Registering a Liaison Office in India

Liaison office is an office set up by foreign entity (Parent Company) in India which acts as a channel of communication between the principal place of business or Head Office of the foreign entity (Parent Company). which does not undertake any commercial /trading/ industrial activity, directly or indirectly, and maintains itself out of inward remittances received from abroad through normal banking channel.

Routes for opening of LO:

• For opening an LO in India, a foreign company needs to obtain registration with the Reserve Bank of India. The route is dependent on the sector of operations. Based on the sector of operations, an LO can come either under Automatic or Government Route.

(1) Automatic Route—Where principal business of the foreign entity falls under sectors where 100% Foreign Direct Investment (FDI) is permissible the application for opening LO can be made to AD category I Bank under the automatic route. The AD Category-I bank may consider such application under delegated powers.

(2) Approval Route—Where principal business of the foreign entity falls under the sectors where 100% FDI is not permissible under the automatic route the application for opening LO shall be under approval route only.

Prior approval of RBI: Prior approval of the Reserve Bank of India is required in the following cases:

1. the applicant is a citizen of or is registered/incorporated in Pakistan
2. the applicant is a citizen of or is registered/incorporated in Bangladesh, Sri Lanka, Afghanistan, Iran, China, Hong Kong or Macau and the application is for opening a branch office in Jammu and Kashmir, North East region and Andaman and Nicobar Islands
3. the principal business of the applicant falls in the four sectors namely Defence, Telecom, Private Security and Information and Broadcasting. Approval of RBI is not required in case where approval of Government or license/permission by the concerned Ministry/ Regulator has already been granted.
4. The applicant is a Non-Government Organisation (NGO), Non-Profit Organisation, Body/   Agency/ Department of a foreign government. However, if such entity is engaged, partly or wholly, in any of the activities covered under Foreign Contribution (Regulation) Act, 2010 (FCRA), they shall obtain a certificate of registration under the said Act and shall not seek permission under FEMA 22(R)3.

Eligibility Criteria

1. The foreign entity (applicant) must have a profit-making track record during the immediately preceding 3 financial years in the home country.
2. The foreign entity (applicant) should have a minimum net-worth of US $ 50,000 or equivalent (based on latest Audited Balance Sheet certified by Certified Public Accountant or any Registered Accounts Practitioner by whatever name called)
3. Liaison Office is not permitted to undertake any commercial or trading or any other profit-making activity.

The name of the Liaison Office must be same as of the foreign entity. For each new Liaison Office, fresh approval of RBI is required

Permitted Activities

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

An entity undertaking any activity beyond the activity mentioned above shall be considered to be in contravention of FEMA.

Prohibited/Restricted Activities

1. The LO in India is not allowed to carry on any business activity in India. It shall not take any trading, commercial or industrial activity. There shall be no generation of revenue by LO in India.
2. It shall not enter into any contracts with Indian residents on its own behalf.
3. No commission/fees shall be charged or any other remuneration received/income earned by the office in India for the LO activities/services rendered by it or otherwise in India.
4. All the expenses for the set-up, operation and maintenance of the LO have to be met out of foreign exchange remittances from the foreign company through normal banking channels.
5. It shall not acquire any immovable property in India except on lease for period not exceeding five years

Procedure for setting up Liaison Office

1. If a foreign company intends to set up a Liaison Office in India, it is required to obtain the prior approval of Reserve Bank of India (RBI). This may take up to 4-6 weeks for processing of approval.
2. Approval is granted for 3 years and can be renewed on expiry thereof.
3. Any Body-Corporate incorporated outside India (including a firm or other association of persons) can open a Liaison Office in India by making an application in FORM FNC with the Authorised banker (AD Category I) in India.

Following attachment must be attached with the form:

1. English version of the Incorporation / Registration Certificate or MOA & AOA certified by Indian Embassy / Notary Public in the Country of Registration.
2. The entity’s most recent Audited Balance sheet.
3. Other needed documents
4. If the LO applicant is a non-governmental/non-profit organization engaged in any of the activities under the 2010 Foreign Contribution (Regulation) Act (FCRA), they will need to obtain an FCRA registration certificate instead of seeking FEMA permission.

Once approved by RBI, a Unique Identification Number (UIN) shall be allocated to the Liaison office. Each RBI-registered liaison office shall be registered as a corporate entity with the Ministry of Corporate Affairs (MCA). It is registration as Liaison office is in itself a foreign company established in India. The MCA will then assign Corporate Identity Number (CIN) to these companies. The MCA will then assign Corporate Identity Number (CIN) to these companies. Once MCA allocates the CIN, then Revenue Authority requires the LO to obtain the Permanent Account Number (PAN) & Tax Deduction Number (TAN).

Annual Activity Certificate (AAC):

The liaison office may submit the Annual Activity Certificate as at the end of March 31 along with the audited financial statements including receipt and payment account on or before September 30 of that year. In case the annual accounts of the office are finalized with reference to a date other than March 31, the AAC along with the audited financial statements may be submitted within six months from the due date of the Balance Sheets to the Authorised Dealer Category-bank and the Director General of Income Tax (International Taxation), Drum Shape Building, I.P. Estate, New Delhi 110002.

Documents required for the establishment of Liaison Office:

Applications are to be submitted through Form FNC Annex-1 (Application for Establishment of Branch/Liaison Office in India). Following documents are required for opening of liaison office:

1. Form FNC – 1 – Three copies
2. Letter from the principal officer of the Parent company to RBI.
3. Letter of authority from the parent company in favor of Local Representative.
4. Letter of authority/ Resolution from parent company for setting up liaison office in India.
5. Comfort letter from the parent company intending to support the operation in India.
6. 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.
7. Certification of Incorporation – Translated & Duly Notarized and Certified by Indian Consulate
8. The Latest audited Balance sheet and annual accounts of parent company duly Translated notarized for past Three years. & Certified by Indian Consulate & Directors
9. Name, Address, email ID and telephone number of the authorized person in Home Country.
10. Details of Bankers of the parent company along with the bank account number
11. Expected funding level for operations in India.
12. 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
13. Details of Activity carried out in Home Country by the parent company in brief about the product and services of company in Brief.
14. Report from the bank of parent company showing the number of years the applicant has had banking relations with that bank.
15. Latest Proof of identity of all the Directors – Certified by Consulate and Banker in Home Country
16. Latest Proof of address all of Directors – Certified by Consulate and Banker in Home Country
17. Structure of the parent company w.r.t Shareholding pattern
18. Resolution for Opening up Bank Account with the Banker
19. 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.

Closure of office and remittance of winding up proceeds:

Requests for closure of the liaison office may be submitted to the Authorised Dealer Category – I bank along with the following documents:

1. Copy of the Reserve Bank’s/Authorised Dealer Category-I bank’s approval for establishing the office.
2. Auditor’s certificate :
   1. indicating the manner in which the remittable amount has been arrived at and supported by a statement of assets and liabilities of the applicant, and indicating the manner of disposal of assets;
   2. confirming that all liabilities in India including arrears of gratuity and other benefits to employees, etc. of the office have been either fully met or adequately provided for;
   3. confirming that no income accruing from sources outside India (including proceeds of exports) has remained unrepatriated to India.

1. Confirmation from the applicant/parent company that no legal proceedings in any Court in India are pending against the office and there is no legal impediment to the remittance.
2. A report from the Registrar of Companies regarding compliance with the provisions of the Companies Act, 2013, in case of winding up of the branch office/liaison in India.
3. Any other document/s, specified by the Reserve Bank/Authorised Dealer Category-I bank while granting approval.

Remittance of winding up proceeds of liaison office established in India shall be governed by the guidelines issued under Foreign Exchange Management (Remittance of assets) Regulations.