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legal procedure for opening branch in US

gauri sahasrabudhe (company secretary in practice) (40 Points)

04 March 2010

A private ltd co from India wants to open a branch office in USA. I want to know the procedure for the same.

If anyone can guide me in this regard it'll be of great help.

Thanks

Gauri

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5 Replies

Rajeev Kumar (Learner) (51 Points)
Replied 06 March 2010

pls reply me too.....

Regards,

Rajeev

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Kiran Toshniwal (Practicing Company Secretary) (142 Points)
Replied 12 March 2010

Hi,

Eligibility Criteria

I) Basic criteria

· Reserve Bank Route — Principal business of the foreign entity falls under sectors where 100 per cent foreign direct investment (FDI) is permissible under the automatic route.

· Government Route — Principal business of the foreign entity falls under the sectors where 100 per cent FDI is not permissible under the automatic route. Applications from entities falling under this category are considered by the Reserve Bank, in consultation with the Government of India, Ministry of Finance.

II) Additional criteria

i) Track Record

· For Branch Office — a profit making track record during the immediately preceding five financial years in the home country.

· For Liaison Office — a profit making track record during the immediately preceding three financial years in the home country.

ii) Net Worth [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].

· For Branch Office — not less than USD 100,000 or its equivalent.

· For Liaison Office — not less than USD 50,000 or its equivalent.

Permitted activities

Branch Office

1. Export/import of goods.

2. Rendering professional or consultancy services.

3. Carrying out research work, in which the parent company is engaged.

4. Promoting technical or financial collaborations between Indian companies and parent or overseas group company.

5. Representing the parent company in India and acting as buying/ selling agent in India.

6. Rendering services in Information Technology and development of software in India.

7. Rendering technical support to the products supplied by parent/group companies.

8. Foreign airline/shipping Company.

Normally, the Branch Office should be engaged in the activity in which the parent company is engaged.

Liaison Office

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.

1. The application for establishing BO / LO in India may be forwarded by the foreign entity in Form FNC through a designated AD Category - I bank to the Chief General Manager-in-Charge, Reserve Bank of India, Foreign Exchange Department, Foreign Investment Division, Central Office, Fort, Mumbai-400 001, along with the prescribed documents.

2. Applications from foreign banks and insurance companies will continue to be directly received and examined by the Department of Banking Operations and Development (DBOD), Reserve Bank, Central Office and the Insurance Regulatory and Development Authority (IRDA), respectively

3. Approval of the Reserve Bank is not required to establish a branch/unit in Special Economic Zones for undertaking manufacturing and service activities. The general permission is subject to the following conditions:

Such units are functioning in those sectors where 100 per cent Foreign Direct Investment is permitted;
Such units comply with part XI of the Companies Act (Section 592 to 602);
Such units function on a stand-alone basis.

4. In order to provide a uniform framework, a Unique Identification Number (UIN) would be allotted to both, the existing as well as the new BOs / LOs.

5. The BOs / LOs shall obtain Permanent Account Number (PAN) from the Income Tax Authorities on setting up of their office in India and report the same in the Annual Activity Certificate

6. Applications for additional offices

· If the number of Offices exceeds 4 the applicant has to justify the need for additional office/s. (i.e. one BO / LO in each zone viz; East, West, North and South)

· Fresh FNC form, duly signed by the authorized signatory of the foreign entity in the home country should be submitted. However, the documents mentioned in form FNC need not be resubmitted, if there are no changes to the documents already submitted earlier.

7. Validity of the approval of Liaison Offices

· Requests on letter head of LO for extension of time for continuance of LOs may be submitted to the AD Category - I bank concerned under whose jurisdiction the LO / Nodal Office is located before the expiry of the validity of the approval

8. The application for winding up may be submitted along with the following documents

· Copy of the Reserve Bank's permission

· 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;

(iii) confirming that no income accruing from sources outside India (including proceeds of exports) has remained unrepatriated to India.

· No-objection or Tax Clearance Certificate from the Income-Tax authority for the remittance.

· Confirmation from the applicant/parent company that no legal proceedings in any Court in India are pending against the BO / LO 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 BO /LO in India.

9. The Above documents should be submitted to the Designated AD Category- I

10. Submission of Annual Activity Certificate

With effect from February 01, 2010, the Annual Activity Certificate as at the end of March 31 shall be submitted, on or before April 30, to the designated AD Category – I bank and a copy to the Directorate General of Income Tax (International Taxation), Drum Shape Building, I.P. Estate, New Delhi 110002, by the following :

(a) In case of a sole BO/ LO, by the BO/LO concerned;

(b) In case of multiple BO / LOs, a combined Annual Activity Certificate in respect of all the Offices in India by the Nodal Office of the BOs / LOs.

11. The designated AD Category - I bank shall scrutinize the Annual Activity Certificate and ensure that the activities undertaken by the BO/LO are being carried out in accordance with the terms and conditions of the approval given by the Reserve Bank.

12. In the event of any adverse findings being reported by the Auditor or noticed by the designated AD Category -I bank, the same should be reported immediately by the designated AD Category–I bank to the respective Regional Office of the Reserve Bank in respect of LOs and to the Central Office of the Reserve Bank in the case of BOs, along with the copy of the Annual Activity Certificate and their comments thereon.

Kiran Toshniwal (Practicing Company Secretary) (142 Points)
Replied 12 March 2010

Hi,

Sorry, The above is for opening if Branch office or liason office in India.

gurubrahmam (chartered accountant) (38 Points)
Replied 30 April 2016

A private ltd co from India wants to open a branch office in USA. I want to know the procedure for the same. If anyone can guide me in this regard it'll be of great help. Thanks