How to set up a branch office of a foreign company in India?
How to set up a branch office of a foreign
company in India?
The Indian market has seen significant growth in the past few years and has turned out to be a lucrative workspace for companies in India as well as abroad. This has attracted foreign companies to start their branch office (BO) in India to boost profits. As India continues to grow at an unprecedented pace, arousing foreign companies’ keen interest to tap the resources and opportunities, there are a set of regulations, rules, and compliances that they need to follow to set up their branch office.
If the company follows all the rules and meets all the requirements leading to the right establishment presence, it can make all the difference between wasted efforts and success in setting up the branch. One of the main challenges is the lack of a viable and good commercial space in major cities of India under their budget. Therefore they can take the alternative of setting it up in business centers to establish a strong physical presence. The Government of India is making all the attempts to help foreign companies looking to set up a branch office in India. Let’s look at the important aspects that you need to consider while setting up a branch office of a foreign company in India.
Branch office of a foreign company in India
The main reason as to why foreign companies set up a branch office is to help them with easier management and carrying out activities in that particular area or country. It can be seen as an extension of the parent company, headquartered in a different country. The companies act, 2013, has all the provisions required for setting up a business in India. According to the companies act 2013, a foreign company is a company or body corporate incorporated outside India and which has a place of business, whether by itself or through an agent, in this country. The RBI under section 11 issues directions to the authorized person for conducting foreign exchange business, and this includes setting up a branch office as well. FEMA,1999 together with RBI, established the rules for the formation of a branch office.
Eligibility requirements for setting up of branch office by a foreign company in India
The foreign exchange management act (FEMA) governs the establishment of a branch office for a foreign company or corporation in India. There is a set of established regulations to which the foreign company has to adhere to in order to start a branch office. One of the most fundamental factors to become eligible is that the business must use its assets only to perform the company’s activities and other associated operations. Also, the foreign company cannot acquire any piece of land or purchase it for renting purposes and must strictly use it to carry out business activities. Two more important qualifications are