How to set up a Project Office in India?

Project office is a place of business that represents the interests of the foreign company to undertake a project in India. A Project office helps the companies to establish their business presence in India for a specific period of time. It can be referred to as a branch office that is established to execute a specific project. Foreign Companies that have been assigned a contract to execute a project in India generally select such mode of execution of the project which is duly registered with the Reserve Bank of India and the Registrar of Companies.

Project offices are similar to Liaison Offices with the only major difference that Project Office is allowed to undertake commercial activities in relation to a particular project. However, Liaison Offices are not allowed to do so. Moreover, proprietary concerns which are established abroad are not allowed to establish a Liaison Office in India.

Also Read: How to set up a Liaison Office/Branch Office in India (interlink)

A Foreign Company has to secure a contractual agreement with an Indian Company to execute a project in India. A Foreign Company needs to take a general permission from RBI to establish a Project Office in India.

Conditions for registration of Project Office in India

The RBI will grant permission to a foreign entity to establish a Project Office in India only if the following conditions are satisfied:

• Foreign Company needs to execute a contractual agreement with an Indian Company to establish the Project Office, and
• Any one of the conditions needs to be satisfied:
• The project is directly funded by inward remittance from abroad, or
• The Project has been cleared by an appropriate authority, or
• The project is funded by a Bilateral or Multilateral International Financing agency, or
• The Indian entity awarding the contract has been granted a term loan by a Public Financial Institution or a bank in India for the purpose of project.

Important Note:
If any entity resident in Bangladesh, Pakistan, Sri Lanka, Iran, Afghanistan, China, Macau and Hongkong wants to open a Project office in Jammu and Kashmir, North Eastern States and Andaman and Nicobar Islands, then approval is granted by RBI in consultation with the Indian Government.

In all other cases, RBI has empowered Authorized Dealer Category-1 banks to grant approval on its behalf.

Documents Requirement for Project Office Registration in India

The foreign entity needs to submit few important documents to:

• Reserve Bank of India
• Registrar of Companies

You can find below the lists of documents to be submitted to both the regulatory authorities

• Documents to be submitted to the RBI
• • Incorporation Certificate of the foreign entity
  • Memorandum of Association and Articles of Association duly attested or apostilled by the respective Indian embassy in the country of registration
  • A resolution stating the intention behind opening a Project 
  • A Letter stating that the company will open a Bank account in India
  • Office in India by the Foreign Entity
  • Current audited balance sheet of the foreign/applicant company
  • A documentary proof that the project office has obtained the term loan for the project office by the Bank or Financial Institution in India or is financially backed by the bilateral or multilateral International Financial Agencies
  • A Bankers Report submitted by the banker of the company mentioning about the relationship of the company with the bank
  • An Authority letter by the foreign/parent entity to the Local representative in India
  • List of complete details of activities to be conducted in the project office in India
  • Proof of residence of the Authorized Personnel
  • A Scanned copy of Passport of the Authorized Personnel 

• Documents to be submitted to the ROC
• Permission letter from RBI to establish Project Office in India
• Memorandum of Association and Articles of Association of the Foreign/Parent Company
• Attested or Notarized copy of the Certificate of Incorporation of the Foreign Company
• A notarized copy of the Power of Attorney stating the name of the people of such person who is residing in India to accept any notice or document on behalf of the company
• Complete details of the director of the Company
• Complete KYC Documents of the shareholders which are holding more than 10% of the equity in the Applicant Company

Procedure of establishing Project Office in India

The following is the step by step process to establish Project Office in India:

Step 1: The foreign company must file an application in Form FNC to the Reserve Bank of India via Authorised Dealer Bank which has an important role to play as all the communication to RBI is routed through it.

Step 2: Further, a request for the scrutiny of documents will be sent to the foreign company’s banker which is known as swift based verification. As soon as the documents are confirmed from the foreign banker, the application will further proceed for the purpose of approval. In case any any additional document is required, RBI/AD Bank may ask for it.

Step 3: As soon as the applicant has received permission for setting up the Project Office, it shall inform AD Category 1 Bank about the same. The AD Category 1 Bank will further  inform regarding this to RBI .

Step 4: Once the application gives approval to set up Project Office in India, an application is filed for registration of Project Office of the foreign company within 30 days of receiving such approval to the ROC. E-Forms will be filed with the ROC by the director who must provide their DIN and must sign the forms through DSC.It generally takes a period of 15 days to register an Project Office.

Step 5: Now the Income Tax Department will issue a 10 digit unique number called PAN Number and once it is obtained, the Project Office will be allowed to open its Bank Account. Further, it will also require to obtain Tax Deduction Account Number as per the TDS Norms.

Time Limit to open Project Office

• It is important to note that the Project office shall be opened within 6 months from the date of receiving the Approval Letter. However, an extension of 6 months may be granted by the AD Category-I Bank for the reasons which are beyond the control of the foreign entity or the person resident outside India
• Any further extension will be granted by the Reserve Bank of India only

Validity of Period of Project Office in India

A Project Office remains valid for the complete tenure of the project till it is completed or wound up.

Final Words

Indian Government is taking all major steps in the right direction to help Indian economy to speed up. It is helping India to become one of the most sought after place to start business. Recent RBI Guidelines in regard to establishing a Project Office in India are also issued to facilitate ease of business in India. It thereby simplify the norms for foreign entities or non-residents to set up a place of business in India where RBI and AD Category Bank has got special powers.

For more details on setting up a Project Office in India, contact Legal Window now.