Establishing Branch Office in India: How can a CA Firm Help

Establishing branch office in India is among the best business strategies that many companies from other parts of the globe seek to invest in the rapidly growing economy in India. However, the process requires going through numerous legal, financial and other regulatory requirements that may turn out to be cumbersome. These guidelines are critically important for the development of integrated business reporting and CA firms are significant in offering their advice and professional services to help with the process. This blog will explore how a CA firm can help in establishing branch office in India and how VJM Global, your top CA firm in India, can help with your needs.

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In regards to this, expanding a business in a new jurisdiction is always a step characterized by all sorts of challenges and decisions. Perhaps the most important consideration when entering a new territory is the establishment of a branch office – this gives the company a chance to study the market and decide whether or not they want to proceed into that territory with more operations.

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For those in other countries, the branch office formation is the most advisable for those with a head office business that wants to expand into India or those who want to start a temporary business in the country. This is a common strategy for many international firms to test the waters of the large Indian market without being locked into long-term contractual agreements.

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What is a Branch Office?

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A branch office in India is the legal creation of a foreign business venture that steps into Indian territory to operate a business licensed by the parent company. This enables the foreign company to operate its affairs in the country while simultaneously operating as a different legal entity.

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Like any other organization, the ranch office has to get approval from the Indian authorities, especially from the RBI, and the Ministry of Corporate Affairs MCA, which regulates all the companies in the country. The major objective of the ranch office is to propagate and achieve global company objectives in India.

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Requirements for Establishing Branch Office in India

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The following are the eligibility criteria to set up a branch office in India:

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• An applicant must be a corporate body established outside the country.
• The company has to be profitable for the past five years in the home country for the financial year ending.
• The Indian branch office shall be named the same as the organization's parent company.
• The company's total assets are at least $ 100,000 or its equivalent.

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Moreover, if the applicant company does not satisfy the financial requirement, it is an associate company of a parent company. Such an applicant company may submit any ‘Comfort Letter’ from the parent company affirming that the parent company meets the prescribed financial requirements

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Procedure for Establishing Branch Office in India

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First and foremost, the foreign company must obtain prior permission from the RBI in accordance with Section 1 of the FEMA Act of 1999 for starting a branch office in India. However, those involved in the business activity that allows 100% FDI through the automatic route of approval are required to submit Form FNC, enclose relevant documents, and forward it to the RBI.

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This could be done according to the public notice procedure and/or direction by the RBI. 

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In case, the office is not opened in that period of time, which is six months from the date, the option approved to open the branch office in India will be released for other parties interested. Therefore, if the opening of the office cannot be done before the expiration of the prescribed period of 6 months, then the AD Category-I bank may permit an additional 6 months for the opening of the office in reasonable circumstances not within the control of the applicant. Any further extension from the above timeline must be obtained from the RBI.

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Documents Required when Registering a Branch Office in India

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Following are the information and documents required for branch office Registration in India:

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• The name and address of the applicant
• An attested copy of the certificate of incorporation or registration obtained from the Notary Public of the country of registration
• Memorandum of Association and Articles of Association certified in original by the Notary Public of the country of registration
• Previous financial information of the applicant, including a balance sheet certified by an independent auditor for the last five years
• Value of goods imported and exported to and from India
• Information about the establishment of the bankers in the home country
• Report from the bankers in the home country with the number of years of banking relations with the banker.
• Branch office registration in India: Address, Email, contact information, and the number of employees are expected to be registered.
• Any other document as may be required

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Further, Prior Approval of RBI shall be Required in the Following Cases:

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• The applicant is either a citizen of Pakistan or incorporated/registered in the Islamic Republic of Pakistan.
• The applicant is either a citizen of or is incorporated or registered in Sri Lanka, Bangladesh, China, Iran, Hong Kong, Afghanistan, or Macau and the application is for the branch office in Andaman and Nicobar Islands or Jammu and Kashmir or in the North Eastern region.
• The applicant's main business falls under any of the mentioned categories: telecom, defense, Information, and broadcasting, or private security.

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But if government permission or approval or license from the concerned ministry or department has already been obtained, then the approval from RBI is not mandatory.

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ROC Filings

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Within 30 days of setting up a branch office in India, the foreign company shall file Form FC-1 with the registrar of companies along with the following documents:

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The officially certified and notarized copy of RBI's approval as per FEMA Rules and Regulations, along with other regulatory bodies. If no approval is necessary, then the representative of the foreign company must make a declaration regarding the same. 

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A copy of the charter or statutes or memorandum or articles of association or any other instrument evidence the constitution of the company

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Copy of the powers of attorney or the board resolution appointing the authorized representative

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Details of all directors and secretaries of the foreign company. These were the specific guidelines and steps necessary to open a branch office in India.

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Advantages of Hiring a CA Firm

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Engaging a CA firm for setting up a branch office in India offers several benefits, including:

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1. Expertise and Experience

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CA firms bring specialized experience to bear in matters concerning regulation, taxation, and financial issues. They are useful for foreign businesses to understand the legal requirements that they need to fulfill while intending to establish a branch office in the country.

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2. Time and Cost Efficiency

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Outsourcing to a CA firm eliminates expenses incurred when starting a branch office, as well as expenses needed to maintain such an office. CA firms efficiently serve as facilitators by making various processes smooth, timely compliance, and legal hassles.

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3. Comprehensive Services

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The strategies shared by CA firms include compliance and reporting, advisory, risk management, finance and law, and outsourcing services. These measures help to ensure all the factors relating to the establishment and administration of branch offices are in place and make foreign companies engage specialist lawyers for this kind of service.

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4. Risk Mitigation

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CA firms reduce risks resulting from noncompliance or regulatory violations in various ways. They make sure that the branch office carries out its every activity in compliance with the laws of India in order to avoid running into legal issues and incurring fines with local entities.

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Summing It Up

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Opening a branch office in India is a strategic process for any firm from another country. It opens many prospects, but this also means leaning against its difficulties. Hiring a good CA firm can help to manage this process well, efficiently, and without violation of any laws and regulations.

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VJM is one of the reputed chartered accountancy firms in India offering a range of services that is ideal for global business. In order to ensure that VJM Global starts and continues to run as a highly professional company, it is staffed with highly trained managers and professionals who will themselves perform all of the tasks entailed in establishing branch offices for the company.