Branch Office

Introduction

BRANCH office is set up in India by a foreign company to conduct the BRANCH operation for its business. The foreign company may have any revenue from the Indian branch office only from the activity permitted by the Indian Reserve Bank; it must meet all of its Indian office expenses by remittances from the head office or revenue generated from the Indian operation permitted by the Indian Reserve Bank. For setting up a branch office there is a need to get prior approval from Reserve Bank of India (RBI).

BRANCH office is appropriate for a foreign company to check and understand the Indian market with very strict control by the Reserve Bank of India, as it allows companies to do business but only to carry out the activities specified in the application of the branch office. Any additional activity to be carried out by the branch office is illegal. Additional business activities can be carried out by the branch office only with prior approval from the Reserve Bank of India.    

Features and Activities of Branch Office

FEATURES OF BRANCH OFFICE

a. The office of Indian BRANCH shall have the same name as the parent company.

b. RESERVE BANK OF INDIA The GOVERNING BODY for BRANCH office License.

c. It is SUITABLE FOR FOREIGN COMPANIES to set up a temporary office in India and to have long-term plans for Indian operations not interested or not planned.

d. All costs incurred by the BRANCH office shall be covered by the head office unless it has income from Indian operations.

e. Spreading its business to a variety of locations and thus enhancing client base.

PERMITTED ACTIVITIES

Companies outside India that are engaged in manufacturing or trading activities are permitted to establish branch offices in India and conduct the following activities in India;

a. Exporting / Importing goods

b. Professional rendering or consultancy services.

c. Carrying out research work which involves the parent company.

d. Promoting technical or financial cooperation between Indian firms and the parent or overseas group.

e. Representing the Indian parent company and acting as purchasing/selling agent in India;

f. Information Technology rendering services and software development services in India.

g. Rendering technical support to parent/group supplied products;

h. Foreign Shipping Company / Airline.

PROHIBITED ACTIVITIES

Companies incorporated outside India forbid the following activity via branch office in India.

a. Retail trading of any type is not allowed by a branch office in India

b. A Branch Office shall not carry out, directly or indirectly, manufacturing or processing activities in India;

c. Profits earned by the branch offices are remittable freely from India, subject to the applicable taxes.

Pre-requisite and Procedure of incorporation

PRE-REQUISITE

a. Profit-making track records in the home country during the five financial years immediately preceding.

b. Net Worth not less than USD 100,000 or its equivalent as described in the latest Audited Balance Sheet or Account Statement certified by a Certified Public Accountant or other Registered Accounting Practitioner under any name.

c. The ownership issues established abroad shall not be permitted to open branch offices in India

Procedure for setting up branch office:

STEP 1: Approval from RBI – The Foreign Exchange Department, Reserve Bank of India, Central Office, Mumbai grants permission for the establishment of branch offices (note – Not RBI offices in the respective state capitals)

1. The application for a branch office and BRANCH office is currently submitted through the Authorized Dealer as per the RBI Requirement. Authorized dealers mean having banking licenses for various institutions.
2. The application should be filed with the RBI in the prescribed form (FNC form).
3.  

STEP 2: Each BRANCH office registered with RBI will be registered with the Ministry of Corporate Affairs; it is a BRANCH office registration as a foreign company established in India. Corporate Identity Number is assigned by the Companies Registrar. The registration will be made through FC-1

Documents Required For Approval And Incorporation

a. Letter from the Parent company to RBI. *

b. Letter of authority for Local representatives from the parent company.

c. Letter of authority / Parent company resolution to set up the BRANCH office in India.

d. Comfort letter from the parent company which intends to support the Indian operation.

e. Two copies of the English edition of the parent company's Certificate of Incorporation, Memorandum & Articles of Association (Charter Document) duly approved by the Indian embassy or notary public in the country of enrolment.

f. Incorporation Certification-Translated & Duly Notarized and Certified by Indian Consulate

g.The New audited the parent company's balance sheet and financial statements duly translated and notarized for the past three years. & certified by the Indian Consulate.

h. Authorized person's name, address, email ID, and telephone number in Home Country.

i. Information on the Organization's Country of Origin bankers along with their bank account number.

j. The Organization's commitment to be open to the report/opinion sought by the Government of India / Reserve Bank of India from its banker

k. The expected level of funding for India operations.

l. Detail address of the proposed local office, the number of people likely to be employed, the number of foreigners among those employed

m. Details of the activity carried out by the applicant organization in Home Country in brief regarding the company's product and services in Brief.

n. Certificate for bankers

o. Latest Proof of Identity of all Directors – Certified by Home Country Consulates and Bankers

p. Latest Proof of Address of all Directors – Certified by Home Country Consulate and Banker

q. Individuals / company details holding more than 10% of the equity

r.  Organizational Structure w.r.t Shareholding pattern

s. Bank Account Opening Settlement with Banker

t.  Bank account Opening Form Duly signed for Indian Bank

u. RBI approval letter

v. Power of attorney or board resolution for authorized representative appointment

*its not exhaustive list of documents, it may increase as per the type of business activity