Open a Branch in India
Updated on Saturday 16th February 2019
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A branch of a foreign company operating on the Indian market can be set up only for specific business activities. When starting a business in India that will be incorporated as a branch office, the representatives of the foreign company should receive an approval from the Foreign Exchange Department, Reserve Bank of India (RBI), situated in Mumbai.
The Reserve Bank of India will verify the activity of the applicant company and further on, the foreign legal entity will need to submit specific company documents. Our team of agents in company registration in India can assist foreign investors with advice on the minimum requirements available for opening a branch office in one of the Indian cities.
Activities of a foreign branch office in India
In order to open a company in India that will perform its operations through a branch office, the applicant foreign business entity has to conduct its activities in specific business sectors, as prescribed by the national legislation applicable here. The branch office may perform one of the following:
- trading activities (the import or export of goods and products) or consultancy services;
- research work, in a field of activity in which the parent company is already activating;
- develop technical or financial operations in collaboration with Indian companies;
- buying/selling agents, airline and shipping activities or business activities related to banking;
- offering services in the information technology and software sector.
Foreign companies may also establish a branch office performing manufacturing activities, but in this case, it is necessary to perform the business operations through an Indian company. Certain activities can’t be conducted through a branch office in India, such as the retail operations of any type.
Also, the branch office may not diversify its operations outside the scope of those that have already been approved by the Reserve Bank of India. Businessmen may find out further details on the above mentioned details from our team of specialists in company formation in India.
Are there any eligibility requirements for opening an Indian branch?
Yes, when opening a company in India through a branch office, the new legal entity has to be registered following the regulations prescribed by the Companies Act 1956, the Companies Act 2013, but it also needs to comply with the provisions of the Foreign Exchange Management Act 1999.
Besides these, the investors of the branch office in India have to provide a financial record of the company abroad, in which the company’s annual profits can be tracked (the financial records for the last five years of activity). The company’s net worth value has to be of at least $100,000 and this must be proven by the company’s latest audited balance sheet.
Registration requirements for a branch office in India
The procedure on how to form a company in India in this case may last several weeks. RBI will grant permission in a period of maximum 4 weeks, provided that all the requirements are met. The foreign company should include the following information in the application with this institution:
- a detailed history of the business activities conducted by the parent company;
- the list of proposed operations that will be conducted in India through the branch office;
- the main reasons for conducting business activities in India through a branch office in this country;
- completing the Form FNC and submit it to the RBI, as long as the sector in which the branch office is registered allows 100% foreign direct investments; if other sectors are targeted, the form should also be sent to the Ministry of Finance.
What are the main incorporation documents for an Indian branch?
The procedure on how to form a company in India through a branch office requires investors to deposit a wide set of company documents, besides the standard forms that are requested by the competent authorities in India. Our team of specialists in company formation in India can assist businessmen with advice on such documents, which are presented below:
- a representative of the parent company abroad (the principal officer) must address a letter to the RBI;
- it is also necessary to provide a letter from the company’s representatives through which they will appoint a local representative;
- a letter through which the parent company states that it will support the Indian branch office in developing its local operations;
- provide two copies of the company’s incorporation documents, attested by the Indian embassy in the country in which the parent company is located;
- a translated and certified copy of the company’s certificate of incorporation;
- a copy (translated and notarized) of the latest audited balance sheet and annual accounts;
- the contact information in the home country of the authorized person;
- an estimate on the funding level that will be used for the Indian branch.
Besides these, other relevant information will have to be offered. For example, it is necessary to offer an estimate on the expected number of employees that will work in the Indian branch office, the number of foreign employees, but also information concerning the company’s directors (regarding their identity and address).
Another requirement when starting a company in India is to offer detailed information concerning the management of the company. In this sense, the parent company must disclose details on the persons/entities that hold more than 10% of the company’s shares, the structure of the company and the shareholding structure. Other documents can be necessary in this case and we invite you to address to our team of consultants in company registration in India, who can offer more details.
Can branch offices acquire property in India?
Investors who want to open a company in India that operates through a branch office will be allowed to purchase property in this country, as long as the respective assets are used in order to perform the company’s activities and other associated operations. Following the regulations applicable in India, foreign companies can’t acquire property with the purpose of renting it.
However, it is important to know that branch offices or other types of companies originating in specific countries are not allowed to purchase property in India. This is applicable in the case of Pakistan, Bangladesh, Sri Lanka, Iran, Bhutan, China and Afghanistan.
When completing the application for registering a branch office in India, the investors will also need to provide English translations of the company’s statutory documents. At the same time, it is necessary to provide information on the company’s net worth value, which can’t be below USD 100,000.
Are there any other procedures when opening an Indian branch?
Yes, investors should be aware that once the company is legally incorporated, other procedures need to be concluded. The newly formed company must obtain a permanent account number, and register for tax purposes. In this sense, the company can apply for a tax deduction number and register for value added tax.
The branch office is also legally required to comply with the accounting procedures that have to be fulfilled during a financial year. Thus, during this period, the branch office has to keep a book of accounts and must audit the company’s annual accounts. Also, the branch has to file for an annual activity certificate with the RBI.
Other institutions must obtain financial documents regarding the activity of the branch office in India and this is the case of Registrar of Companies (RoC), where the branch has to deposit the annual return and the annual balance sheet. In the situation in which the company will suffer various changes, the local institutions have to be announced. Thus, RoC and RBI have to be notified on any change related to the branch office, but this also is applicable when the parent company changes the company’s directors or modifies any provisions of its founding documents.
Investors should also know that they may set up a branch office in India in the country’s Special Economic Zones (SEZ). However, when opening a branch in these regions, the branch office will be limited to performing its business activities only in these special zones.
As mentioned above, branch offices are not allowed to develop certain types of economic activities (such as retail), but when operating in an Indian SEZ, the company may enter such operations in specific conditions, and it will not be necessary to obtain approval from RBI.
The application is comprised of a set of documents that must be submitted by the applicant and foreign entities are invited to contact our team of consultants in company formation in India for in-depth advice on this subject. Our representatives can offer advice on the fees and other associated costs related to the registration of a branch office in an Indian city.