BRANCH OFFICE OF FOREIGN ENTITY IN INDIA

Since India is one of the major economies in the world, foreign companies and investors expand and diversify their activities and use this mode of setting up Branch Offices to learn more about the Indian market without having to make a long-term commitment. Only upon getting the branch license from RBI, the foreign company is allowed to commence the operations.

As per Section 2(14) of the Companies Act, 2013 “branch office”, in relation to a company, means any establishment described as such by the company.

According to section 2(v)(iii) of FEMA ‘Person resident in India’ includes an office, branch or agency in India owned or controlled by a resident in India. Thus, all such branches or offices would become ‘Person resident in India’.

Conditions for setting up a branch office

Businesses that would like to set up a branch office in India need to meet the following conditions:

• The applicant company must be a body corporate incorporated outside India;
• The name of the Indian branch office must be the same as the parent company (if the branch office does not have revenue from India operations, its expenses must be met by the head office);
• The net worth of the branch office must not be less than US $100,000; and
• The parent company should have a profit making record in the immediately preceding five financial years in the home country.

In cases where the applicant foreign entity does not meet the financial criteria, the parent company may issue a Letter of Comfort (LoC), given the company satisfies the prescribed criteria for net worth and profit.