Introduction: Branch Offices

It is a part of the company located other than the main office, where the same business activity is conducted. Most of the branch offices are smaller divisions of different aspects of the company such as human resources, marketing, and accounting. A branch office will typically have a branch manager who will report to and answer to management at the main office.

Table of Contents

Introduction: Branch Offices
How does a Branch Office work?
How branch office help foreign companies?
Role of FDI to open branches in India?
Procedure after getting the RBI approval

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How does a Branch Office work?

Branch offices are useful in that they allow many of the client considerations to be conducted closest to clients and locality. They can also adjust their business need on location-specific terms. They can be set up according to the Geo-graphic needs.

How branch office help foreign companies?

A branch office is suitable for a business model for foreign companies looking to establish a temporary presence in India and also the government has many FDI-attracting schemes where companies can reduce taxation and other business expenditure. It provides an extension of the head office business and carries on the same business and activity as that of its parent company. Most businesses use this model to learn more about the Indian market without having to make a long-term commitment.

Role of FDI to open branches in India?

Foreign investment offers advantages to both the investor and the foreign host country. Both parties are mutually benefited due to FDI. It helps businesses with market diversification, tax incentives, lower labor costs, preferential tariffs, and subsidies

Conditions for setting up a branch office

When opening a company in India through a branch office, the new legal entity has to be registered following the regulations prescribed by the Company Act 1956 and Companies Act 2013, and also comply with the provisions of the Foreign Exchange Management Act 1999.RBI will grant permission for a period of a maximum of 4 weeks.

For Domestic business in India

Need a board resolution for hiring a place for business. After this need to apply for a shop establishment license for the new branch. The branch has to manage service Tax, Professional Tax, and VAT separately. Have to place nameplates, rubber stamps, and bill books separately.

Businesses running outside India

The applicant company must be a body corporate incorporated outside India.
The name of the Indian branch office must be the same as the parent company (if the branch office does not have revenue from India operations, its expenses must be met by the head office).
The net worth of the branch office must not be less than US$ 100,000.In cases where the applicant's foreign entity does not meet the financial criteria, the parent company may issue a Letter of Comfort (LoC), given the company satisfies the prescribed criteria for net worth and profit.
The parent company should have a profit-making record in the immediately preceding five financial years in the home country.

What are the Permitted Activities?

In India Branch office cannot directly carry out manufacturing activities unless such manufacturing activity is carried out in a special economic zone with the purpose of exporting products out of India. Sub-contractors are also included in this type of activity.
If a foreign company engaged in trading and manufacturing activities in its home country in order to set up a branch office in India.

What kind of purpose foreign companies can open branches in India?

Export/Import of goods
Professional or consultancy services.
Carrying out research work, in which the parent company is engaged
Promoting technical or financial collaborations between Indian companies and a parent or overseas group of companies.
Representing the parent company in India and acting as buying/selling agents in India.
Rendering services in Information Technology and development of software in India.
Rendering technical support to the products supplied by the parent/group companies.
Foreign airline/shipping company
Foreign Banks.

Establishment of Branch Office (BO)/Liason Office (LO)/ Project Office (PO) in India by Foreign entities.

1	Application form foreign companies( a body incorporated outside India, including a firm or other association of individuals)for establishing BO/LO/PO in India shall be considered Category – I (RBI)
2	An applicant from a person resident outside India for the opening of BO/LO/PO in India shall require prior approval by the AD Category-I bank to the General Manager, RBI, Central Office cell, Foreign Exchange Department, 6, Sansad Marg, New Delhi-110001 who shall process the application in consultation with the Government of India. Applicant from Pakistan, Bangladesh, Srilanka, Afghanistan, Iran, China, Hong Kong, or Macau, and application is for opening a BO/LO/PO in Jammu and Kashmir, North-East Region, and Andaman and the Nicobar Islands. Applicant affiliated with these four sectors namely Defence, Telecom, Private Security, and Broadcasting also falls under this category. The applicant is a Non-Government (NGO), Non-profit organization Body/Agency/Department of a foreign government. 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	Non–resident entity applying for a BO/LO in India for Branch office
4	An applicant that is not financially sound and is a subsidiary of another company may submit a Letter of Comfort (LOC) (Annex A) from the parent group.

Following information is required by the foreign company to deposit the following set of forms.

1	FNC form duly signed by AR
2	Information about the parent company along with its certificate of incorporation attested by a Notary Public or the Indian Embassy in the country of registration.
3	The incorporation documents of the branch office to be established in India
4	Proof of registered office
5	Note on location or proposed activity
6	The latest audited balance sheet of the applicant entity
7	Board resolution to open a branch office
8	KYC of the authorized signatory
9	Information about the local representatives of the parent company in the branch office.

Procedure after getting the RBI approval

Every branch office registered with RBI shall get itself registered with the Ministry of Corporate Affairs as direct means of the registration by the branch office as an establishment of a foreign company in India. On such registration, a CIN i.e Corporate identify Identify Number is allotted by the Registrar of Companies.

1	Form FC -1
2	Charter, Statutes or memorandum and articles of association or other instrument constitution of the company
3	If the above documents are not English then the translated version of the document
4	Director details – Individuals
5	Director details – bodies corporate
6	Reserve bank of India approval letter
7	Secretary details
8	Power of attorney or board resolution in favor of the authorized representative
9	Companies have to file annually and periodically documents as mentioned above

Validity – Three years of validity from the date of issuing.

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