PROCEDURE FOR OPENING A BRANCH OFFICE / LIAISON OFFICE IN ABROAD

No prior permission of Reserve Bank is required to open offices (trading or non-trading) abroad or post representatives abroad by Indian firms/companies.

The Indian firm/companies should submit applications to their bankers (authorized dealers) in form OBR along with the particulars of their turnover duly certified by their auditors and also a declaration to the effect that they have not approached/would not approach any other authorized dealer for the facility being applied for. The application form OBR needs to be filled in with necessary details along with supporting documents.  After which the foreign exchange is released by the authorized dealer (bank).

Foreign Exchange released by the Bank Authorized dealers may release exchange towards initial expenditure as also for recurring expenses of the office as under, provided the applicant fulfils the following conditions:

	Category	Initial Expenditure	Recurring Expenditure (per annum)
(a)	EEFC Account(Exchange Earners’ Foreign Currency account)	No limit for remittances out of EEFC funds.	No limit for holders remittances out Of EEFC funds.
(b)	Firms/companies not having EEFC accounts or not having sufficient funds EEFC accounts.	Up to 15% of the average annual sales / income or turnover during the last two financial years or up to 25% per cent of the net worth, whichever is higher.	Up to 10% of their average annual sales/income turnover during last two years.

In the case of newly established 100% EOUs or Units in EPZs and Hardware/Software Technology Parks, exchange may be released as per their estimated requirements for initial as well as recurring expenses on verification of suitable documentary evidence during the first two years of their operation. From third year onwards, exchange may be released as per item (a) or (b) above. Thus for first two years such units can get more foreign exchange released than the limits for other Indian companies.

The recurring (expenditure) remittance facilities are allowed initially for a period of two years only, after obtaining confirmation form the applicant that they have completed all legal and other formalities in India and abroad in connection with the opening of trading/non-trading office or for posting a representative abroad. The renewal of remittance facility after two years may be granted provided proper accounts of utilisation of foreign exchange released are furnished to the authorized dealer.

You may note that if you are a new Company you may not be able to get the approval of Authorized Dealer to open offices aboard.

The general terms and conditions for opening the offices abroad normally are:

1. The overseas office should not create any financial liabilities contingent or otherwise for the head Office in India.

2. Exchange released by the authorized dealer should be strictly utilized for the purpose(s) for which it is released. They unused exchange may be repatriated to India under advice to the authorized dealer.

3. The details of bank account opened in the overseas countries should be promptly reported to the authorized dealer.

4. The approval granted for the purpose should be made valid for 6 months from the date thereof, within which time the applicant should open its overseas office or post representative abroad. In case the overseas office is not opened or the representative is not posted abroad within this period, intimation in writing to the effect should be sent to the authorized dealer immediately after expiry of 6 months period. Fresh application for release of exchange should be submitted to the authorized dealer as and when the overseas office is desired to be opened.

5. Profits, if any, earned by the overseas office/s should be repatriated to India.

6. The following statements should be submitted by the applicant to the authorized dealer:

1. A statement showing details of initial expenses incurred together with suitable documentary evidence, wherever possible, within three months from the date of release of exchange for that purpose.

2. Annual account of trading/non-trading office abroad duly certified by statutory Auditors/Chartered Accountants.

Temporary Site/Project Offices Abroad

Indian firms/companies executing contracts/projects abroad with the approval of the appropriate authority are permitted under a general permission granted by Reserve Bank to set up site/project offices abroad provided that such offices are maintained out of project receipts and remittances from India are not required. These offices are required to be closed down and surplus foreign exchange earnings repatriated to India after completion of the project.

Credit facilities for overseas trading offices of Indian companies

Reserve Bank considers, on merits, request from Export Houses/Trading Houses/Star Trading Houses/Super Star Trading Houses to avail of fund based/non-fund based facilities for their trading offices abroad from overseas banks. Application in such cases should be made to the Chief General Manager, Reserve Bank of India, Exchange Control Department (Export Division), Mumbai together with full particulars of the exchange facilities availed of for maintenance of the overseas office concerned, full details of terms and conditions subject to which the facilities are being extended by the overseas bank and the need for availing of the credit facilities by the overseas trading office.

Application for permission to post a representative 

Establish office/branch overseas

·         The application is to be made in form OBR to the Bank with supporting documents.

·         The estimates of foreign exchange expenditure should be given in units of foreign currency and the appropriate rupee equivalent furnishing the exchange rate applied.

Documents to be submitted along with the Form OBR

Correspondence, if any, in original together with photocopies regarding the arrangement made in foreign country for posting of representative/establishment of branch/office.

Bank certificates, in form BCX (certificate of export), together with photocopies thereof for the immediately preceding four calendar half years in support of export realizations.

R.V.Seckar

rvsekar2007@gmail.com

919848915177