HOW TO INCORPORATE A PROJECT OFFICE IN INDIA

  1. Registration of Project Office:-

The RBI allows a parent company based in another country for project office registration in India to represent the parent company’s interests when executing projects in India. However, the parent company must have a contractual relationship to execute a project in India. The project can be entitled to a foreign company by any Indian government sector or private sector enterprise.

Further, the project office can only engage in activities under the project’s scope undertaken by the parent company in India. Incidental and related activities are also considered under the scope of the project.

The registration process for Project office registration is executed as per the guidelines mentioned under section 6(6) of the Foreign Exchange Management Act 1999.

The Reserve Bank of India has the authority to approve a foreign company’s project office in India. However, before establishing a project office in India, the foreign company must first secure a contract with an Indian company.

RBI guidelines and Companies Act, 2013 has made it mandatory for a foreign company to acquire the registration certificate with the Registrar of Companies (ROC) if the foreign company wants to establish a project office in India. It has to adhere to all the procedural formalities during the project office registration process.

2- Investment Entry Routes in India:-

  • Reserve Bank Route

The primary business of a foreign company falls under the criteria where 100 percent Foreign Direct Investment (FDI) is allowed.

  • Government Route

A foreign entity’s primary business falls under the criteria where 100 percent foreign direct investment is not permitted. The Reserve Bank of India, in collaboration with the Ministry of Finance, Government of India, reviews applications from companies classified as Foreign Non-Government Organizations/Non-Profit Organizations/Government Bodies/Departments.

3- Requirement for Project Office Registration in India:-

  • Formal Contract Of The Project-

It is necessary for the foreign company to have a secured project in India and to come under a formal and legal agreement that will help in the financial statement related to the project.

  • Clearance Of Project-

Make sure that the project has been approved by the appropriate and recognized authorities.

  • Foreign Funding-

Ensure that the project is financially supported out of the inward remittance from the foreign country; else, an International Financing Agency must sponsor the project.

  • Indian Funding-

In the case of zero foreign funding, it becomes the responsibility of the Indian entity to obtain the term loan from a Public Financial Institution or a bank in India.

4-     Documents Required for Project Office Registration in India:-  (Documents Submitted to the RBI)-

1-     Certificate of Incorporation

  • Memorandum of Association & Article of Association attested by Indian Embassy/Notary Public in the Country of Registration.
    • Current Audited Balance sheet of the applicant company.
    • A resolution by the foreign company’s Board stating the intention behind establishing the project office in India.
    • Documentary proof that the Project Office is financially backed by the bilateral or multilateral International Financing Agencies OR the Indian Company has obtained term loan for the Project Office by the Financing Institution or Bank in India.
    • Banker’s report submitted by the company’s banker stating the company’s relationship with the bank.
    • A letter of authority issued by the parent company in regard to the local representative
    • Complete details of activities conducted in the project office in India
    • Residence Proof of the authorized personnel
    • Copy of passport of the authorized personnel
    • A letter requesting that the company will open a bank account in India.
  • Documents Submitted To The ROC:-
  • Permission from RBI to set up a project office in India
  • MOA and AOA of the Foreign Company
  • Notarized copy of Certificate of Incorporation
  • A notarized copy of a power of attorney mentioning the name of the person residing in India and making him responsible for accepting any notice or document on behalf of the company
  • A complete details of Directors of the Company
  • Complete KYC of the shareholders holding more than 10% of Equity in the Applicant Company

6-        Project Office Registration Procedure:-

  1. Legalisation Of Documents:-

It is necessary to file all the documents of the foreign company with the RBI. The list of documents includes a certificate of incorporation, MOA and AOA of the foreign company, board resolutions. In addition, make sure to legalize all the documents of the authorized signatory of the foreign entity either via Indian Embassy or via apostiled as per Hague Convention.

  • Filing Of Application With RBI Through AD Bank

Parent office application for a foreign company is filed in FNC. The application is filed to the Reserve Bank of India via AD Bank (Authorised Dealer). The AD bank has an important role since all the communication to the RBI is dispelled through them.

  • Verification Of KYC From The Banker Of Parent Company

A request for the scrutiny of documents is sent to the foreign company’s banker. This process of sending a request for verification is also called swift-based verification. Once the documents are confirmed by the foreign banker, the application is preceded for approval purposes. The RBI/AD can also ask for the additional documents as the case may be.

  • Approval Of RBI For Project Office Registration In India

Once the company is incorporated, the next step is to open the company’s bank account, wherein foreign direct investment should reach within 180 days of forming the company with advance intimation to the banker.

  • Registration Of Project Office Of Foreign Company With The ROC

Once the approval is received from RBI for the establishment of the Project Office in India, an application is filed for project office registration of the foreign company within 30 days of such approval. DIN is required in case any Indian director and the digital signature are needed of the authorized signatory for e-filing statutory forms with the ROC.

  • PAN Card, Tax Deduction Number, And Bank Account Opening:-

The income tax department of India issues a unique 10 digit number, known as PAN number. Once the PAN number is obtained, the branch office is eligible to open its bank account. And it is necessary for every taxpayer to obtain a Tax Deduction Account Number to be compliant in all the TDS Norms.

  • Other Registration And Licenses:-

Once the Project Office comes inactive state, there are different activities related to compliance that rely on the business genre and the state-specific laws applicable to all the entities indulging in the commercial activities. For example, Goods and Services Tax (GST), Professional Tax Act, Provident Funds Act, Employee State Insurance Act (ESIC).

 

Frequently Asked Questions On Registration of Project Office in India:-

1-     DEFINE PROJECT OFFICE ?

A foreign company set up a project office in India if a project has been assigned to them by the government or a private sector when the project has to be executed in India. However, it is necessary to complete the registration process with RBI & ROC before commencing business operations. Therefore, project office registration cannot be done until all the requisite conditions are met.

2-     WHAT ARE DOCUMENTS TO BE SUBMITTED TO RBI?

  • Certificate of Incorporation
  • Memorandum of Association & Article of Association attested by Indian Embassy/Notary Public in the country of Registration.
  • Current Audited Balance sheet of the applicant company.
  • A resolution by the foreign company’s Board stating the intention behind establishing the project office in India.
  • Documentary proof that the Project Office is financially backed by the bilateral or multilateral International Financing Agencies OR the Indian Company has obtained term loan for the Project Office by the Financing Institution or Bank in India.
  • Banker’s report submitted by the company’s banker stating the company’s relationship with the bank.
  • A letter of authority issued by the parent company in regard to the local representative
  • Complete details of activities conducted in the project office in India
  • Residence Proof of the authorized personnel
  • Copy of passport of the authorized personnel
  • A letter requesting that the company will open a bank account in India
    • WHAT ARE THE INVESTMENT ENTRY ROUTES IN INDIA FOR PROJECT OFFICE REGISTRATION?
  • Reserve Bank Route

The primary business of a foreign company falls under the criteria where 100 percent Foreign Direct Investment (FDI) is allowed.

  • Government Route

The primary business of a foreign entity falls under the criteria where 100 percent Foreign Direct Investment is not allowed. The Reserve Bank of India reviews applications from companies that come under the category of Foreign Non-Government Organizations/Non-Profit Organizations/Government Bodies/Department and the Ministry of Finance, Government of India.

4-     What is the Procedure to Incorporate a Project Office in India?

  • Legalisation of Documents
  • Filing of Application with RBI through AD Bank
  • Verification of KYC from the Banker of Parent Company
  • Approval of RBI for Project Office Registration in India
  • Registration of Project Office of Foreign Company With the ROC
  • Registration of Project Office of Foreign Company With the ROC
  • Other Registration and Licenses.
    • What are the Documents to be submitted to ROC?
  • Permission from RBI to set up a project office in India
  • MOA and AOA of the Foreign Company
  • Notarized copy of COI
  • A notarized copy of a power of attorney mentioning the name of the person residing in India and making him responsible for accepting any notice or document on behalf of the company.
  • A complete details of Directors of the Company
  • Complete KYC of the shareholders holding more than 10% of Equity in the Applicant Company.

6-     What are the important points to consider before applying for Project Office registration?

  • Formal Contact of the Project
  • Clearance of Project
  • Foreign Funding
  • Indian Funding.

7-     Can a Liasioning Office upgraded into Branch Office continue to have the same PAN and bank account?

Yes, provided the bank account is re-designated as a Branch Office account.

8-     Is Liasioning Office/Branch Office/Project Office required to register/report with Police authorities?

Only candidates from Bangladesh, Sri Lanka, Afghanistan, Iran, China, Hong Kong, Macau, and Pakistan will need to enlist with the State Police authorities. Copy of endorsement letter for people from these nations will be set apart by the AD Category I bank to the Ministry of Home Affairs, Internal Security Division – I, Government of India, New Delhi for important activity and record. Every single other nation is absolved from enrolling with the State Police authorities.

9-     Can Liasioning Office/Branch Officemaintains more than one account in India?

No, if a Liasioning Office/Branch Office needs to open more than one account; it needs to acquire the earlier authorization of the Reserve Bank through its AD Category I bank, supporting the explanation behind the additional account.

10-  What are the permissible credits and debits to the INR account of the Project Office?

The credits to the account should represent the funds received from the head office through normal banking channels for meeting the expenses of the office and/or the rupee amounts receivable, if any, under the contract, and no other amount should be credited without prior permission of the Reserve Bank. Similarly, debits to this account could be raised only to meet the office’s local expenses and intermittent remittances pending winding up / completing the project.

For the intermittent remittances, the AD bank should be satisfied with the bonafide of the transaction and ensure submission of the following documents:-

  • An Auditors’ / Chartered Accountants’ Certificate to the effect that sufficient provisions have been made to meet the liabilities in India, including Income Tax, etc.
  • An assurance from the Project Office that the remittance will not jeopardize the completion of the project in India and that any shortfall in funds for meeting any liability in India will be covered by inward remittance from abroad.