We, at GKKEDIA & CO. , are here to provide all the details you need to know regarding the Registrar of companies (ROC) & Reserve Bank of India (RBI) compliances in order to establish a project office in India.

Firstly, let us understand what is a “project office”:-
A Project Office (PO) means a place of business established to represent the interests of a foreign company executing a project in India. Such offices are prohibited from undertaking or carrying on any activity other than the activity relating to the execution of the project for which such office is established.

Project office excludes a “Liaison office”.
The only difference between the two is that the project office can undertake commercial activities that too only related to the specific project for which it has been established while the liaison office cannot undertake any commercial activities ,its only there to represent the foreign entity.

Foreign Companies who have been awarded a contract to execute a project in India, select the mode of execution of the project, through project offices duly registered with the Reserve Bank of India (RBI) and the Registrar of
Companies (ROC).

RBI Compliances for project offices regarding establishment eligibility requirements & reporting:-
According to the 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, notified by the Reserve Bank vide Notification No FEMA 22(R)/RB-2016 dated March 31, 2016, as amended from time to time:-

No person resident outside India shall without prior approval of the Reserve Bank open in India a branch office or a liaison office or a project office or any other place of business by whatever name called except as laid down in these Regulations.

Provided that:-

• A banking company resident outside India shall not require any approval under these Regulations for establishing any office in India if such company has obtained necessary approval under the provisions of the Banking Regulation Act, 1949.
• An insurance company resident outside India shall not require any approval under these Regulations for establishing any office in India if such company has obtained approval from the Insurance Regulatory and Development Authority established under section 3 of the Insurance Regulatory and Development Authority Act, 1999.

 
A foreign company may open project office/s in India provided it has 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.

RBI has given general permission for opening of Project Office in India if the above conditions are satisfied. In this case, Authorized Dealer Category-I banks are empowered to grant approval.

A point to pay attention:- A person from Bangladesh, Sri Lanka, Afghanistan, Iran, China, Hong Kong or Macau opening a project office in India shall have to register with the concerned State Police Authorities. Copy of approval letter for ‘persons’ from these countries shall be marked by the AD Category-I bank to the Ministry of Home Affairs, Internal Security Division-I, Government of India, New Delhi.

A person resident outside India desiring to establish a project office in India shall submit an application in Form FNC (Annex C) to an Authorised Dealer Category-I bank who may, subject to the provisions of Regulation 5, grant approval as per the directions and/or guidelines issued by the Reserve Bank in this regard. In case no office is opened by the person resident outside India within six months from the date of approval letter, the approval for establishing the office in India shall be cancelled. In cases where the person resident outside India is not able to open the office within the stipulated time frame due to reasons beyond their control, the Authorised Dealer Category-I bank may consider granting extension of time for setting up the office by a further period of six months. Any further extension of time shall require the prior approval of the Reserve Bank in this regard.

Exceptional cases where prior approval of RBI required:-
Any application from a person resident outside for opening a project office in India shall require prior approval of Reserve Bank in the following cases where:-

• 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 liaison, branch or project office in Jammu and
  Kashmir, North East region and Andaman and Nicobar Islands;
• the principal business of the applicant falls in the four sectors namely Defence, Telecom, Private Security and Information and Broadcasting:

 
Provided that approval of the Reserve Bank of India is not required in case where Government approval or license/permission by the concerned Ministry/ Regulator has already been granted. Further, in the case of proposal for opening a project office relating to defence sector, no separate reference or approval of Government of India shall be required if the said non-resident applicant has been awarded a contract by/entered into an agreement with the Ministry of Defence or Service Headquarters or Defence Public Sector Undertakings.

The applicant is a Non-Government Organisation, 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 this regulation.

This has since been reviewed and as notified through Notification No FEMA 22(R)(1),
Accordingly, the Form FNC has also been suitably modified and the following phrase added under the heading ‘Declaration’ in Part II clause (ii), at the end of the existing sentence.

“We will not undertake either partly or fully, any activity that is covered under Foreign Contribution Regulation Act, 2010 (FCRA) and we understand that any misrepresentation made or false information furnished by us in this behalf would render the approval granted under the Foreign Exchange Management (Establishment in India of a branch office or liaison office or a project office or any other place of business) Regulations, 2016, automatically as void ab initio and such approval by the Reserve Bank shall stand withdrawn without any further notice”.

Remittance of Profit or Surplus:-
PO is permitted to remit outside India profit of the project net of applicable Indian taxes.

However, authorized Dealer Category – I bank may permit intermittent remittances by project offices pending winding up / completion of the project subject to submission of certain prescribed documents as below:-

• The Project Office submits an Auditors’ / Chartered Accountants’ Certificate to the effect that sufficient provisions have been made to meet the liabilities in India including Income Tax, etc.
• An undertaking from the Project Office that the remittance will not, in any way, affect the completion of the Project in India and that any shortfall of funds for meeting any liability in India will be met by inward remittance from abroad.

 
Inter-Project transfer of funds requires prior permission of the Regional Office concerned of the Reserve Bank under whose jurisdiction the Project Office is situated.

Acquisition of property:-
Acquisition of property by branch office/project office shall be governed by the guidelines issued under Foreign Exchange Management (Acquisition and transfer of immovable property outside India) Regulations.

Transfer of assets:-
A person resident outside India permitted under these Regulations to establish a branch office or liaison office or project office may apply to the concerned Authorised Dealer Category-I bank for transfer of its assets to a Joint
Venture/Wholly Owned Subsidiary or any other entity in India. Authorised Dealer Category-I bank shall be guided by the instructions laid down by Reserve Bank in this regard.

Annual Activity Certificate (AAC) regarding reporting:-
AAC from a Chartered Accountant showing the project status and certifying that the accounts of the project office have been audited and the activities undertaken are in conformity with the general/ specific permission given by
the Reserve Bank may be submitted by the project office to the designated Authorised Dealer Category-I bank.

Time Limit for Filing AAC:-
If its financial year ends on 31stMarch,then Within 30th September of that year If its financial year ends on some other date,then Within 6 months from the end of the financial year.

ROC compliances i.e. the filing requirements:-
Every Foreign company is required to submit below documents to the Registrar of Companies for registration, within 30 days of the permission of RBI/AD Bank:

• Certified copy of the charter, statutes or memorandum and articles, of the company or other instrument constituting or defining the constitution of the company and, if the instrument is not in the English language, a
  certified translation thereof in the English language;
• Full address of the registered or principal office of the company
• List of the directors and secretary of the company containing such particulars as prescribed under Rule 3.
• Name and address or the names and addresses of one or more persons resident in India authorized to accept on behalf of the company service of process and any notices or other documents required to be served on the
  company.
• Full address of the office of the company in India which is deemed to be its principal place of business in India.
• Particulars of opening and closing of a place of business in India on earlier occasion or occasions
• Declaration that none of the directors of the company or the authorized representative in India has ever been convicted or debarred from formation of companies and management in India or abroad.
• Other Documents as may be prescribed

 
Rule 3(3) of the Companies (Registration of Foreign Companies) Rules, 2014 requires application in eForm FC-1 to be supported with an attested copy of approval from the Reserve Bank of India/AD Bank under Foreign Exchange
Management Act and the rules and regulations thereunder or a declaration from the authorized representative of such Foreign Company that no such approval is required.

And Rule 3(4) provides that in case of any alteration in the aforesaid documents the Foreign Company is required to submit a return in eForm FC-2 containing the particulars of alteration as per the prescribed format with the Registrar of Companies, within 30 days of any such alteration.

Written by
Vaibhav Bansal
Articled Clerk