Project Offices
‘Project Office’ means a place of business to represent the interests of the foreign company executing a project in India but excludes a Liaison Office. The project office is the ideal method for companies to establish a business presence in India for a limited period of time.
INTRODUCTION TO PROJECT OFFICE
A project office is a location of business that represents a foreign company's interests in doing a project in India. A project office assists organisations in establishing their commercial presence in India for a limited time period. It is a branch office that has been formed to carry out a specific project. Foreign companies that have been given a contract to complete a project in India often choose a form of project execution that is properly registered with the Reserve Bank of India and the Registrar of Companies.
Project offices are identical to Liaison Offices, with the exception that Project Offices are permitted to engage in commercial operations in connection with a specific project. Liaison Offices, on the other hand, are not permitted to do so. Furthermore, foreign-based private enterprises are not permitted to open a Liaison Office in India.
To start a business in India, a foreign company must first secure a contractual agreement with an Indian company. To establish a Project Office in India, a foreign company must first obtain RBI clearance.
What are the conditions for establishing a Project Office
Only if all of the following requirements are met will the RBI allow a foreign business to open a Project Office in India:
- To create the Project Office, a foreign company must enter into a contractual arrangement with an Indian company, and
- The project is entirely funded by inbound remittances from overseas
- The project has been approved by the proper authorities, or
- A Bilateral or Multilateral International Financing Agency, or both, funded the project.
- For the purpose of this project, a Public Financial Institution or any bank in India has to grant a term loan to an Indian entity who is awarding the contract.
What are the documents required for the establishment of the Project Office in India?
Some important papers must be submitted by the foreign entity to:
- The Reserve Bank of India, and
- The Registrar of the Company (ROC)
- Following are the list of documentation that must be provided to both regulatory agencies, the documents are required to RBI:
- Memorandum of Association and Articles of Association of the foreign entity, officially certified or material available by the relevant Indian embassy in the country of registration
- A resolution expressing the Foreign Entity's desire to create a Project Office in India.
- The foreign/applicant company's current audited balance sheet
- A formal proof that the project office has acquired a term loan from a bank or financial institution in India, or that the project office is financially backed by bilateral or multilateral international financial agencies.
- A bankers report submitted by the company's banker detailing the company's relationship with the bank.
- A letter of authority from the foreign/parent entity to the Indian local representative
- Detailed list of activities to be carried out in the project office in India.
- Proof of Authorized Personnel's Residence
- A scanned copy of the authorised personnel's passport
The submission of Documents to the ROC
- The letter from the RBI to open a project office in India.
- The foreign/parent company's Memorandum of Association and Articles of Association
- Copy of the Certificate of Incorporation obtained by the Foreign Company that has been attested or notarized
- A notarized copy of the Power of Attorney naming the persons who are authorised to accept any notification or document on behalf of the corporation in India.
- Complete information about the company's director
- Complete KYC documents for shareholders who own more than 10% of the Applicant Company's stock.
What is the registration process of the Project Office?
The procedure for establishing a Project Office in India is as follows:
Step 1: The foreign firm must submit an application to the Reserve Bank of India in Form FNC via an Authorised Dealer Bank, which plays a vital role because it is the gateway for all interactions with the RBI.
Step 2: An application for document scrutiny, also known as swift based verification, will be addressed to the foreign company's banker. The application will go forward for approval as soon as the foreign banker confirms the paperwork. If any more documentation is necessary, the RBI/AD Bank may request it.
Step 3: As soon as the application receives approval to open the Project Office, the applicant must notify AD Category 1 Bank. The AD Category 1 Bank will also notify the RBI about this.
Step 4: Within 30 days after receiving clearance from the ROC to establish a Project Office in India, an application for registration of the foreign company's Project Office is filed with the ROC. The director must supply their DIN and sign the documents through DSC in order to file E-Forms with the ROC. An average registration duration for a Project Office is 15 days.
What are the Advantages of Project office?
- Not a separate legal entity hence cost of compliance is less.
- Easy repatriation of funds.
- No Tax on dividends
- Easy to shut down
What are the Disadvantages of Project Office?
- Unlimited liability
- Requires reporting of Global accounts before Indian authorities
- May lead to being treated as “PE”
- Higher tax rate
- Future collaboration with Indian investor/partner is not possible
- Cannot borrow funds from Indian financial institutions
Required Documents
| Acceptable Document | Document Type | Additional Details |
|---|---|---|
| - | - | - |
FAQs
You Ask, We Answer
The PO remains valid for the entire tenure of the project (till the project is completed or wound up).
• The office shall be opened within 6 months from the date of approval letter. • Extension for 6 months may be granted by AD Category-I bank for reasons beyond the control of the person resident outside India. • Further extension may be granted by RBI only • It takes generally takes 15 days to register a PO.
Yes, the AD bank should ensure compliance to the extant instructions issued by the Department of Banking Regulation.
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