How to Set Up Liaison Office Management in India By CS Mamta Kumari, Mamta Kumari & Associates


BRIEF SUMMARY

Foreign companies planning to set up their business operations in India need to start a liaison office. The main purpose of starting a liaison office is to explore possible business opportunities in India by gathering relevant business information. This helps the companies to develop a business strategy to tap the existing business potential in India.

The application for Liaison office Licenses is approved by the RBI, but as per the recent changes the applications for Liaison office are routed through the A.D i.e Authorised Dealers. Due to this the timeline for setting up the liaison office has increased tremendously. Further the documentation required for the same has also increased.

GENERAL FEATURES OF LIAISON OFFICE

  • The name of Indian liaison office shall be same as parent company.
  • The governing body for the Liaison office License is Reserve Bank of India.
  • It is suitable for foreign Companies looking to setup a temporary office in India to liaison its existing business with Indian clients.
  • The Liaison office does not have any ownership; it is just extension of the exiting company in the foreign country.
  • All the expenses of the Liaison office are met by the head office; hence the funds shall be received from head office account only.
  • The License for the Liaison office is given for three years and shall be renewed every 3 years.

 ACTIVITIES ALLOWED TO LIAISON OFFICE IN INDIA

  • Representing in India the parent company / group companies.
  • Promoting export / import from / to India.
  • Promoting technical/financial collaborations between parent/group companies and companies in India.
  • Acting as a communication channel between the parent company and Indian companies.

CONDITION FOR SETTING UP LIAISON OFFICE

  • The company looking to start a Liaison office in India shall have a profitable track record during immediately preceding three years in the home country.
  • The Net Worth i.e total of paid-up capital and free reserves, less intangible assets as per the latest Audited Balance Sheet or Account Statement certified by a Certified Public Accountant or any Registered Accounts Practitioner by whatever name shall be not less than or equal to USD 50000/- .

DOCUMENTS REQUIRED FOR LIAISON OFFICE SETUP

Currently as per the RBI Requirement the application for the branch office and Liaison office is submitted through the Authorised dealer. The authorised dealer means the various institution having banking licenses.

The applicant of the Branch/Liaison office has to opt for the any of the Authorized Dealer; it is always preferable for the company to opt for the same authorized dealer as it is dealing in the home country.

  • Form FNC 1 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.
  • Letter of authority/ Resolution from parent company for setting up liaison 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 attested by the Indian embassy or notary public in the country of registration.
  • Certification of Incorporation – Translated & Duly Notarised and Certified by Indian Consulate
  • The Latest audited Balance sheet and annual accounts of parent company duly Translated notarized for past Three years. & Certified by Indian Consulate & Directors
  • Name, Address, email ID and telephone number of the authorized person in Home Country.
  • Details of Bankers of the Organization the Country of Origin along with the bank account number
  • Commitment from the Organization to the effect that it will be open to report / opinion sought from its banker by the Government of India / Reserve Bank of India
  • Expected funding level 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 in Home Country by the applicant organisation in brief about the product and services of 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
  • Structure of the Organization 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 Banker
  • Duly Signed Bank Account Opening Form for Indian Bank

NOTE – THE ABOVE LIST IS NOT EXHAUSTIVE AND MAY DIFFER DEPENDING UPON THE REQUIREMENT FROM THE AUTHORISED DEALER 

BRIEF SUMMERY OF STEPS TO GET RBI LICENCES

  • Selection of Authorised Dealer by Client, as the same AD will have the bank account of the Company.
  • Working on the documentation required for Liaison 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. 

PROCEDURE AFTER GETTING THE RBI LICENCE

Every Liaison office registered with RBI shall get itself registered with the Ministry of Corporate Affairs; it is a registration by the Liaison office as a establishment of foreign company in India. On such registration a CIN i.e Corporate Identity Number is allotted by the Registrar of Companies.

The following documents shall be filled with the Registrar of Companies:-

  • Form 44
  • Charter, statutes or memorandum and articles of association or other Instrument constituting or defining the constitution of the company(In the manner provided under Rule 16, 17 of the Companies (Central Govement’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 authorised representative(s)

OTHER BUSINESS LICENCES APPLICABLE TO LIAISON OFFICE

  • Permanent Account Number Pan Number
  • Tax Deduction Number Tan Number
  • Shop & Establishment Registration

ANNUAL ACTIVITY TO BE CARRIED OUT BY LIAISON 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 Liaison office to RBI & ROC
  • No additional place of business can be started unless approval is taken from RBI. 

Author
Mamta Kumari
Mamta Kumari & Associates
Practicing Company Secretary
csmamtayadav@gmail.com

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