Liaison Office Registration

A Liaison Office in India serves as a representative office for a foreign company, primarily focused on exploring and understanding the business landscape, market conditions, and consumer demand. It helps in conducting market research and gathering information from customers and vendors about the company’s products. To ensure a smooth registration process, businesses can opt for online Liaison Office registration through Ruchir Jain & Co., offering a hassle-free experience.

Get Free Consultation

Liaison Office Registration - Overview

Role of a Liaison Office:
- Serves as a representative of a foreign company in India.
- Focuses on understanding the business environment, market conditions, and nature of agreements in the Indian market.
- Conducts market research to assess demand for products and gathers information from potential customers or vendors.
Benefits for Foreign Investors:
- Provides an entry point for foreign investors into the Indian market.
- Allows businesses to explore opportunities with minimal financial, administrative, and legal commitments.
- Supports entry into the growing Indian marketplace.
Primary Purposes of a Liaison Office:
- Represents the parent company and its group companies in India.
- Promotes exports and imports between India and foreign countries.
- Encourages technical and financial collaboration between the parent company and Indian businesses.
- Acts as a communication and transactional bridge between Indian companies and the parent company.
Regulation and Approval Process:
- Governed by the Foreign Exchange Management Act (FEMA).
- Foreign companies must obtain approval from the Reserve Bank of India (RBI)'s Foreign Exchange Department to set up a liaison office in India.
Special Consideration for Foreign Insurance Entities:
- Foreign insurance companies can also establish liaison offices in India.
- Approval from the Insurance Regulatory and Development Authority (IRDA) is required for them to operate.

Checklist to consider before registering Liaison office in India

No Income-Generating Activity: The liaison office is not permitted to generate any income within India. All operational expenses are funded by the parent company.
Net Worth Requirement: The parent company must have a proven track record of at least three consecutive years and a net worth exceeding $50,000, as verified by their auditors.
Taxation in India: The liaison office may be subject to income tax in India, as per the regulations set by Indian tax authorities.
Name and Approval for New Offices:
- The liaison office must adopt the same name as the parent company.
- Each new liaison office requires separate approval from the Reserve Bank of India (RBI), along with full authorization.

Qualification criteria for Liaison Office Registration in India

The formation of a business presence for a foreign parent company in India is regulated by the Foreign Exchange Management Regulations, 2016. To establish a liaison office in India, the following eligibility criteria must be met:

Prohibition of Income-Generating Activities: The liaison office is not allowed to engage in any income-generating activities within India.
Net Worth Requirement: The foreign parent company must have a net worth exceeding $50,000.
Track Record Requirement: The parent company must provide a beneficial track record or report for the last three years.

Activities that can be done in a Liaison Office

Facilitates effective communication between the foreign parent company and Indian dealers or business partners to create market and business opportunities.
Fosters strong export and import relations between companies from different countries.
Establishes technical and financial collaborations between overseas and Indian entities.
Acts as the representative of the foreign parent company in India.
India, being one of the world’s fastest-growing economies, attracts numerous multinational companies keen to invest in the Indian market and establish their liaison offices here.
Memorandum of Association
Articles of Association
Complete details of Directors
Complete details of shareholders of the applicant company
Net worth certificate, attested by a Certified Public Accountant (CPA)
Audited financial statements for the last three years
Banker's report of the applicant company

List Of Documents For Liaison Office Registration

Documents Required from the Parent Company:

Certificate of Incorporation or Registration of the foreign parent company
Memorandum of Association (MOA) and Articles of Association (AOA)
Full list of Directors
Full list of shareholders or members of the applicant company
Net worth certificate issued by a Certified Public Accountant (CPA)
Audited financial statements for the last three years
Bank statement of the applicant company

Documents needed from the Authorized Signatory

5 passport-sized photographs
5 copies of the passport
Business visa with immigration arrival stamp
5 copies of national identity card proof
Address proof, such as a bank statement, electricity or water bill, or phone bill
Power of attorney in the name of the Authorized Representative (AR)
Board resolution authorizing the AR to act

Drafting of Government Forms and Documents

Once all the required documents are collected, the next step is to draft the following documents for signature by the company and the authorized officer:

Board resolution approving the establishment of the liaison office in India
Resolution from the applicant confirming FDI eligibility and the source of funds
Resolution detailing the nature of the business activity and the proposed location of the liaison office
Form FNC
Official letter from the parent company providing assurance

The Registration Process Liaison Office in India

Applying for Digital Signature of Authorized Signatory: According to the Information Technology Act, a Digital Signature Certificate (DSC) holds the same legal validity as a handwritten signature. It is mandatory to file all applications in a digital format with the Registrar of Companies. The registration process is approved using the digital signatures of the proposed directors and shareholders.
Filing the Application with RBI via AD Bank: The application to establish a liaison office of a foreign company must be filed in Form FNC. The application is submitted to the Reserve Bank of India (RBI) through an Authorized Dealer (AD) Bank. The AD bank acts as the intermediary for all communications with the RBI.
Verification of KYC by the Foreign Company’s Banker: A request for document verification is sent to the foreign company’s banker, commonly referred to as swift-based verification. Once the foreign bank verifies the documents, the application is forwarded to the RBI for approval. The RBI may request additional documents if necessary.
Approval from the Reserve Bank of India for Liaison Office Registration: The RBI follows a specific procedure for approving liaison offices in India, with priority given to applicants who do not fall under the automatic route.
Registration of Liaison Office with the ROC: After approval, a bank account is opened in the liaison office’s name, and the FDI must be received within 180 days (6 months) from the date of registration, with prior notification to the concerned bank.
Obtaining PAN Number, Tax Deduction Number, and Opening a Bank Account: The Income Tax Department issues a unique 10-digit PAN number. After obtaining the PAN, the liaison office can open a bank account in its name. It is also mandatory to acquire a Tax Deduction Account Number (TAN) for compliance with TDS norms.
GST Registration and Import Export Code (IEC): After opening a bank account and receiving a cheque book, the liaison office needs to apply for an Import Export Code (IEC) and GST registration, using the bank account details.

Frequently Asked Questions

A liaison office of a foreign organization is allowed to do just limited movement in India, provided none of the activities is benefit making action. As such, a liaison office can do statistical surveying and so on.
A Liaison office acts as a place in India which presents foreign company primarily with the need to understand and explore the environment of business, the business conditions, understanding or agreement nature of the market and carrying on market research for the product of the organization in order to look and to provide for further information from future customers or vendors.
The Reserve Bank of India approves the setting up of a liaison office in India. A particular agenda or policy is followed in the approval process of the liaison office in India by the AD Banker. Priority is afforded to the applicants where an automatic route is not available.
Income-generating activity is forbidden It is mandatory for the foreign parent office to own net worth that exceeds $50,000 Beneficial track statement or report of the preceding three years of the applicant company is necessary
On collecting the complete set of required documents the next step is to draft the documents mentioned below for the signature purpose by the company and from the authorised officer. Approval from the Board Resolution of the company for setting up the liaison office in India. A resolution from the applicant stating the FDI eligibility and source of fund A resolution explaining the nature of the business activity, location of the business activity of suggested Liaison office A resolution stating the nature of the business activity and the location of business activity of the suggested Liaison office Form FNC A formal letter from holding company stating comfort
The application for Digital Signature Certificate (DSC) for such companies is filed through the online portal, and the shareholders and directors of the company should sign it. The issuing of DSC needs some mandatory documents like address proof, identity proof associated with some photographs.
A request concerning the scrutiny of documents is submitted to the foreign company’s banker. This process is also called swift based verification (sending requests for the purpose of verification)