Category: Legal Tips

How to form a Multi-State Co-operative Society in India?

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multistate cooperative societyThe Multi-State Cooperative Societies Act, 2002 which substitutes the earlier statute of 1984, facilitates the incorporation of cooperative societies whose objects and functions spread over to several states. The Act provides for formation of both primary (with both individual and institutional members) and federal cooperatives (with only institutional membership). Any application for the registration of a multi-state cooperative society, of which all the members are individuals, should be signed by at least fifty persons from each of the states concerned. In the case of a society of which the members are cooperative societies, it should be signed by duly authorized representations of at least five such societies registered in different states (Sec.6). Their main objects shall be serving the interests of members in more than one state and their by-laws shall provide for social and economic betterment of their members through self-help and mutual aid in accordance with co-operative principles (Sec. 7). Otherwise, they are ineligible for registration. A multi-state co-operative society is a body corporate with limited liability (Sec.9).

In order to ensure financial discipline, extensive provisions have been enacted. No part of the fund other than net profit shall be distributed among members (Sec.62). Investment of society’s fund only in recognized securities is permissible (Sec.64). Contribution to political parties or loans to non-members or borrowing from external sources are prohibited. Annual auditing by recognized auditors is mandatory (Sec.65). Central Government may direct for special audit if it is of the opinion that the society’s affairs are not being managed in accordance with the co-operative principles or prudent commercial practices (Sec.77).

 

Documents required for a Multi State Co-operative Society

  • four copies of the proposed Bye-laws.of the Multistate cooperative society.,duly signed by each of the persons who sign the application.
  • Name of the proposed multi-state cooperative society.
  • Head Quarters and address to be registered.
  • a list of persons who have contributed to the share capital, together with the amount contributed by each of them, and the admission fee paid by them.
  • Area of operation.
  • Main objectives
  • a certificate from the Bank or banks stating the credit balance in favour of the proposed multistate cooperative society.
  • a scheme showing the details explaining how the working of the multi-State co-operative society will be economically sound and the registration of such multi-State co-operative society will be beneficial for social and economic betterment of its members through self-help and mutual aid in accordance with the co-operative principles.
  • certified copy of the resolution of the promoters which shall specify the name and address of one of the applicants to whom the Central Registrar may address correspondence under the rules before registration and dispatch or hand over registration documents.

 

To form a Multi-State Co-operative Society in India just fill this form:

How to form a Co-operative Societies in India?

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cooperative societyIn India, Co-operative Societies were regarded as ideal instruments to motivate the people to come together and help themselves in the process of eliminating the unscrupulous middlemen making huge profit at the expense of the society. The Cooperative Credit Societies Act, 1904 enabled formation of cooperatives for supplying to farmers cheap credit and protect them from exploitation in the hands of moneylenders. The Cooperative Societies Act, 1912 expanded the sphere of cooperation and provided for supervision by central organization. A cooperative society, which has its object the promotion of the economic interests of its members in accordance with the co-operative principles may be registered with limited or unlimited liability by filing application accompanied by copy of its byelaws and signed by at least 10 adult members of the same locality, class, caste, tribe or occupation (Sec.4 to 9).

The controlling provisions include Registrar’s power of holding inquiry into the constitution, working and financial conditions of the society, inspection of books of indebted society, dissolution of the defunct society, cancellation of registration of society whose membership falls below 10, and winding up of the society through liquidator (Sec. 35, 36, 39, 40 and 42). The legislation is in force even today inUnionTerritoriesand is invoked by the Central Government.

 

A co-operative society has been formed behind the following broad objectives.

  • To render services to its members instead of making profits.
  • It encourages a state mutual help in the place of competition.
  • It assures a state of self-help in the place of dependence.
  • It develops a state of moral solidarity in the place of unfair business activities.

 

Advantages:

  • Unlike other retailers, cooperative stores supply quality goods. Consumers are thus saved from adulteration and other malpractices.
  • As consumers are the owners and managers of such stores, genuine requirements of the majority of consumers can be met. In other words, goods required by a majority of the customers are always dealt by such stores.
  • Cooperative societies are an important form of democratic business enterprise because of its diffused ownership. As a result, no single group can secure control over the organisation.

 

Disadvantages:

  • It caters to the needs of small and medium-income groups.
  • There is too much dependence on the honesty, integrity and loyalty of members and workers.
  • There is lack of proper sales promotion drives by the sales force of these stores.
  • Management of such stores usually rests in the hands of amateurs. Professional managers cannot be hired due to lack of funds.

 

Documents required for a Co- Operate Society:

  • Model bye-laws (4 copies)
  • Enquiry Performa
  • List of promoter members.
  • Copy of promotional meeting resolution resolving name of the society, value of share money, admission fees, liabilities, total number of members of managing committee, annual submission fees etc.

 

To start Co-operative Societies in India just fill this form:

What are the Popular Non Government Organisation (NGO) Entities in India?

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If you are thinking for starting a new Non Government Organisation (NGO) in India then first you have to know, what is an NGO? and which popular NGO entity is best for your goal which you want to achieve;

 

ngo-entityWhat is an Non Government Organisation (NGO)?

Any organisation working for a social, cultural, economic, educational or religious cause is termed as an NGO or Non Government Organisation. NGOs have made favourable indents to needy sections of Indian society at par with a constantly changing socio-economic climate. NGOs have reached out to all sections of society including women, children, pavement dwellers, unorganised workers, youth, slum-dwellers and landless labourers.

Documents requirements for an NGO
  • Income & Expenditure Statement
  • Receipt & Payments Statement
  • Balance Sheet
  • Auditors Report
  • Activity/Annual Report of The Organisation for the previous year.
  • Budget Estimates for the project for current year
  • Details of Beneficiaries
  • Details Managing Committee
  • Details of Employees on Form
  • Copy of Registration Certificate
  • Memorandum of Association / bye-laws/ Articles.
  • Utilisation Certificate in respect of grants released in the previous year
  • List of Assets acquired wholly or substantially out of government grants under GFR 19

An NGO can also be formed under various legal identities:

(i)  Society registered under Societies Registration Act, 1860.

(ii)  Trust (Formed under the Trust deed and registered with Income Tax Authority.)

(iii) Limited company incorporated under section 25 of the Companies Act, 1956

(iv) Co-operative Society

(v)  Multi-State Co-operative Society

(vi) Trade Unions

(vii) Political Party in India

 

What is Trust?

A Charitable trust or Trust is a legal entity which can be set up by anyone who has decided to commit themselves in principle to setting aside some of their assets or income for Charitable causes. The main obligation is to work within the charitable purposes and the powers set out in the Trust Deed

To Know more about Firm CLICK HERE:

 

What is Society? 

A Society is formed when people come together to do something with some common purpose which is legal and useful for others. A society should generally not get into profit making activities. Societies are governed by the Societies Registration Act 1860.

To Know more about Society CLICK HERE:

 

What is Sec. 25 Company? 

NON PROFIT COMPANY or Company under sec. 25 – is identical to an ordinary company in all respects except that it is not established for profit and commercial gain.  It is also called a Section 25 Company and is a voluntary association of people, registered under the Indian Companies Act, 1956. It is a company with limited liability that may be formed for “promoting commerce, art, science, religion, charity or any other useful object,” provided that no profits, if any or other income derived through promoting the company’s objects may be distributed in any form to its members.

To Know more about Company under sec. 25 CLICK HERE:

The main differences between a trust, a society and a section 25 company

Public Trust

Society

Section 25 Company
Statute/ Legislation Public Trust Act like Bombay Public Trusts Act of 1950 Societies Registration Act of 1860 Companies Act of 1956
Jurisdiction of the Act Concerned State where registered Concerned State where registered Concerned State where registered
Authority Charity Commissioner Registrar of Societies Registrar of Companies
Registration As Trust As society (and by default also as  Trust in Maharashtra & Gujarat) As Section – 25 company
Main Document Trust deed Memorandum of Associations and Rules & Regulations Memorandum and Articles of Association
Stamp Duty Trust deed to be executed on non-judicial stamp paper of prescribed value No stamp paper required for Memorandum of Associations and Rules & Regulations No stamp paper required for Memorandum and Articles of Association
Number of persons needed to register Minimum two trustees; no upper limit Minimum seven; no upper limit Minimum seven; no upper limit
Board of Management Trustees Governing body or council/managing or executive committee Board of Directors/Managing Committee
Mode of succession on board of management Usually by appointment Usually election by members of the general body Usually election by members of the general body

Co-operative Societies:

In India, cooperative societies were regarded as ideal instruments to motivate the people to come together and help themselves in the process of eliminating the unscrupulous middlemen making huge profit at the expense of the society.

To Know more about co-operative societies CLICK HERE:

Multi-State Co-operative Societies:

Those co-operative societies, whose objects are not limited to one state and serving the interests of members in more than one state for social and economic betterment of its members are considered Multi State Co-operative Society.

To Know more about Multi-State Co-operative Societies CLICK HERE:

Trade Unions:

Trade Union means any combination, whether temporary or permanent, formed primarily for the purpose of regulating the relations between workmen and employers or between workmen and workmen or between employers and employers, or for imposing restrictive conditions on the conduct of any trade or business, and includes any federation of two or more Trade Unions

To Know more about Trade Unions CLICK HERE:

 

Political Party:

Political Party is also a type of an NGO because it has many advantages which a NGO have. If you are thinking to make a new Political Party in India then first you have to know, what is a Political Party?

A political party is a group of citizens who come together to contest elections and hold power in the government. They agree on some policies and programmes for the society with a view to promote the collective good. Since there can be different views on what is good for all, parties try to persuade people why their policies are better than others. They seek to implement these policies by winning popular support through elections.

Three components are needed for a political party:

  • The leaders,
  • The active members and
  • The followers

The Indian political parties are categorized into two main types:

  • National level parties:

National parties are political parties which, participate in different elections all over India.

  • State level parties:

The state level political parties are those, which are recognized in less than four states and they work in the states.

To Know more about Political Party CLICK HERE:

How to form companies under section 25 in India?

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COMPANYConferring of corporate personality to associations that promote cultural and charitable objects, but exempting them from the operation of some cumbersome requirements (which are essential only for regulation of business bodies but are difficult for compliance by non-profit companies), are the noteworthy features that are provided under the Companies Act, 1956. According to section 25(1), “Where it is proved to the satisfaction of the Central Government that an association:

Is about to be formed as a limited company for promoting commerce, art, science, religion, charity or any other useful object,

Intends to apply its profits, if any, or other income in promoting its objects, and to prohibit the payment of any dividend to its members,

the Central Government may, by license, direct that the association may be registered as a company with limited liability, without addition to its name of the word “Limited” or the words ‘Private Limited’.”

Existing companies complying with the above requirements may also be given such license by the Central Government (Sec 25{1}). The License system presupposes imposition of conditions and compulsion to comply with them (sec {5}). It insists on duty not to alter the object clauses of its memorandum. It provides for revocation of licenses after due hearing in case of deviance from statutory requirement (Sec 25 {7} and {8}).

The Central Government by notification under section 25(6) has provided for several exemptions and privileges to non-profit companies. Prominent among them include exemptions from publication of name (sec147); exemption from filing of annual return about membership [sec166 (2)]; liberty to hold general body meeting on public holidays or outside the business hours [sec166 (2)]; reduction of time length of meeting notice to 14 days instead of 21 (sec 171(1)); requirement to keep books of account of past four years instead of eight years (sec 209(4a)); exemption from the requirement of Central Government’s permission for enhancing the number of directors (sec 259); relaxation in holding Board meeting (once in six months instead of three months)(sec 285) and its quorum (sec 287); competence of the Board to decide about borrowing of money, investing of funds or making of loan by circulation instead of by holding meeting (sec292);exemption from the requirements of intimating to the registrar the particulars about change in the composition of the Board (sec 303); relaxation in the matters of quantum loan or purchase of shares that can be made by the company without central government prior approval (sec 370 & 372). Finally, registration under section 25 is a prima facie proof that the body is not for profit and there is no element of sale when a club serves refreshments to the members and hence, Sales Tax is not applicable.

 

Documents required for company under section 25

  • Draft of the Memorandum and Articles of Association.
  • Details such as name, address, occupation of the promoters.
  • List of companies, associations in which the promoters are directors or hold responsible position with the description of the position held.
  • List of the proposed members of the Board of Directors.
  • Declaration signed by an Advocate / Chartered Accountant / Company Secretary on non-judicial stamp paper of appropriate value.
  • The proposed sources of income and the expenditures thereof.
  • A note on the proposed activities and also the past activities, if any.
  • A statement of the grounds for making an application under section 25. In this statement a reference to the relevant clause in the Memorandum of Association regarding the Vision and Mission of the proposed company should be made.
  • Declaration signed by all the promoters on non-judicial Stamp Paper of appropriate value.
  • In case of an existing society applying for conversion into a section 25 company, audited statement of accounts and annual report of the society for the past two years  should be submitted.
  • A certified copy of the notice to be published in newspapers.

 

To form a Company under Section-25 in India just fill this form:

 

How to form a Society in India?

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Societies Registration Act, 1860 is a central act for registering not-for-profit organizations.  Almost all the states in India have adopted (with modifications, if any) the central Act for creating state level authorities for registering and supervising various types of not-for-profit entities. According to the act, any seven persons who subscribe to a Memorandum of Association (MOA) can register a society.  The Memorandum should include the names of the society, its objectives, the names, addresses and occupations of those members subscribing to it as well as the first governing body to be constituted on registration. The MOA should be accompanied by the Rules and Regulations- this should include details such as the procedure for enrolling and removing various categories of members, procedure of forming the governing body, conduct of meetings, election and removal of office bearers, procedure for conducting annual general body meetings, etc. The membership of the society may be kept open (or by invitation) to anybody who subscribes to its aims and objectives, for which a fee may be charged.  Although the society can sue and can be sued, the liability of the members is limited, as no judgment can be enforced against the members’ private assets. The society has a perpetual existence and common seal, and can sue or be sued in the name of the office bearer as prescribed under its rules (sec.6). This enables its effective participation in public life

In order to ensure compliance with the purpose and byelaws or memorandum of association, democratic process is provided by allowing the general body meeting of members to decide the composition of the governing body and control their acts through deliberations in the meeting (sec.12&15). Alteration, extension, or abridgement of purpose of the association or any decision on amalgamation can be effected when the proposition of such measure made by the governing body is approved by the votes of three-fifths of the members present in the special meeting convened for this purpose with due notice (sec.12). For dissolution of the society also, similar approval is required (sec.13). All the documents filed by the society with the Registrar are open to inspection by any person (sec.17). This enables transparency and democratic control. Members guilty of offences against the property of the society are punishable with imprisonment or fine (sec.10).

While the Central Act has abstained from providing for extensive governmental control, except routine matters of filing annual statements, many of the state legislations have gone for widespread governmental controls to deal with abuses, malfeasance and nonfeasance of societies. The legal measures include: state’s power of enquiry, investigation and surcharge: cancellation of registration and consequent dissolution of societies; super session of governing body; appointment of administrator; dissolution; and removal of defunct societies. The policies of state legislations vary from one to another in adopting these measures. Under section 25 of the Karnataka Act and section 32 of the Madhya Pradesh Act, the Registrar on his own motion, and on the application of the majority of the members of the governing body or of not less than one-third of the members of the society, can hold or authorize an enquiry into the constitution, working and financial condition of the society.

 

What are the Advantages of Society?

  • Simple process of registration.
  • Simple record-keeping and even simpler regulations.
  • Low possibility of interference by the regulator.
  • Exemption from tax due to charitable nature of operations.

What are the Disadvantages of Society?

  •  Tax exemption extended to societies may apply to public trusts only to the extent the Income Tax department accepts their activities as being charitable.
  • As a charitable institutional form, in essence inappropriate for the for-profit, financially sustainable strategic goal of finance operations;
  • No system of equity investment or ownership, thereby, making it less attractive for commercial investors interested in microfinance;
  • Commercial investors generally regard the investments in such entities risky primarily on account of their lack of professionalism and managerial practices and are, therefore, reluctant to commit large volumes of funds to such NGOs;
  • In accordance with Section 45S of the RBI Act, 1934, no unincorporated bodies are allowed to accept deposits from the public. Organisations registered under the Societies Registration Act and the Trust Act is considered unincorporated bodies. Therefore, according to the law, they are not even allowed to collect savings from their clients; and
  • Also vulnerable to the implication under the money lenders (prevention of usurious interest rates) acts of various state governments.

Documents required for Society

  • Registration can be done either at the state level (i.e., in the office of the Registrar of Societies) or at the district level (in the office of the District Magistrate or the local office of the Registrar of Societies)
  • Memorandum of association and rules and regulations
  • Consent letters of all the members of the managing committee
  • Authority letter duly signed by all the members of the managing committee
  •  An affidavit sworn by the president or secretary of the society on non-judicial stamp paper of Rs.20-/, together with a court fee stamp
  • A declaration by the members of the managing committee that the funds of the society will be used only for the purpose of furthering the aims and objects of the society.

 

To form a Society in India just fill this form:

Formation of Trust : How to form a Trust in India?

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Formation-of-Trust
Formation of Trust

Public Trusts, at times synonymous with foundations, can be created for public charitable purposes. There is no allIndialevel Act for setting up public charitable trusts. Some of the states inIndiahave enacted Public Charitable Trust Act, while most states inIndiado not have a trust act. An NGO can be created only under a public trust act. Madhya Pradesh and Rajasthan have independent state level public trust acts. Some states, likeWest BengalandBihar, do not have any act to register a public trust. A trust can be registered in one State, but the same may have a scope to operate in any number of States. In the state ofMaharashtraandGujarat, all organizations that are registered as ‘Society’ are by default also registered as Public Trust. The trustees are required to manage the trust and they are also liable for breach of the trust. Trustees are individually as well as collectively responsible for every action carried out on behalf of the trust.

A private trust, created under and governed by the Indian Trusts Act of 1882, aims at managing assigned trust property for private or religious purpose. A private trust does not enjoy the privileges and tax benefits that are available to public trusts or NGOs.

The basic concept of setting up a Public Charitable Trusts relies on the settler (creator or owner) of the trust setting aside some moveable and/or immovable asset to be used by the trustee (eg, administrator of the trust) for achieving the objects (must be legal purpose) of the trust as laid down by the settler. Benefits of such trusts shall be open to people irrespective of caste, creed or faith.)

InIndia, there are thousands of trusts created by the owner of industrial houses and rich individuals and their families. Public Charitable Trusts, under Indian laws are treated as organisations with charitable purpose entitling all the tax benefits applicable. Examples of Public Charitable Trusts promoted by business families are Sir Dorabji Tata Trust, Paragon Charitable Trust, etc.

Under Indian Trust Act, a settler can create a trust with his or her own personal property, designate one or more trustees and lay down the terms and conditions benefiting the identified beneficiary(ies) including one’s own child, relative or any other individual or group of individuals. Private trust or family trust is not a Public Charitable Trusts and hence does not enjoy the privileges entitled to a trust with charitable purpose.

 

What are the Advantages of Trust?

  • Simple process of registration.
  • Simple record-keeping and even simpler regulations.
  • Low possibility of interference by the regulator.
  • Exemption from tax due to charitable nature of operations.

 

What are the Disadvantages of Trust?

  • Tax exemption extended to societies may apply to public trusts only to the extent the Income Tax department accepts their activities as being charitable.
  • As a charitable institutional form, in essence inappropriate for the for-profit, financially sustainable strategic goal of finance operations;
  • No system of equity investment or ownership, thereby, making it less attractive for commercial investors interested in microfinance;
  • Commercial investors generally regard the investments in such entities risky primarily on account of their lack of professionalism and managerial practices and are, therefore, reluctant to commit large volumes of funds to such NGOs;
  • In accordance with Section 45S of the RBI Act, 1934, no unincorporated bodies are allowed to accept deposits from the public. Organisations registered under the Societies Registration Act and the Trust Act are considered unincorporated bodies. Therefore, according to the law, they are not even allowed to collect savings from their clients; and
  • Also vulnerable to the implication under the money lenders (prevention of usurious interest rates) acts of various state governments.

Documents required for trust

  • Detail of all members or trustees of the trust with their address and PAN no.
  • Certified true copies of the Institution’s Registration Certificate
  • Certified true copies of Laws & by-laws of the Institute
  • Copy of income tax registration certificate.
  • Audited Balance Sheet and Income & Expenditure account with Audit Report of last 3 years
  • The original copy of Trust Deed evidencing the creation of the Trust.

 

To form a Trust in India just fill this form:

How to form a Branch Office in India?

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Branch office is that type of business entity which helps to expands business in the different parts of the country and in many different countries too. It refers to an establishment which carries on substantially the same business and activity as is carried out by its Head Office. it establish with the approval of RBI

Foreign companies engaged in manufacturing and trading activities abroad are allowed to set up Branch Offices in India for the following purposes:

  • Export/Import of goods
  • Rendering professional or consultancy services
  • Carrying out research work, in which the parent company is engaged.
  • Promoting technical or financial collaborations between Indian companies and parent or overseas group company.
  • Representing the parent company in India and acting as buying/selling agents in India.
  • Rendering services in Information Technology and development of software in India.
  • Rendering technical support to the products supplied by the parent/ group companies.
  • Foreign airline/shipping company
  • Foreign Banks

 

Advantages:

  • Can perform some revenue generating activities in India, unlike a liaison office (see below).
  • It is a separate legal entity for certain purposes.

 

Disadvantages:

  • Restrictions on range of activities, which are subject to RBI approvals.
  • Formalities and legal set-up costs are involved.

 

Procedure for setting up Branch office?

  • Reserve Bank permits companies engaged in manufacturing and trading activities abroad to set up Branch Offices in India for the following purposes:
  • To represent the parent company/other foreign companies in various matters in India e.g. acting as buying/selling agents in India
  • To conduct research work in the area in which the parent company is engaged
  • To undertake export and import activities and trading on wholesale basis
  • To promote possible technical and financial collaborations between the Indian companies and overseas companies.
  • Rendering professional or consultancy services
  • Rendering services in Information technology and development of software in India
  • Rendering technical support to the products supplied by the parent/Group companies.
  • A branch office is not allowed to carry out manufacturing, processing activities directly/indirectly. A Branch Office is also not allowed to undertake Retail Trading activities of any nature in India. Branch Offices have to submit Activity Certificate from a Chartered Accountant on an annual basis to the Central Office of FED. For annual remittance of profit Branch Office may submit required documents to an authorised dealer.
  • Permission for setting up branch offices is granted by the Reserve Bank of India. Reserve Bank of India considers the track record of the Applicant Company, existing trade relations with India, the activity of the company proposing to set up office in India as well as the financial position of the company while scrutinising the application.

 

To form a Branch Office in India just fill this form:

Starting a Project Office in India! How to start a Project Office in India?

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Project offices are that type of business entities which are incorporated by the foreign companies for as like temporary project or site offices in India. Now a days The Indian Government grants general permission for foreign companies to incorporate project office entity in India.

 

Advantages:

  • Having a full transparency into all aspects of the projects
  • Having better control over projects
  • Being better equipped to make the optimal decisions related to projects
  • Minimizing uncertainty and associated risks
  • Increasing support and buy in from all stakeholders

 

Procedure for setting up Project Office?

Foreign companies are granted projects in India by Indian entities. General Permission has been granted by Reserve Bank of India vide Notification No. FEMA 95/2003-RB dated July 2, 2003 to foreign companies to open Project Office/s in India provided they have secured from an Indian company, a contract to execute a project in India, and

  • the project is funded directly by inward remittance from abroad; or
  • the project is funded by a bilateral or multilateral International Financing Agency; or
  • the project has been cleared by an appropriate authority; or
  • a company or entity in India awarding the contract has been granted Term Loan by a Public Financial Institution or a bank in India for the project.
  • However, if the above criteria are not met, or if the parent entity is established in Pakistan, Bangladesh, Sri Lanka, Afghanistan, Iran or China, such applications have to be forwarded to Central Office of the Foreign Exchange Department of the Reserve Bank at Mumbai for approval.

 

To start a Project Office in India just fill this form:

What are the popular business entities in India for Foreign Companies?

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If you are running a foreign entity and thinking to start a new business in India then first you have to choose that which legal entity is best for your business needs and goal. Now days these are the most popular Business entities:

  •                Liaison Office/Representative Office
  •                Project Office
  •                Branch Office
  •                Joint venture companies

Liaison Office/Representative Office

‘Liaison Office’ means a place of business to act as a channel of communication between the Principal place of business or Head Office by whatever name called and entities in India but which does not undertake any commercial /trading/ industrial activity, directly or indirectly, and maintains itself out of inward remittances received from abroad through normal banking channel.

To Know more about Liaison Office CLICK HERE:

Project Office:

Project offices are that type of business entities which are incorporated by the foreign companies for as like temporary project or site offices in India. Now a days The Indian Government grants general permission for foreign companies to incorporate project office entity in India.

To Know more about Project Office CLICK HERE:

Branch Office:

Branch office is that type of business entity which helps to expands business in the different parts of the country and in many different countries too. It refers to an establishment which carries on substantially the same business and activity as is carried out by its Head Office. it establish with the approval of RBI

To Know more about Branch Office CLICK HERE:

Joint Venture Company:

As it seems from its name a joint venture is a new enterprise owned by two or more participants to share markets / intellectual property and its knowledge and its profit too.

It is essentially a medium to long-term contract which is specific and flexible. Though, the joint venture a newly created business enterprise can be represented and its participants can continue to exist as separate firms. It can also be organized as a partnership firm, a corporation or any other form of business organisation which the participating firms choose to select.

To Know more about Joint Venture Company CLICK HERE:

Starting a Liaison Office in India! How to start a Liaison Office in India?

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Liaison Office
Liaison Office

There are quite a few foreign companies who want to first study the Indian markets and obtain relevant information before they expand their operations inIndia. Some foreign companies establish a liaison office as an intermediate step before entering into a Joint Venture (JV) or setting up a Wholly Owned Subsidiary (WOS). The establishment of liaison offices is governed by the Reserve Bank of India (RBI). By its very nature, a liaison office inIndiacan act only as a communicative channel for the parent company to supply information on the Indian market and customers, and cannot carry on any business activities inIndia. As a result, the liaison office cannot generate any revenue inIndiaand all the expenses of running and maintenance of the Indian office are required to be met out of the foreign exchange remitted from abroad.

 ‘Liaison Office’ means a place of business to act as a channel of communication between the Principal place of business or Head Office by whatever name called and entities in India but which does not undertake any commercial /trading/ industrial activity, directly or indirectly, and maintains itself out of inward remittances received from abroad through normal banking channel;

Permitted activities for a Liaison Office in India

i)    Representing inIndiathe parent company/group companies.

ii)   Promoting export import from/toIndia.

iii)  Promoting technical/financial collaborations between parent/group companies and companies inIndia.

iv) Acting as a communication channel between the parent company and Indian companies.

 

Procedure to Set up a Liaison Office in India.

Foreign companies intending to set up a liaison office inIndiafor undertaking liaison activities on behalf of the parent company or foreign trading companies intending to set up liaison offices inIndiafor promotion of exports fromIndiashould submit their application in Form FNC 1 to the Central office of RBI, Mumbai (Foreign Investment Division). In approved cases, permission is granted initially for a period of 3 years. However, application for renewal of application should be made to the concerned regional office of the RBI under whose jurisdiction the office is situated.

 

Conditions Imposed While Granting Permission

The conditions precedent for setting a liaison office inIndiaare as follows :

 

  1. No commission / fee will be charged or any other remuneration received by the Indian office of the foreign company for its liaison activities inIndia.
  2. Except the liaison work, the office will not undertake any activity of a trading, commercial or industrial nature without the prior permission of RBI

 

1. The entire expenses of the Indian office will be met exclusively by remittance from abroad through normal banking channels.

 

Zero Tax Liability:

Since a liaison office is not allowed to earn any income, there is no tax liability of a liaison office or its parent company for this representative office.

 

Maintenance of Bank Accounts

 

A liaison office inIndiais permitted to maintain and operate bank accounts inIndiabut only with authorised dealers. While opening such rupee accounts in the name of office, bank obtains an undertaking in prescribed form QA22 duly signed by all the persons who are authorised to operate on the accounts.

 

Required Documents:

 

  1. English version of the certificate of incorporation/registration or Memorandum & Articles of Association attested by Indian Embassy/Notary Public in the country of registration.
  2. Latest Audited Balance Sheet of the applicant company/firm.
  3. Other Details like:

i)  Value of goods imported from and / or exported toIndia by the applicant during each of the last three years:

a)  Imports details fromIndia

b)  Exports details toIndia

ii) Particulars of existing arrangements if any, for representing the company inIndia.

iii)  Particulars of the proposed Branch/Liaison Office

a)  Details of the activities/services proposed to be undertaken/ rendered by the office.

b)  Place where the office will be located.

 

Advantages:

  • Fewer ongoing formalities although there are set-up costs.
  • No separate legal entity but does provide a formal presence for UKCo in India.

Disadvantages:

  • Cannot trade or generate revenue in India.
  • UKCo may be exposed to claims and liabilities in India.

 

 

To start a Liaison office in India just fill this form: