Business entities registered outside India (Foreign Company) can establish business operations in India without creating and registering a subsidiary company. Subject to the RBI guidelines, a foreign company can open a Branch Office or Liaison Office in India. The scope of operations of such offices is typically limited to activities and functions such as country representative office, sourcing, technical and/or marketing support, import and export, etc.
Business entities incorporated outside India are allowed to set up Branch Offices in India with specific approval of the RBI. Such branch offices are permitted to represent the parent/group companies and undertake the following activities:
Generally, branch offices should engage in the same activities as the parent company.
A Liaison Office (or Representative Office) can undertake only liaison activities, i.e. function as a channel of communication between the foreign company’s head office overseas and business/commercial parties in India.
Liaison offices cannot undertake any business activities and/or earn any income in India. Expenses of such offices should be met entirely through inward remittances of foreign exchange from the head office located outside India.
A liaison office can undertake the following activities in India:
The RBI grants general permission to foreign companies for setting up Project Offices in India, in instances where these companies secure contracts for executing projects in India from an Indian company. The following conditions should also be satisfied:
Exceptions: If the above mentioned criteria are not satisfied, or the foreign company’s parent entity is incorporated in Pakistan, Bangladesh, Sri Lanka, Afghanistan, Iran or China; applications for setting up a project office should be forwarded to the Foreign Exchange Department, Reserve Bank of India, Central Office, Mumbai, for prior approval.
Branch Office – SEZ
RBI approvals are not required to establish a branch/unit in Special Economic Zones (SEZ) to carry out manufacturing and service activities, subject to the following conditions:
Establishing a Branch/Liaison Office in India involves:
- Seeking RBI approval through an Authorized Dealer of a Category I Bank; and
- Registration of the branch/liaison office with the Registrar of Companies, New Delhi.