As the name suggest the Liaison office is setup by a foreign company in India to carry out the liaison activity for its business. The company cannot have any revenue for the Indian Liaison office; It has to meet all its expenses of Indian office through remittances from the Head office. The Liaison office is not allowed to earn any income in the India.
Liaison office is suitable for a foreign company to test and understand the Indian market , as it does not allow the companies to do business but just to be in the market and understand the Indian market or carry out the Research & Development activities or to understand the problem of existing clients of the company and serve them better.
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 Authorized 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 Licence 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 then of 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 Authorized dealer. The authorized 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.
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 Authorized 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 :-
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
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 REGSITRATION
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.
CLOSURE OF LIAISON OFFICE
Generally the Liaison office licenses is given for three years , if at any time the Company plans to close the Liaison office setup in India it shall file the necessary documents with the Authorized Dealer , and the application for the closure shall be forwarded by the Authorised Dealer.
Copy of the Reserve Bank's permission/ approval from the sectoral regulator(s) for establishing the BO / LO.
Auditor's certificate- i) 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; ii) 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; and iii) confirming that no income accruing from sources outside India (including proceeds of exports) has remained un-repatriated to India.
No-objection / Tax Clearance Certificate from Income-Tax authority for the remittance/s.
Confirmation from the applicant/parent company that no legal proceedings in any Court in India are pending and there is no legal impediment to the remittance.
A report from the Registrar of Companies regarding compliance with the provisions of the Companies Act, 1956, in case of winding up of the Office in India.
Any other document/s, specified by the Reserve Bank while granting approval.