For the objectives of making one's business prominent in any targeted foreign country and acquiring a considerably large customer base, one of the most elegant means opted by foreign companies is setting up a branch office (BO) in the specified country. In ours this highly refined and beneficial web article, we are offering the full gamut of information regarding a Branch Office (BO), and all procedures for opening a branch office in India by a foreign company, for doing desired business activities in the concerned economic field.
Here, noteworthy is that a Branch Office (BO) has larger scope and ambit regarding business expansion and promotion than that supported by a Liaison Office (LO). The liaison office is mainly concerned with making liaisons with foreign companies and customers for business promotion and growth. On the other hand, a branch office can do much more then these activities can earn profits and remit the same to the parent company, and more actively and effectively represent the parent company in the targeted foreign country.
However, an active branch office is regarded as a part of the parent company or group, and therefore, has no separate legal entity of its own. This branch office is not generally permitted to carry on manufacturing, commercial, or retail trading activities in the foreign country where it is situated. Again, the profits earned by doing the permitted business activities by a branch office can be freely remitted to the parent company, after paying all applicable taxes in the pertinent country.
Procedure for Opening a Branch office in India by Foreign CompanyFor opening a branch office in India by a foreign company engaged in the manufacturing or trading activities in any economic sector, directly concerned are the Reserve Bank of India (RBI) and the Registrar of Companies (ROC) in the targeted State of India.
- Thus, for opening a branch office in India, essential are compliances under the Foreign Exchange Management Act (for approval of RBI), and compliances under the New Companies Act, 2013. Generally, approval for setting up a branch office in India is obtainable within a time-period ranging from 2 to 4 weeks.
- For obtaining permission from the RBI for opening a branch office in India, in any State of the country, an application is to be made in Form FNC-1, which is to be sent to the Chief General Manager, Exchange Control Department (Foreign Investment Division), RBI Central Office, Mumbai. The documents to be enclosed with this FNC-1, are almost the same which are generally submitted in the case of setting up a liaison office in India (informed in our other article bearing the name, setting up a liaison office in India).
- The ROC appointed in the State where the foreign company desires to establish its branch office, demands all those documents which are generally submitted for setting up a private limited company in India. In addition to the approval letter from the RBI in favor of the cherished branch office, ROC is also entitled to know everything about the parent company and its businesses. Regulation and controlling of the activities of the branch office are regularly exercised by the ROC every year.