A Liaison Office‘ is a representative office set up primarily to explore and understand the business
and
investment climate. Such office is not permitted to undertake any commercial / trading /
industrial activity, directly or indirectly, and is required
to maintain itself out of inward remittances
received from parent
company
through normal banking channels.
As
defined under clause 2(e) of Foreign Exchange Management (Establishment in India of Branch
or Office or other Place of Business) Regulations,
2000.
'Liaison Office'
means a place of business to act as a channel of communication between the
Principal place of business or Head Office by
whatever name called and entities in India
but
which does not
undertake any commercial /trading/
industrial activity, directly or indirectly, and maintains itself
out of inward remittances received from abroad through
normal banking channel;
The liaison
office can do only permitted activities
in India these are:-
(i) Representing the parent company/group
companies in India.
(ii) Promoting export import from/to India.
(iii) Promoting technical/financial
collaborations
between
parent/group
companies
and companies in
India.
(iv) Acting
as a communication
channel between
the parent company and Indian companies.
As
per sub-section (6) of Section 6 of the Foreign Exchange Management Act,
1999 the Reserve
Bank may, by regulation,
prohibit, restrict, or regulate establishment in India of a branch, office or
other place of business by a person resident outside India, for carrying on any activity relating to such branch,
office or other place of business.
In
exercise of the powers given under sub section 6 of section
6 of
the Foreign Exchange
Management Act, 1999. RBI
has framed the regulation by way of notification to regulate the
provisions relating the Liaison office in India. These regulations are Foreign
Exchange Management (Establishment
in India of branch or
office or other place of
business) Regulations, 2000 framed by way of Notification No. FEMA 22 /2000-RB dated 3rd May
2000.
As per the notification mentioned above no person resident outside India shall, without prior approval of the
Reserve Bank, establish in
India a branch or a liaison office or a project office or any
other place of business by whatever name called. The permission for Liaison office is required
to be
taken in the form of
application to the RBI. Such an application is
required to be made in the prescribed form i.e. Form FNC. The FNC is the form which serves as the purpose for RBI for
getting the required
information to arrive at the decision whether the permission is to be granted
to Liaison office
in India or not.
The
application form duly completed should be submitted to AD Category – I bank designated
by the applicant for onward
transmission to
the Chief General Manager-in -Charge, Reserve
Bank, Foreign
Exchange
Department, Foreign Investment
Division, Central Office, Fort,
Mumbai
The information required to be given
in form:
v Full
name and address
of the applicant company/firm [whether the applicant is
a proprietary
concern or partnership firm or limited company or public sector undertaking or any other
organisation].
v Date and Place of incorporation / registration of
the applicant company.
v Details of capital
of the applicant company.
v Brief description of activities of the
applicant company.
v Value of goods imported from and / or exported to India by the applicant during each of the last three years.
v Particulars of existing
arrangements if any,
for representing the company in India
Particulars of the proposed Branch/ Liaison Office like activities to be undertaken and place of establishment
Documents required to be submitted along with
Form:
v Translated English version of the
Company‘s Certificate of
Incorporation/Registration,
Memorandum & Articles of Association attested by the Indian Embassy/Notary public in the country of registration
(Two
original copies)
v Copies of last three years audited Balance Sheet, Profit & Loss Account of the applicant company/firm.
v Undertaking that the Liaison office will not carry out any trading and commercial activity in
India.
v Copy of
the Board resolution for opening
office in India.
v Declaration by the applicant company
v Comfort
letter by the applicant
company
The
permission granted
to Liaison office shall be for the period of three years. The liaison office is
required to approach the AD before the expiry of three years for seeking extension/ renewal of permission otherwise it will be considered that the liaison office is functioning without
a valid
permission in
violation of regulation 3 of Notification
No. FEMA 22 /2000-RB dated
3rd May 2000.
Permitted
Activities:
The
liaison office can do only those activities in India that are permitted as per Schedule II of the
said
notification. As per the Schedule II, activities that can
be done by the liaison office are:-
v Representing
in India the parent company/group companies.
v Promoting export
import from/to India.
v Promoting
technical/financial
collaborations between parent/group
companies and
companies in India.
v Acting as a communication channel between
the parent company and Indian companies.
Prohibited/Restricted Activities:
v The
liaison office in India is not allowed to carry on any business activity in India. It shall
not take any activity Trading, commercial or industrial activity. There shall be no generation of
revenue by Liaison office in
India.
v It shall
not enter into any contracts with Indian residents;
v No commission /fees shall be charged or any other remuneration received /income earned
by the office in
India for the liaison office activities/services rendered by it or otherwise in
India.
v All the expenses
for
the set-up, operation and maintenance of
the Liaison office have to be met out
of foreign exchange
remittances from
the Foreign
company through
normal
banking channels.
v The Liaison office shall not borrow/lend any money from/to any person in India without
RBI prior permission.
v It shall not acquire, hold,
and
transfer any immovable property
in India without RBI prior
approval.
v Prior approval
of RBI required before
shifting of Liaison
office.
Acquisition of Immovable property
in
India
As per Foreign Exchange
Management (Acquisition and transfer of
immovable property in India)
Regulations, 2000 FEMA
21/2000-RB, dated 3-5-2000, [the regulations to provide for provision for acquisition and transfer
of immovable property in India]
the Liaison
office is not allowed to own/acquire any immovable property
in India however, the same
can
take on lease the immovable for carrying
on the permitted activities in India.
Closure of Business
operations
The Reserve Bank of India is required to be
intimated with the documents:
v Copy of
the letter of approval of Reserve Bank
of India for establishment
of Liaison
in
India.
v Board resolution
from
foreign/parent company
duly notarised/consularized
v Power of attorney
from foreign/parent
company duly notarised/counslarized in favour
of person signing documents for closure.
v Certificate
by Liaison office on pending
legal
proceedings in Indian
courts or enquiries from
Enforcement
Directorate.
v Certificate
by Liaison office that
it does not own any immovable property
in India
