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Master Direction - Establishment of Liaison/ Branch/ Project Offices in India by foreign entities (Updated as on May 17 2016)

FEMA - 10/2015-16 - Dated:- 1-1-2016 - RBI/FED/2015-16/6 FED Master Direction No.10/2015-16 January 01, 2016 (Updated as on May 17, 2016*) To, All Authorised Dealer Category - I banks Dear Madam / Sir, Master Direction - Establishment of Branch Office (BO)/ Liaison Office (LO)/ Project Office (PO) or any other place of business in India by foreign entities Establishment of branch office/ liaison office / project office or any other place of business in India by foreign entities is regulated in t .....

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s as to how the foreign exchange business has to be conducted by the Authorised Persons with their customers/constituents with a view to implementing the regulations framed. 3. This Master Direction consolidates the existing instructions on the subject of Establishment of branch office/ liaison office / project office or any other place of business in India by foreign entities at one place. Reporting instructions can be found in Master Direction on reporting (Master Direction No. 18 dated Januar .....

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as been significantly amended, it has been replaced rather than showing the changes in track mode for reader convenience. INDEX Sr. No Contents 1. General criteria 2. Procedure for applying 3. Opening of bank account by BO/LO/PO 4. Annual Activity Certificate by BO/LO/PO 5. Extension of validity period of the approval of LO and PO 6. Registration with police authorities 7. Application for additional offices and activities 8. Extension of fund and non-fund based facilities 9. Remittance of profit .....

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body corporate incorporated outside India, including a firm or other association of individuals) for establishing BO/ LO/ PO in India shall be considered by the AD Category-I bank as per the guidelines given by Reserve Bank of India (RBI). If the principal business of the entity resident outside India falls under sectors where 100 percent Foreign Direct Investment (FDI) is allowed in terms of FEMA Notification No. 20/2000-RB dated May 3, 2000, as amended from time to time, and the entity seeks t .....

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is for opening a BO/LO/PO in Jammu and Kashmir, North East region and Andaman and Nicobar Islands; c. The principal business of the applicant falls in the four sectors namely Defence, Telecom, Private Security and Information and Broadcasting. In the case of proposal for opening a PO relating to defence sector, no separate reference or approval of Government of India shall be required if the said non-resident applicant has been awarded a contract by/ entered into an agreement with Ministry of De .....

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plications in consultation with the Government of India. iii. The non-resident entity applying for a BO/LO in India should have a financially sound track record viz: a. For Branch Office - a profit making track record during the immediately preceding five financial years in the home country and net worth of not less than USD 100,000 or its equivalent. Net Worth [total of paid-up capital and free reserves, less intangible assets as per the latest Audited Balance Sheet or Account Statement certifi .....

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oup company satisfies the prescribed criteria for net worth and profit. 2. Procedure for applying i. The application for establishing BO / LO/ PO 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 AD Category-I bank shall after exerci .....

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ions and Directions. ii. However, before issuing the approval letter to the applicant, the AD Category-I bank shall forward a copy of the Form FNC along with the details of the approval proposed to be granted by it to the General Manager, Reserve Bank of India, CO Cell, New Delhi, for allotment of Unique Identification Number (UIN) to each BO/LO. After receipt of the UIN from the Reserve Bank, the AD Category-I bank shall issue the approval letter to the non-resident entity for establishing BO/L .....

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e tenure of the project. iv. There is a general permission to non-resident companies to establish POs in India, provided they have secured a contract from an Indian company to execute a project in India. Also, the project must have secured the necessary regulatory clearances; andis funded directly by inward remittance from abroad; or the project is funded by a bilateral or multilateral International Financing Agency, or a company or entity in India awarding the contract has been granted Term Loa .....

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ordingly. vi. The approval granted by the AD Category I bank should include a proviso to the effect that in case the BO/LO/PO for which approval has been granted is not opened within six months from the date of the approval letter, the approval shall lapse. In cases where the non-resident entity is not able to open the office within the stipulated time frame due to reasons beyond its control, the AD Category-I bank may consider granting extension of time for a further period of six months for se .....

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Department, Reserve Bank of India. viii. There is a general permission to non-resident companies for establishing BO in the Special Economic Zones (SEZs) to undertake manufacturing and service activities subject to the conditions that: a. such BOs are functioning in those sectors where 100% FDI is permitted; b. such BOs comply with Chapter XXII of the Companies Act, 2013; and c. such BOs function on a stand-alone basis. In the event of winding-up of business and for remittance of winding-up proc .....

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ts and Debits to the account shall be: a. Credits Funds received from Head Office through normal banking channels for meeting the expenses of the office. Refund of security deposits paid from LO s account or directly by the Head Office through normal banking channels. Refund of taxes, duties etc., received from tax authorities, paid from LO s bank account. Sale proceeds of assets of the LO. b. Debits Only for meeting the local expenses of the office. ii. A BO may approach any AD Category-I Bank .....

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project by the Government authority/Public Sector Undertakings or are permitted by the AD to operate in India may open a bank account without any prior approval of the Reserve Bank. An entity from Pakistan shall need prior approval of Reserve Bank of India to open a bank account for its project office in India. iv. AD Category - I banks can open non-interest bearing foreign currency account for POs in India subject to the following: The PO has been established in India, with the general / speci .....

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ject related expenditure and credits shall be foreign currency receipts from the Project Sanctioning Authority and remittances from parent/group company abroad or bilateral / multilateral international financing agency. The responsibility of ensuring that only the approved debits and credits are allowed in the foreign currency account shall rest solely with the AD Category-I bank. Further, the accounts shall be subject to 100 per cent scrutiny by the Concurrent Auditor of the respective AD Categ .....

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he AAC to the designated AD Category -I bank as well as Director General of Income Tax (International Taxation), New Delhi whereas the PO needs to submit the AAC only to the designated AD Category -I bank. ii. The designated AD Category - I bank shall scrutinize the AACs and ensure that the activities undertaken by the BO/LO are being carried out in accordance with the terms and conditions of the approval given. In the event of any adverse findings reported by the auditor or noticed by the desig .....

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end the validity period of LO/s for a period of 3 years from the date of expiry of the original approval / extension granted if the applicant has complied with the following conditions and the application is otherwise in order: a. The LO should have submitted the Annual Activity Certificates for the previous years and b. The account of the LO maintained with the designated AD Category - I bank is being operated in accordance with the terms and conditions stipulated in the approval letter. Such e .....

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for two years only. No further extension would be considered for liaison offices of entities which are Non-Banking Finance Companies and those engaged in construction and development sectors (excluding infrastructure development companies). Upon expiry of the validity period, the offices shall have to either close down or be converted into a Joint Venture / Wholly Owned Subsidiary in conformity with the extant Foreign Direct Investment policy. 6. Registration with police authorities Applicants f .....

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/ LOs may be submitted to the AD Category-I bank in a fresh FNC form. However, the documents mentioned in form FNC need not be resubmitted, if there are no changes to the documents already submitted earlier. a. If the number of offices exceeds 4 (i.e. one BO / LO in each zone viz; East, West, North and South), the applicant has to justify the need for additional office/s and it shall require prior approval of RBI. b. The applicant may identify one of its offices in India as the Nodal Office, wh .....

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. Requests for undertaking activities in addition to what has been permitted initially (Annex C) by Reserve Bank of India/ AD Category-I bank may be submitted by the applicant to the Reserve Bank through the designated AD Category -I bank justifying the need. 8. Extension of fund and non-fund based facilities AD Category-I bank, may, based on their business prudence, Board approved policy and compliance to extant rules/regulations stipulated by DBR, RBI extend fund/non-fund based facilities to B .....

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ble profit has been earned by undertaking the permitted activities; and iii. that the profit does not include any profit on revaluation of the assets of the branch. ii. AD Category - I bank can permit intermittent remittances by POs pending winding up / completion of the project provided they are satisfied with the bonafides of the transaction, subject to the following: a. The PO submits an Auditors / Chartered Accountants Certificate to the effect that sufficient provisions have been made to me .....

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r nodal office, as the case may be. The application for winding up may be submitted along with the following documents: a. Copy of the Reserve Bank's/AD Category-I bank s approval for establishing the BO/ LO/ PO. b. Auditor's certificate : i. indicating the manner in which the remittable amount has been arrived at and supported by a statement of assets and liabilities of the applicant and indicating the manner of disposal of assets; ii. confirming that all liabilities in India including .....

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arding compliance with the provisions of the Companies Act, 2013, in case of winding up of the BO /LO in India, wherever applicable. e. The designated AD Category - I banks has to ensure that the BO / LO/ PO had filed their respective AACs. f. Any other document/s, specified by Reserve Bank of India/AD Category-I bank while granting approval. ii. Designated AD Category-I bank may allow remittance of winding up proceeds in respect of offices of banks and insurance companies, after obtaining copie .....

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the Companies Act 2013, if necessary. Also, i. Transfer of assets by way of sale to the JV/WoS be allowed by AD Category-I bank only when the non-resident entity intends to close their BO/LO/PO operations in India. ii. A certificate is to be submitted from the Statutory Auditor furnishing details of assets to be transferred indicating their date of acquisition, original price, depreciation till date, present book value or written down value (WDV) value and sale consideration to be obtained. Sta .....

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re payment of all applicable taxes while permitting transfer of assets. v. Credits to the bank accounts of BO/LO/PO on account of such transfer of assets will be treated as permissible credits. vi. Donation by BO/LO/PO of old furniture, vehicles, computers and other office items etc. to NGOs or other not-for-profit organisations may be permitted by the AD category-I banks after satisfying itself about the bonafides of the transaction. 12. Guidance note for the AD Category-I bank i. A BO/LO/PO or .....

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. Each BO/ LO/PO are required to transact through one designated AD Category-I bank only who shall be responsible for the due diligence and KYC norms of the BO/LO/PO. BO /LO/PO, present in multiple locations, are required to transact through their designated AD. However, the AD of the nodal office is required to comply with all the reporting norms. v. BO/LO/PO can change their existing AD Category-I bank subject to both the AD banks giving consent in writing for the transfer and the transferring .....

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o lease period not exceeding five years. viii. AD Category-I bank can allow term deposit account for a period not exceeding 6 months in favour of a BO/LO/PO of a person resident outside India provided the bank is satisfied that the term deposit is out of temporary surplus funds and the BO/LO/PO furnishes an undertaking that the maturity proceeds of the term deposit will be utilised for their business in India within 3 months of maturity. However, such facility may not be extended to shipping/air .....

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n from the Government of India in the pre-FEMA period shall also approach their AD Category-I bank with a copy of the said approval for allotment of a UIN by the Reserve Bank. x. Change in the name of the existing LO/BO may be permitted by the AD Category-I bank only if the non-resident entity changes its name without change in ownership and if the application to this effect is received with the Board resolution for change of name and documents/certificate from ROC India showing change of name. .....

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oreign entity is not transferrable to another foreign entity. xi. Change in the Top Management or CEO/MD/CMD etc. of the BO/LO does not require prior approval from the Reserve Bank/AD Category-I bank. However, AD Category-I bank should be intimated about the same. Annex A Format of the Letter of Comfort The Authorised Signatory, (Address of the Authorised Dealer Category-I bank) Dear Sir, Sub: Application for establishment of branch / liaison Office in India by our subsidiary / group company, M/ .....

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iaison office in India will be met by us (the parent company/group company), in case of inability on part of the branch/ liaison office to do so. 3. We are also enclosing the financial background of our company in the form of our latest Audited Balance Sheet / Account Statement certified by a Certified Public Accountant. Yours faithfully, ( ) Authorised Representative of the parent company Annex B Form FNC Application for establishment of branch office/liaison office/project office in India [Thi .....

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Intangible assets, if any 3. Brief description of the activities of the applicant 4. i. Value of goods imported from and / or exported to India by the applicant during each of the last three years: a. Imports from India b. Exports to India ii. Particulars of existing arrangements if any, for representing the company in India iii. Particulars of the proposed liaison/ branch office: a. Details of the activities/ services proposed to be undertaken/ rendered by the officeb. b. Place where the office .....

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the organisation. 7. For project offices: i. Reference no. and date of letter awarding the contract ii. Particulars of authority awarding the project/contract iii. Total amount of contract iv. Address/e-mail/telephone number/fax number of the project office v. Tenure of project office vi. Nature of project undertaken 8. Any other information which the applicant company wishes to furnish in support of this application. Part II- Additional information to be submitted by applicants where Reserve B .....

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Directors/Key Executives Sr. No. Full name of Board of Directors and Key Executives (wherever applicable) Present position held with date (since when) Date of Birth Parentage Present and permanent address Nationality Passport Nos. and issue date Contact address and telephone number III. Details of shareholders of applicant company (All firms/companies/entities/individuals having shareholding more than 10 %) Sr. No Full name Parentage Father/ Mother Date of birth Permanent address Present address .....

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lease provide the following details Detention/case/FIR/warrant number Police station/District/Agency Section of law Name and place of the court The above mentioned details are in respect of both India and any other foreign country DECLARATION We hereby declare that: i. The particulars given above are true and correct to the best of our knowledge and belief. ii. Our activities in India would be confined to the activities indicated in column 4(iii) (a)/7 (vi) above. iii. If we shift the office to .....

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dia /Reserve Bank. vi. We understand that the approval, if granted, is from FEMA angle only. Any other approvals / clearances, statutory or otherwise, required from any other Government Authority/ Department/ Ministry will be obtained before commencement of operations in India. vii. We have no objection to the Reserve Bank placing the details of approval in public domain. viii. We enclose the following documents: a. Copy of the Certificate of Incorporation / Registration; Memorandum of Associati .....

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nsist on auditing of accounts, an Account Statement certified by a Certified Public Accountant (CPA) or any Registered Accounts Practitioner by any name, clearly showing the net worth may be submitted] c. Bankers' Report from the applicant s banker in the host country / country of registration showing the number of years the applicant has had banking relations with that bank. d. Power of Attorney in favour of signatory of Form FNC in case the Head of the overseas entity is not signing the Fo .....

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