Liaison office is set up 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. The role of Liaison offices is, therefore, limited to collecting information about possible market opportunities and providing information about the company and its products to the prospective Indian customers.
Establishment of Liaison office by foreign entities is regulated in terms of Section 6(6) of Foreign Exchange Management Act, 1999. Application to open Liaison Office in India is approved by Reserve Bank of India (RBI).
Condition for Setting Up Liaison Office
- Applications from foreign companies (a body corporate incorporated outside India, including a firm or other association of individuals) for establishing Liaison Office in India shall be considered by the AD Category-I bank as per the guidelines given by Reserve Bank of India (RBI).
- The non-resident entity applying for a Liaison Office in India should have a financially sound track record viz:
For Liaison Office — a profit making track record during the immediately preceding three financial years in the home country and net worth of not less than USD 50,000 or its equivalent.
Procedure for applying
- The application for establishing Liaison Office in India may be submitted by the non-resident entity in Form FNC (Annex B) to a designated AD Category – I bank (i.e. an AD Category – I bank identified by the applicant with whom they intend to pursue banking relations) along with the prescribed documents mentioned in the Form and the LOC, wherever applicable.
- The validity period of an Liaison Office is generally for 3 years,
- An applicant that has received permission for setting up of a Liaison Office shall inform the designated AD Category I bank as to the date on which the Liaison Office has been set up. The AD Category I bank in turn shall inform Reserve Bank accordingly.
- In case the Liaison Office for which approval has been granted is not opened within six months from the date of the approval letter, the approval shall lapse.
Permitted activities for a liaison office in India
- Representing the parent company / group companies in India.
- 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
Features of liaison office
- Name of Indian liaison office shall be same as parent company.
- License for a liaison office is given for 3 years and shall be renewed every 3 years.
- Reserve Bank of India is a governing body for a liaison office License.
- It is suitable for foreign Companies looking to setup a temporary office in India to liaison its existing business with Indian clients.
- A Liaison office is just extension of the exiting company in the foreign country.
- Expenses of Liaison offices are to be met entirely through inward remittances of foreign exchange from the Head Office outside India.
Documents Required for Liaison Office Setup
- 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.
- Bankers Certificate 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