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New guidelines regarding establishment of Liaison Office (LO), Project Office(PO) and Branch Office

by  AMA Team on September 17, 2016 in #Liaison Office in India
India is one of the fastest growing economy in the world. The government is making all the efforts to make it one of the best places for doing business. The latest RBI guidelines regarding establishment of Liaison Office, Branch Office, Project Office have been issued with the aim to facilitate ease in doing business in India.  Effective from 31st March, 2016, following changes have been made for the establishment of the said Liaison Office/ Branch Office/ Project Office:
  1. Delegation of Power to AD : Authorized Dealer Banks can now approve of application to set up LO / BO in India except in the following cases:
    • The applicant is a citizen of or is registered/incorporated in Pakistan;
    • The applicant is a citizen of or is registered/incorporated in Bangladesh, Sri Lanka, Afghanistan, Iran, China, Hong Kong or Macau and the application is for opening a BO/LO/PO in Jammu and Kashmir, North East region and Andaman and Nicobar Islands;
    • The principal business of the applicant falls in the four sectors namely Defence, Telecom, Private Security and Information and Broadcasting. In the case of proposal for opening a PO relating to defence sector, no separate reference or approval of Government of India shall be required if the said non-resident applicant has been awarded a contract by/ entered into an agreement with Ministry of Defence or Service Headquarters or Defence Public Sector Undertakings. There shall be no requirement of any approval from RBI also only for such cases;
    • The applicant is a Non-Government Organisation (NGO), a Non-Profit Organisation, or a Body/ Agency/ Department of a foreign government.

      However the AD bank has to report to the RBI regarding the receipt of application for further generation of UIN. Earlier permission from RBI was required to be taken for setting up a LO/PO/BO.
  2. Time Period : Validity for setting up of Liaison Office in the business of construction & development and Non-Banking Finance Companies (NBFCs) has been set for two years. The validity of setting up of LO in rest all of the cases is for 3 years. The validity of the PO is for the tenure of the project.
  3. Validity of Approval : After the approval, LO/PO/BO shall establish the office within six months. The approval shall elapse, in case the office is not set up in six months. Companies looking for any further extension of time shall require prior approval of RBI. Earlier there was no clarification on such time limit. 
  4. Shifting of Office : AD banks are now authorized to grant approval to shift office to another city in India. In case the office change is within the same city, no such approval shall be required. Only filing of an intimation of the new address with the AD bank would be required.
  5. Name Change : AD bank may permit change in name of LO/BO/PO if there is no change in the ownership of foreign company. However if the change in name is due to merger/acquisition/change in ownership of the parent company, then the closing of existing LO/BO/PO shall be required. Also, fresh approval would be required for the same.
To view the guidelines, please click here