corporateleaps

[corporateleaps]

Think About These Things Before Starting a Liaison Office in India

A foreign company may want to set up a liaison office in India for any of these reasons - (a) sourcing division or to enhance export (b) simply to test the Indian market with a new business, (c) to have an Indian presence for its global business outlook.

A Liaison Office (Representative Office) can only carry out liaison activities, which means it can help as a way of interaction between the Head Office (foreign) and interested parties in India. Liaison offices are not permitted to engage in any commercial activities in India. Liaison offices do not generate any income of its own; its expenses are met fully by its foreign based parent company via inward remittances received in convertible foreign exchange.

A liaison office is permitted to engage in any or all of the following activities while in India: Serve as a channel between the foreign based parent company and parties in India Gather market information and provide information about the products to Indian customers Promote imports/export to/from India Promote technical/financial collaboration between the foreign based parent company and Indian customers Open Non-Interest bearing INR current account with Category-1 Banks in India

If a prospective foreign firm seeking to India covers all these, then the Liaison Office is the best way to get started in India. The process of setting up a liaison office in India is regulated by the Reserve Bank of India (RBI) and the Indian Ministry of Finance. The rules and regulations governing the establishment of liaison offices are governed by the Foreign Exchange Management Act, 1999 and Circulars/Notifications are re periodically issued by RBI.

There are two ways to set up a liaison office in India:

RBI Route If the sector the prospective foreign company is interested in falls under the specified industries for a full automatic route of investment as regards Foreign Direct Investment Policy, then the application for establishing a liaison office would be approved by the Reserve Bank of India.

Government Route If the sector the prospective foreign company is interested in does not come under the 100% automatic route and Non-Profit and Non-Government Organization, then the application for establishing a liaison office would be authorized by the RBI.

In addition to these, the Reserve Bank of India has set out the eligibility criteria foreign entities must satisfy before they would be allowed to start a liaison office in India.

The eligibility criteria are as follows: A history of profit spanning immediately preceding three financial years. A minimum net worth of $50,000 or its local currency equivalent with verifiable proof as per their last audited balance sheet from a reputable CPA.

Other criteria for starting a liaison office in India include having a designated manager of the prospective liaison office and a potential office space which their consultants who are helping the foreign entities package their application for liaison office could provide. These are called Virtual Office or Service Office Services.

Application for the establishment of a liaison office in India has to be made through the Reserve bank of India through Authorized Dealer Category-1 Bank in India. RBI will issue a Unique Identification Number (UIN) on approval of the application.

Annual Compliance Relative to other forms of businesses, a liaison office in India has to do some minimal annual compliance. An annual compliance is an activity certificate that is issued by Public Chartered Accountant at the end of the first quarter of the year. It must be submitted to the Authorized Dealer Category-1 Bank, Directorate General of Income Tax (International Taxation), Director General of Police and the Registrar of Companies concerned on or before 30th September every year together with audited receipts and payments account.

Tenure Approval is 3 years though an extension is possible under certain conditions.

Track Record Of Annual Activity Certificates Annual Activity Certificates contain a record of the account maintained with the designated bank in line with the initial terms and conditions.

Additional Activities and Offices At times it may become necessary to establish an additional liaison office in India. In such cases, a new application duly signed by the authorized signatory of the foreign company is filled and submitted to the RBI stating the reason(s) for additional office and specifying one of the offices as the nodal office for coordination with other departments would have to be submitted.

[corporateleaps]

Now It Takes Just One Day For Online Company Registration In India

According to World Bank’s “Ease of Doing Business” report of 2014, of the 189 countries under review, India ranked 142. One of the primary reasons for this, which incidentally is a big issue new entrepreneurs face, is the time it takes to register a new business in India.

In 2015, India’s position appreciated by 12 points, a huge leap if you ask me. But the process of registering a company still took a long time. This is something we should improve upon if we are to become a global business hub. To further compound issues, Forbes ranked India a miserly 95 in their list of business-friendly countries.

During the much publicised “Startup India, Standup India” program, India’s Prime Minister Modi gave assurance that the government will significantly reduce the time it takes to register a new company in India. And it does appear that the Ministry of Corporate Affairs eventually got this one right.

In January, a pilot scheme was launched with the main aim to reduce the amount of time it takes to register a new business. Previously, it took between 2 to 5 days to get company name approved and another 7 days to record the name of your business along with payment of stamp duties and various other formalities.

With the establishment of this pilot project, about 14,000 new businesses were created; out of the 14,000 new companies formed about 70% of them took less than 24 hours to be fully incorporated! The other 30% experienced delays due to name selection issues.

According to reports, this pilot project gained a lot of grounds as more companies were registered and fully incorporated within 24 hours. And as the pilot project stabilises, the government is convinced that more companies will be registered and fully integrated within 24 hours.

What Is New?

Previously new entrepreneurs would go to Registrar of Companies (RoC) to complete the registration process. But the Ministry of Corporate Affairs has launched an automated process to approve company registrations. So now you can do online company registration in India and get registered and incorporated within 24 hours.

Apart from the automated system of company registration, the number of steps needed for incorporating a new business in India has reduced from 39 to 26. And with the new automated process fast gaining grounds, the government wants to significantly lessen the number of steps further such that a new entrepreneur could easily and quickly register and incorporate his new business entity.

What Next?

The Ministry of Corporate Affairs in conjunction with experts from Infosys are seriously working on a new model that will significantly reduce the time further and the number of steps required to register a new business entity.

For example, in June, they released a new form for company incorporation which will further reduce the steps required. This new module also allows for the registration of a new business even when it is yet to ascertain the name of the company. A special MOA will be made that would allow the formation of the new business entity.

Officials from the Ministry of Corporate Affairs and Infosys are working on how to ease the rules and mitigate the penalties and fines if a procedure was not followed. Maybe they would come up with a centralized system that would deal with the time-consuming operations, thus allowing the entrepreneur to focus on running his business profitably without having to worry about the legal paperwork.

With these innovative projects, one can now complete online company registration in India within 24 hours. Entrepreneurs would be more comfortable to do business in India as the climate is becoming more business friendly.