Establishing a business presence is the first
and foremost task which needs to be checked off the list for prospective
companies and investors. These companies and investors must exhaust all the
options for investment and available avenues before entering India to start a
business. When foreign investors are researching the Indian market to suit
their company motives and have no idea about the liberalizing FDI caps and its
effect on their business, they turn to online
liaison office in India before entering the market.
The Liaison Office allows foreign companies to create
a business presence in India while keeping legal, financial, and administrative
processes on the down low. This helps the foreign company comprehend the Indian
market easily without spending much money on the Indian terrain. After
conducting a comparative study of the current trends in the market, the company
can move forward to develop it in the market.
The process of setting up an LO
The business activities of the foreign parent company
can be managed by the liaison office in India and promote the business as well.
The LO acts as a communication channel between the parent company and the
Indian company. Liaison offices cannot engage in commercial, industrial, and
trading activities and they operate on the remittances granted by the parent
company. Once the parent company procures a liaison office and gets the liaison
office number India, then it gets the license to do the following tasks
1. Act as the bridge between the overseas head
company and Indian parties so that viable market opportunities can be
established.
2. Engage in the strong
promotion of the parent company and also encourage imports/exports between
countries.
3. Ensure that there is amicability between
companies and hence establish cooperation in the financial and technical fields
between the overseas and Indian companies.
4. Act as the Indian representative of the foreign
parent company.
Legal Permissions to set up an LO
·
The process of application and approval for a liaison company/branch
office in India is governed by the Foreign Exchange Management Act. This Act
binds any new foreign company to go through a strict process under the
supervision of the Foreign Exchange Department of the Reserve Bank of India.
·
If an insurance company from a foreign country wishes to establish
itself in India, then it has to be approved by the Insurance Regulatory and
Development Authority. Then these companies are allowed to establish LOs in
India.
The route of investment
The RBI processes applications of the entities by
two routes
1. RBI route- If the business of the foreign
company predominantly falls under sections where 100 percent FDI is permissible,
then the automatic route can be considered for processing and approval.
2. Government route- If the pre-eminent business of
the company doesn’t fall under the sections of 100% admissible FDI, then the
RBI considers these applications, along applications of NGOs with a
consultation of the Government of India and the Ministry of Finance.
