Setting up a branch of a foreign company in India involves several legal, regulatory, and procedural steps. Here’s a step-by-step guide to help understand the key requirements and process:
Determine the Type of Office:
Foreign companies can set up various types of offices in India, such as:
Branch Office (BO): Engages in activities like export/import of goods, consultancy services, technical support, and research, but is limited to certain activities approved by the Reserve Bank of India (RBI).
Liaison Office (LO): Only acts as a communication channel between the parent company and Indian companies. It cannot carry out any commercial activities.
Project Office (PO): Set up specifically to execute projects in India, typically where the foreign company has secured a project from an Indian company.
Branch Office is suitable for companies looking to conduct business in India without a full-fledged company.
Approval from RBI (Reserve Bank of India):
Foreign companies need RBI approval under the Foreign Exchange Management Act (FEMA), 1999.
Application is made through an authorized dealer bank.
Certain sectors (defense, telecommunications, etc.) have specific guidelines and may require additional approvals.
Registering the Branch with the Registrar of Companies (RoC):
After RBI approval, the branch office must be registered with the Ministry of Corporate Affairs (MCA) under the Companies Act, 2013. This involves:
Filing Form FC-1 with the RoC.
Submitting necessary documents, such as proof of registered office, details of directors, and a copy of the certificate of incorporation of the foreign company.
Required Documentation:
Parent Company Documents: Certificate of incorporation, Memorandum of Association (MoA), Articles of Association (AoA), board resolutions, etc., notarized and apostilled.
Financial Statements: Audited financial statements of the parent company.
Branch Office Documents: RBI approval, lease agreement for office space in India, and details of the designated authorized person in India.
At this stage, engaging a professional consultancy like CRUISE CORPORATE CONSULTANCY SERVICES Pvt. Ltd. (CCCS) can help ensure that all documents are correctly prepared, submitted, and aligned with Indian regulations.
Compliance and Reporting Requirements:
Annual Filings: Filing financial statements and an annual return with the RoC.
Taxation: A branch office is taxed at the rate applicable to foreign companies.
Reporting to RBI: Annual Activity Certificates (AAC) are to be submitted by the auditor to the RBI and the parent company.
Other Registrations:
Permanent Account Number (PAN) and Tax Deduction and Collection Account Number (TAN) with the Income Tax Department.
GST Registration if the branch is involved in taxable goods and services.
Registrations with relevant industry bodies or associations if required.
Bank Account:
Open a local bank account in India. Transactions should adhere to FEMA regulations.
Challenges and Important Considerations:
Restrictions on Activities: The RBI restricts certain business activities for branch offices, so ensure compliance with the allowed scope.
Corporate and Tax Compliance: India has a complex regulatory environment, so regular compliance is essential to avoid penalties.
Local Partner: Engaging a local consultant or partner can help navigate regulatory and procedural complexities efficiently.
By following these steps and with professional assistance from CRUISE CORPORATE CONSULTANCY SERVICES Pvt. Ltd. (CCCS), foreign companies can establish a branch office in India and successfully enter the market.
