A branch office in India is like a business outpost created by a foreign company to do business there. It can be helpful for the foreign company to enter the Indian market. But sometimes, for different reasons, the company may decide to close it down.
To set up a branch office in India, the foreign company must meet specific requirements and follow the legal rules. They need to give certain documents and get approval from the Reserve Bank of India (RBI) and the Ministry of Corporate Affairs (MCA). If you want to learn more about how to set up a branch office in India, you can check out our article "Step-by-Step Process of Establishing a Branch Office in India."
This guide explains the important steps and things to think about when shutting down a branch office in India.
Understand the Branch Office in India and its Validity Period:
A branch office's initial validity period in India is typically 3 years. But if the foreign company plans to keep doing business through the branch office after those first three years, they can renew the registration.
To renew, the company needs to provide the required documents and meet any other rules set by the Reserve Bank of India (RBI), which oversees the activities of foreign companies in India.
The process to shut down the Branch office in India:
Certificate of completion from the Ministry of Corporate Affairs (MCA) :
To get a Certificate of Completion from the Ministry of Corporate Affairs (MCA) for closing the branch office, you need to follow these steps:
- Form Submission: Fill out the necessary form and submit it to the Ministry of Corporate Affairs (MCA). Make sure you use the correct form designed for requesting closure.
- Board Resolution: Get a board resolution from the parent company confirming the decision to close the Indian branch office. This resolution must be officially authorized and included as part of the closure application.
Bank Closure Application: The branch office must send a closure request to the bank for the Indian Branch office.
Audited Financials: The branch office is required to prepare financial statements and all other necessary reports up to the date of closure.
No Due Certificate: To obtain this certificate, you must submit a closure certificate, branch office financial statements, and other required reports to the income tax authorities.
Remittance of Surplus Funds: If there are extra funds in the bank account of the Indian Branch Office, they can be sent back to the parent company. However, this can only be done after the bank has applied to the Reserve Bank of India and received approval for closing the branch office.
Closure of Bank Account and Unique Identification Number: After repatriating the funds, you should request the bank to close the branch office's bank account.
Conclusion:
In conclusion, setting up a branch office in India can be a smart strategy for foreign companies looking to enter the Indian market. However, there are instances when closing the branch office becomes necessary for various reasons. Compliance with regulatory requirements is a crucial aspect of the closure process.
To ensure a smooth and lawful closure, it is advisable to collaborate with experienced professionals like KDP Accountants. These experts possess the expertise and experience needed to navigate complex closing procedures, ultimately delivering a seamless and legally compliant closure for international businesses operating in India.
The above note is subject to further study and clarifications. This note does not form an opinion from our end and before taking any decision based on above, it is recommended to consult our experts on the subject.Kamdar, Desai & Patel will not be liable for any damages (including, without limitation, damages for loss of business projects, or loss of profits) arising in contract, tort or otherwise from the use of or inability to use this article, or any of its contents, or from any action taken (or refrained from being taken) as a result of using this article or any such contents.
