Criteria to setup Branch office, Liason office or Subsidiary company in India

Basis

Liaison Office [LO]

Branch Office [BO]

Wholly Owned Subsidiary (WOS)

Meaning

A Liaison Office [also known as representative office] can undertake only liaison activities i.e. it can act as a channel of communication between Head Office abroad and parties in India. It is not allowed to undertake any business activity in India and cannot have any income in India.

Companies incorporate outside India and engaged in manufacturing or trading activities are allowed to setup Branch Offices with specific approval of the RBI. Normally, the Branch Office should be engaged in the activity of the Parent Company.

An incorporated entity formed and

registered under the Companies Act, 2013. It is a distinct legal entity, apart from its shareholders.

Constitution

1.   An extension of the Head Office

2.   It is a simple form of structure

3.   No separate legal standing of its own

1.   An extension of the Head Office with right to accrue income in India

2.   It is a simple form of structure

3.   No separate legal standing of its own

1.   Company form of organization

2.   Separate legal entity

Permitted Activities

1.   Representing in India the parent company / group companies.

2.   Promoting export / import from / to India.

3.   Promoting technical/ financial collaborations between parent / group companies and companies in India.

4.   Acting as a communication channel between the parent company and Indian companies.

1.   Export/ import of goods.

2.   Rendering professional or consultancy services.

3.   Carrying out research work, in areas in which the parent company is engaged.

4.   Promoting technical or financial collaborations between Indian companies and parent or overseas group company.

5.   Representing the parent company in India and acting as buying/ selling agent in India.

6.   Rendering services in Information Technology and development of software in India.

7.   Rendering technical support to the products supplied by parent/ group companies.

8.   Foreign airline/ shipping company.

As per its ’main objects’ stipulated in the Memorandum of Association subject to Indian regulations.

This is the most suitable structure for IT, manufacturing and trading companies in India

Criteria for set up

1.   Parent Company should have a profit-making track record during the

immediately preceding three financial years in the home country.

2.   Net Worth of the Parent Company not less than USD 50,000 or its equivalent.

1.   Parent Company should have a profit making track record during the immediately preceding five financial years in the home country.

2.   Net Worth of the Parent Company not less than USD 100,000 or its equivalent.

A private company is required to be incorporated with a minimum Authorized & paid up capital of Rupees 100,000 and minimum two shareholders. No requirement of track record of parent company as shareholder

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