Liaison Office Registration

Introduction to Liaison Office Registration

Foreign companies who want to establish their business operation in India must start a Liaison office. The aim of setting up a Liaison office is to discover the possible outcomes of business opportunities a company can receive in India by gathering all the necessary business information. Liaison office is the popular option for investors who want to explore & understand the business environment of India. The type of entity is beneficial for promoting the parent company & acts as the communication channel between the Indian and foreign companies.

The Liaison office was established with the aim of working as a bridge because it imports and exports from/to India, conducting market research, delivering feedback, and promoting technical & financial participation of foreign companies. Foreign investors love the opportunities the Liaison office delivers. Through this, foreign investors can limit their legal, financial, and administrative responsibilities. 

The activities permitted by the Liaison office

• Signify the foreign parent company in India
• It helps to form a technical & financial collaboration between Overseas and Indian company
• Advertising Export/import partnerships between countries
• Set up strong communication between foreign companies and Indian parties with the aim of developing marketing potential.

We all know that India is rapidly progressing and growing globally economically. There are multiple foreign companies who want to invest in the Indian market. This is the reason why foreign companies love to establish their Liaison office in India. This complete process can be turned into an easy and hassle-free way when you have experts who help you in the complete procedure.

The Eligibility Criteria for Registering the Liaison Office in Delhi India

The Liaison office can be established after obtaining permission from the RBI under the provision of FEMA (Foreign Exchange Management Regulation), 1999. Here, we have mentioned the following requirements for opening a Liaison office in India-

• Anyone who is not a resident of India but wants to set up a Liaison office in India requires approval from the Bank Of India.
• A minimum net worth of 50,000 USD is required to verify the most recently audited balance sheet.
• 3-year records for being a profitable operation preceding the three financial years in your home country.
• For financial companies, there is no need to get approval from the RBI, in case the business has received the required approval under the Act of Banking Regulation in 1949.

In case a business doesn’t meet the following requirement, but the subsidiary company does, the parent business can present the letter of comfort on behalf of the subsidiaries.

Documents needed For the Registration of Liaison Office in India

An essential document for registering a liaison office in India is Form FNC-1, which consists of a number of letters, resolutions, and certifications.

• The parent company's letter of authority supporting the local representative is an essential part. By doing this, the figure employer presents the local consultant the authority to act on its behalf whilst the liaison office is being hooked up and run. 
• A letter to the Reserve Bank of India (RBI) written by the parent company's principal officer is attached to the form. The parent company intends to open a liaison office in India, as stated in this letter.
• A letter of authority or resolution from the parent company offering official consent for establishing the liaison office in India is also enclosed.
• A comfort letter from the parent company confirming support for the liaison office's operations in India is required by the form.
• A board resolution is required in order to guarantee legal and operational clarity, allowing employees of the parent company to sign documents and submit applications to RBI. The local representative may receive further authority over this resolution by means of a notarized Power of Attorney.
• Financial records are required, including the most recent audited balance sheet and the parent company's annual accounts for the previous five years. The administrators of the parent business enterprise and the Indian Consulate need to translate, notarize, and certify those files.
• Records pertaining to the legal status of the parent company are essential. This contains two copies of the Memorandum and Articles of Association in English, duly attested by the Indian embassy or a notary public in the country of registration. 
• Additionally, the Indian Consulate must translate, properly notarize and certify the Certificate of Incorporation.
• It is necessary to provide the bank account number and information about the parent company's domestic bankers.
• It is necessary to have details about the authorized person in the home country, such as name, address, email address, and phone number.
• The form should specify the expected level of funding for operations in India.
• It is necessary to provide a brief summary of the applicant organization's domestic operations, including its goods and services.
• The applying organization must pledge to be transparent in response to requests from its banker for reports or views made by the RBI or the Government of India.
• Information about people or businesses that own more than 10% of the applicant company's equity is required.
• Information about the planned local office, the number of workers, the number of foreign workers, and, if chosen, the address of the local office head are required.
• It is required that the applicant company provide a banker's certificate attesting to its financial standing.
• Verification of the applicant company's due diligence and the background information of its promoters is crucial.
• It is necessary to describe the organizational structure in terms of shareholding patterns.
• Signed bank account opening form from an Indian bank is required.
• It is necessary for all directors to provide identification and proof of address, attested to by the banker and consulate in their home nation.
• The form includes a resolution for opening a bank account with the assigned banker.
• It is necessary to have an additional certificate from a certified public accountant (CPA) attesting to the profit made in the home country during the previous three fiscal years.
• It is necessary to obtain full KYC (Know Your Customer) information from shareholders who own more than 10% of the applicant company.
• The form's declaration section lists the applicant's promises, which include using a designated account for transactions, notifying the bank of any property acquisitions, reporting senior management changes, and making sure term deposits are used properly.

Benefits of Setting Up A Liaison Office in India

For companies aiming to increase their footprint abroad, putting in place a liaison workplace has diverse advantages.

• First and foremost, the Liaison Office acts as an essential conduit for communication between the main office and the overseas head office. This makes it less difficult to communicate in a timely and green manner, which helps the enterprise advantage marketplace opportunities as they present themselves in the host country.
• A liaison office is relatively simple to set up and close, making it easy to enter and exit foreign markets. It isn't always necessary to buy fixed property inside the call of the Liaison Office within the host country, not like whilst developing a corporate structure. This adaptability gives groups a short and low-cost manner to build a neighborhood presence.
• Liaison Offices are appealing because they are not required to pay taxes under the Income Tax Act of 1961 due to their non-operational nature. Financial advantages result from this tax exemption, which frees agencies to strategically install assets without disturbing them about collecting extra tax responsibilities.
• Liaison Offices allow businesses to take advantage of emerging market opportunities without having to deal with the hassles of establishing a corporate structure. This minimizes the time and assets wished for established order and allows for short market entry and responsiveness to transferring commercial enterprise environments.

The exemption from most requirements of the Companies Act 2013, with the exception of obtaining an Annual Activity Certificate, is one noteworthy benefit. Liaison Offices' overall cost of compliance is greatly decreased by this exemption. By eliminating the extensive legal and regulatory obligations that usually go together with company structures, corporations can give attention to their core commercial enterprise operations, even cutting down on working prices.

Drawbacks of Setting Up A Liaison Office in Delhi India

There are several drawbacks to opening a liaison office.

• First off, a Liaison Office cannot carry out any business operations, in contrast to a Branch Office. Its function is limited to enabling correspondence between the overseas headquarters and the main office; it is not authorized to carry out business operations.
• The list contained in Schedule II of Notification No. FEMA 22/2000-RB limits the actions of a liaison office. Any departure from this list necessitates prior Reserve Bank approval, which increases regulatory scrutiny and might reduce the Liaison Office's flexibility in carrying out a range of business activities. These limitations could limit the operational flexibility and scope of businesses that choose to use a Liaison Office structure.

Compliance for a Liaison Office in Delhi India

Every 12 months, the liaison office wishes to verify that its operations are in step with its constitution via filing an Annual Activity Certificate (AAC) to the Reserve Bank of India (RBI). This certificate attests to the office's adherence to regulatory necessities and was created by way of a chartered accountant. In addition, an AAC needs to be submitted to the Directorate General of Income Tax no later than sixty days following the end of the fiscal year.

A Liaison Office must obtain prior RBI approval through its Authorized Dealer (AD) Category-I bank in order to open multiple bank accounts in India. The additional account must be justified in the application, and approval is subject to fulfilling regulatory requirements. This strict framework for compliance guarantees openness, responsibility, and conformity to the rules that govern Liaison Offices in India.