Procedure for Opening Representative Office by Foreign Companies

Abstract:

This article provides an outline of the Procedure for Opening Representative Office by Foreign Companies. The Representative Offices set up by the foreign companies work as a channel of communication between the head office located in the overseas country and the parties in India.

Representative Office by Foreign Companies-

The representative office set up by the foreign companies act as a channel of communication between the head office or the parent organization located in the foreign country and the parties located in India.

The representative offices of the foreign companies are not permitted to take up any trading or business activities in India as well as are not privileged to earn any income within the country. The expenses of such offices are entirely carried out by the payments received from the foreign exchange reserves by parent company or the head office located in the overseas country. The representative offices accumulate information about the potential opportunities in the Indian market and also pass on information about the company and its products to the Indian consumers to attract inflows of profits.

Procedure for Opening Representative Office by Foreign Companies-

Foreign companies that wish to set up representative offices, also known as liaison offices, in India, have to fill up an application form known as FNC-1 along with the documents that have been put forth by Foreign Investment Division, Foreign Exchange Department, Reserve Bank of India, Central Office, Mumbai. Permissions for setting up branch offices are given by the concerned regional office of the RBI and are generally valid for a period of three years. This duration can be extended by the Regional Office under whose governance the offices are set up.

On the other hand, a major duty to be carried out by the representative office or the liaison office, in India, is to mention every detail of the activities being undertaken by the offices on a yearly basis and get it certified by a Chartered Accountant to the implicated Regional Office of the Reserve Bank of India. To be precise, this document confirms the fact that the representative offices set up by the foreign companies have only carried out the activities that have been permitted by the Reserve bank of India.