Published Thu, 29 Sep 2022
Project Office' means a place of business in India to represent the interests of the foreign company executing a project in India but excludes a liaison office. Setting up a project office is one of the ideal methods for foreign entities to establish their business presence in India if the object is to have a presence for a limited period of time for the sole purpose of execution of the project in India.
In this article, we have detailed out the complete procedure for setting up a project office in India.
Eligibility Criteria for Setting-up a Project Office
A foreign company may open a project office in India provided it has secured from an Indian company, a contract to execute a project in India and the project has been cleared by an appropriate authority. Along with the aforesaid conditions, either of the following should also be complied with to meet the criteria for establishment:
- the project is funded directly by inward remittance from abroad; or
- the project is funded by a bilateral or multilateral International Financing Agency (i.e. the World Bank or the International Monetary Fund or similar other body); or
- a company or entity in India awarding the contract has been granted term loan by a Public Financial Institution (as defined in Section 4A of the Companies Act, 1956) or a bank in India for the Project.
Cases in Which Prior Approval of RBI is Required for Establishment of Project Office
An application from a foreign entity for the opening of a project office in India shall require prior approval of Reserve Bank of India and shall be forwarded by the AD Category-I bank to the General Manager, Reserve Bank of India, Central Office Cell, Foreign Exchange Department, 6, Sansad Marg, New Delhi - 110 001 who shall process the applications in consultation with the Government of India in the following cases:
- The applicant is a citizen of or is registered/incorporated in Pakistan;
- The applicant is a citizen of or is registered/incorporated in Bangladesh, Sri Lanka, Afghanistan, Iran, China, Hong Kong or Macau and the application is for opening a project office in Jammu and Kashmir, North East region, and Andaman and the Nicobar Islands;
- The principal business of the applicant falls in the four sectors namely Defence, Telecom, Private Security, and Information and Broadcasting. However, prior approval of the Reserve Bank of India shall not be required in cases where Government approval or license/permission by the concerned Ministry/Regulator has already been granted.
- The applicant is a Non-Government Organisation (NGO), Non-Profit Organisation, Body/ Agency/ Department of a foreign government. However, if such entity is engaged, partly or wholly, in any of the activities covered under Foreign Contribution (Regulation) Act, 2010 (FCRA), they shall obtain a certificate of registration under the said Act and shall not seek permission under 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.
Process for Project Office Registration
Submission of application in Form FNC with AD Category I Bank: A foreign entity that meets the eligibility criteria as provided above may establish a project office in India by submitting an application in Form FNC to a designated AD Category-I bank along with the following documents:
- Copy of the Certificate of Incorporation / Registration along with Memorandum and Articles of Association attested by the Notary Public in the country of registration [If the original Certificate is in a language other than in English, the same may be translated into English and notarized as above and cross-verified/attested by the Indian Embassy/ Consulate in the home country].
- Bankers' Report from the applicant’s banker in the host country/country of registration showing the number of years the applicant has had banking relations with that bank.
- Company Profile (in English translation)
- List of Directors of Parent Company (in English translation, with notarization and attestation by the Indian Embassy)
- Power of Attorney in favor of an authorized signatory of Form FNC in case the Head of the overseas entity is not signing the Form FNC
- Letter of comfort from the parent/ group company of the foreign entity establishing project office (required only when the applicant foreign company is not financially sound and is a subsidiary of another company that satisfies the eligibility criteria)
- Copy of the signed contract obtained from an Indian company for project execution
- Confirmation letter of securing necessary regulatory clearances.
- Documentary evidence on the funding condition being met either by inward remittance from abroad; or the project is funded by a bilateral or multilateral International Financing Agency, 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.
Verification of documents and allotment of UIN: AD Category-I bank after exercising due diligence in respect of the applicant’s background, and satisfying itself as regards adherence to the eligibility criteria for establishing project office, antecedents of the promoter, nature, and location of activity of the applicant, sources of funds, etc., and compliance with the extant KYC norms grant approval to the foreign entity for establishing project office in India.
After issuance of UIN, AD Category-I bank issues the approval letter to the foreign entity for establishing its project office in India
Intimation of setting up PO with AD Bank: An applicant upon receiving the permission for setting up of a project office shall inform the designated AD Bank as to the date on which the project Office has been set up which shall not be later than 6 months from the date of the approval letter. In case the foreign entity is not able to open its project office within the period of six months due to reasons beyond its control, the AD Category-I bank may consider granting an extension of time for a further period of six months for setting up the office. Any further extension of time shall require the prior approval of the Reserve Bank of India.
Intimation of Setup to Registrar of Companies: Every foreign company establishing its PO in India is required to register itself with the Ministry of Corporate Affairs (MCA) by filing Form FC-1 within a period of thirty days of the establishment of PO. List of documents and details required to be submitted along with Form FC-1 include:
- A certified true copy of the charter, statutes or memorandum and articles of the foreign company or other instrument constituting or defining the constitution of the company (with the translation of the document in English, in case the instrument is not in the English language)
- List of directors and secretary of the foreign company duly notarised and apostilled by Indian Embassy
- Power of attorney or board resolution in favor of authorized representative in India and extracts of Board resolutions of Foreign Company
- RBI approval letter
- A declaration that none of the directors of the company or the authorized representative in India has ever been convicted or debarred from the formation of companies and management in India or abroad
- Complete address of the registered or principal office.