FEMA Regulations for Approval of LO/ BO/ PO of Foreign Companies in India

Approval of Branch Office (BO)/ Liaison Office (LO)/ Project Office (PO) of Foreign Companies under FEMA Regulations in India

i) RBI notifies Procedural Guidelines for Establishment of BO/ LO/ PO in India by foreign entities [12 May 2016]

RBI has issued procedural guidelines for adherence by the AD Banks and Stakeholders for opening up of a branch office or a liaison office or a project office in India of a company / person resident outside India, in line with the it’s Notification dt. 31 March, 2016 simplifying FEMA Regulations, i.e. Foreign Exchange Management (Establishment in India of a branch office or a liaison office or a project office or any other place of business) Regulations, 2016. The salient provisions of the procedural guidelines issued by the RBI in this regard are as under:

RBI/2015-16/397 A.P. (DIR Series) Circular No.69 [(1)/22(R)] May 12, 2016

ii) RBI Notifies Simplified Amended FEMA Regulations 2016 for Opening & Maintenance of Liaison Office, Project Office, Branch Office of a Foreign Company in India [31 March 2016]

As a measure towards improving the ease of doing business in India, the RBI has decided that except for a few sectors (viz. Defence, Telecom, Private Security, Information and Broadcasting and Non-government organization) and except a few countries, the power to grant approvals for establishment of Branch Office (BO)/ Liaison Office (LO)/ Project Offices (PO) in India by foreign entities, would be delegated to the Category-I AD Banks. Further, anyone who has been awarded a contract for a project by a Government authority/ PSU would be automatically given approval to open a bank account.

Earlier these entities used to seek the approval of Reserve Bank of India (RBI) before setting-up their BO/LO/PO office in India. While Reserve Bank of India (RBI) gives permission in those cases where 100% FDI is allowed under automatic route, all other cases are referred to the Government for approval. The foreign entities can set-up their BO/LO/PO in India without registering themselves as companies/trusts etc. under Indian Laws.

Accordingly, the FEMA Regulations have been revised by the RBI, by way of Foreign Exchange Management (Establishment in India of a branch office or a liaison office or a project office or any other place of business) Regulations, 2016, as under:

RBI (FED/CO, Mumbai) Notification No. FEMA 22(R) /RB-2016 dt. 31st March 2016

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