Foreign companies can open a liaison office in India to facilitate and promote the parent company’s business activities, and act as a communications channel between the foreign parent company and Indian companies.
Governing Authority- For establishing a Liaison office in India approval of the Reserve Bank of India shall be required. The application in the prescribed form for seeking permission to establish Liaison Office in India shall be forwarded to Reserve Bank India through an AD Category – I Bank.
Governing Law– Foreign Exchange Management Act, 1999 read with Foreign Exchange Management (Establishment in India of branch or office or other places of business) Regulations, 2000.
- A profit-making track record during the immediately preceding three financial years in the home country.
- Net Worth, e. total of paid-up capital and free reserves less intangible assets as per the latest Audited Balance Sheet or Account Statement certified by a Certified Public Accountant or any Registered Accounts Practitioner by whatever name, of not less than USD 50,000 or its equivalent.
Time Period-Permission to set up such offices is initially granted for a period of 3 years and this may be extended from time to time by an AD Category I bank.
- Representing in India the parent company/ group companies;
- Promoting export / import from / to India;
- Promoting technical/financial collaborations between parent/group companies and companies in India;
- Acting as a communication channel between the parent company and Indian companies.
- Enter into Business Contract in its own name;
- Borrow or lend any money from/to any person in India;
- Acquire, hold, transfer or dispose of any immovable property in India;
- Rendering any consultancy or other services directly/indirectly with or without any consideration;
- Undertaking any trading, commercial or industrial activities in India;
- Such offices should not charge any commission or receive other income from Indian customers for providing any services including liaison services;
- Expenses of such offices are to be met entirely through foreign inward remittances from the Foreign Company abroad.
A liaison office is not allowed to operate in any way commercial, trading and industrial activities, directly and indirectly.
Closure of Liaison Office
- For closure of Liaison office request for closure is required to be made to RBI through AD Category -1 Bank.