign company can have any revenue from the Indian branch office, only from the activity allowed by RBI. Let us now look at the prerequisites:

a. Prerequisites for opening foreign company branch office in India
• Profit making track record for immediate preceding 5 years in foreign company’s home country.
• Net worth of not less than USD 100,000.
• The last audited balance sheet of the foreign company.
• Foreign proprietary concerns are not allowed to set up a branch.
• RBI Act
• Companies Act 2013.
• RBI permission is mandatory.
• The Indian office expenses to be met by remittance of head office or through the revenue generated from Indian operation permitted by RBI.
• Branch office can function only after getting RBI licence.

Branch office is the best form of business to test and understand Indian market. Branch office to carry additional business should apply for prior approval with RBI.
Application to be made to RBI in form FNC annex 1:

General Features

• The name of the Indian branch office should be the same as the parent company.
• The governing body to issue licence is RBI.

b. Documents required for branch office RBI approval

• Form FNC three copies.
• Letter from the principal company to RBI.
• Letter of authority from parent company to local representative.
• Letter of authority/resolution form parent company for setting up branch office in India.
• Comfort letter from parent company intending to support the operation in India.
• Two copies of English version of certificate of incorporation, MoA(charter document) of parent company attested by Indian Embassy or notary public in the country of registration.
• Certificate of incorporation duly translated and notarized and certified by Indian consulate.
• The latest audited balance sheet and annual accounts of parent company duly translated and notarized for past three years certified by Indian Consulate and Directors.
• Name, address, telephone number and email ID of the authorized person in home country.
• Details of bankers in the country of origin along with bank account number.
• Commitment from the organization that it is open to report.
• Opinion sought by the bankers by the GOI/RBI.

c. Permitted activities for foreign company branch office in India engaged in manufacturing or trading activities:
• Export/import of goods.
• Professional or consultancy services.
• Research work of parent company.
• Promoting technical and financial collaboration.
• Representing parent company and acting as buying/selling agent in India.
• Services in information technology and development of software in India.
• Technical support for the products supplied by the parent group company.
• Foreign airline or shipping company.

d. Prohibited activities

The following activities are prohibited for a foreign company branch office in India.
• Retail trading activities.
• Branch office not allowed to carry out manufacturing or processing activity in India directly or indirectly.

Conclusion: Foreign companies not interested or not planning to have long-term plans for Indian operations can set up branch as a temporary office. It helps to spread its business to diverse locations and increases customer base.

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