How to establish and register Foreign Company’s Branch office in India

Introduction

Foreign Companies in order to expand their business and for growth establish branch offices around the globe.A branch office in India is essentially an extension of a foreign company’s operations that gets established and registered within India and performs activities similar to that of Parent company . So as to permit the foreign company to conduct business activities in the country . The main purpose of a branch office is to expand its business in India and advance the business interests of the parent company in India. . It’s worth noting that a branch office makes the directors of the overseas parent company liable for any actions, both positive and negative, carried out by the branch office in India. This is why many companies prefer to establish a wholly-owned subsidiary in India instead of a branch office.

Features of Branch Office

Here are some key points to understand about branch offices:

•Legal Structure: A branch office is a part of the parent company at a legal level. It is in this way that the parent company has responsibility for the acts and agreements of the branch office.

•Authority: Although the branch office is responsible for its independent daily operations, the ultimate authority resides then and there with the parent company. Decisions concerning the parent company’s strategic directions, policies, and large investments are normally made by the management of the parent company.

•Operations: Branches can often mirror the operations and functions of the main company where they are placed with slight adjustments to cater for the localization of the needs. This may include selling, marketing, customer support, and other business activities.

•Expansion and Market Presence: Branch offices act as a vital part of the company’s business strategy to enter into new geographical areas. They are the main tool that lets businesses set up a physical location to different regions and, thus, they will be capable of offering better services to local customers, opening new markets, and establishing strong partnerships with entrepreneurs and other stakeholders.

•Regulatory Compliance: According to different jurisdictional requirements, a branch office may comply with a variety of legal and regulatory obligations, e.g. registration, permits and licences, and local tax and labour laws.

•Risk and Rewards: Branch offices provide opportunities to strengthen their business and on the contrary represent some of the major risks. Such risks include issues with culture, the instability of the market, regulatory modifications, and operational difficulties. On the other hand, a successful branch office has a positive impact on the profitability of the main company.

Comparison between branch office,subsidiary and associate companies

2.Autonomy and control

Branch Office – It is controlled by the parent company

Subsidiary Company – majority ownership is acquired by another company which has the ability to make decisions, being defined as a parent company or a holding company,

Associate Companies – The parent company does not have full control over it but has significant influence

3.Liability

Branch Office – Liability rests with the parent company since the branch office does not have a separate legal identity

Subsidiary Company – Has its own legal identity and liability, separate from the parent company.

Associate Companies – Liability of the parent company depends on the nature of the relationship and the level of control it exhibits.

Establishment and Registration of a foreign Company’s branch office in India

Here’s how branch officers are registering in India:

1.Eligibility:

The initial stage should be to check whether the overseas company is competent to open a Branch office in India or not, and two factors to be met are as follows:

•The Parent Company over the 5 years immediately prior should have recorded a profit of at least $1,00,000 in its home country

•The parent company must have a net value of, at least, equal to $100,000.

2.Obtain Necessary Approvals and registrations to be done:

(The first step to get the things process is) Obtain all the necessary approvals and registration by the regulatory authorities such as the Reserve Bank of India (RBI) and different government departments.

•RBI approval

The scenarios for the companies from foreign countries which are willing to establish a branch office in India are unwilling to wait and money when they submit the required documents to the Reserve Bank of India. They can file an application to the RBI together with the attached required documents such as board resolutions, financial statements, and all the details of the planned activities of the branch office.by the form of FNC ( Freely Negotiable Credit) application to the one of the two routes under FEMA, 1999 decided by the level of Foreign Direct Investment. The two routes have

Your way of FEMA

Government paths

After the RBI’s approval letter is received, in case the branch office won’t open within 6 months, the RBI will cancel the approval. We are allowed above 6-months to open if only the reason for not being able to open the branch office within 6 months is beyond our control.

•Registrar of Companies Registration (ROC)

Within 30 days of RBI approval, Form FC-1 application to ROC (in Annexure II) should be filed with the ROC.

•Income tax department

If possible, obtain a (PAN) or Permanent Account Number because it is mandatory for different financial and tax reasons in India. and Tax Deduction and Collection Account Number (TAN) etc and

•Registration with other Authorities:

In some cases, the branch office may have to enrol with other departments such as the Goods and Service Tax department (GST), Employees’ Provident Fund Organization (EPFO), and Employee State Insurance Corporation (ESIC) depending on the type of the business activities.

3. Choose a Location:

Take a decision on the branch office’s location. It can be any city in India but certain locations may have their own specific regulations or benefits.

4. Compliance Requirements:

Apart from the diverse regulatory mandates such as timely submission of the annual report, keeping the books of accounts in good order as well as ensuring proper tax compliance, any organisation having its basis in India must comply with labour laws that are prevalent in the country. It includes those laws specifying employment, wage, work environment, etc.

5. Open a Bank Account:

When you have got the required approvals and the registration process is over, you can start the procedure at a bank in order to open an account stating the name of your branch office in India and the account is gonna be used for all the financial activities that it is related to in India.

Conclusion

Overall, branch offices play a vital role in the corporate strategy of many businesses, serving as a bridge between the parent company and new markets or regions. By carefully planning and managing their branch operations, companies can effectively leverage this model to achieve their growth objectives and enhance their global footprint.