April 2024

Foreign companies incorporating private limited company for executing a limited period contract in India and face lots of legal compliances from starting to closing of the company which wastes lots of time and recourses of the company. In order to make entry and exit easy for a foreign company who wants to execute a project in India, RBI has made a concept of Project office registration by which the company can open project office in India for a particular project with the approval of RBI and ROC and can close the project office after completion of the project. ‘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. Project Office Registration A foreign company can establish a project office in India either on a temporary basis or a permanent project office, provided the foreign company has been awarded a project to be executed by them in India from the government or private sector. Registration of Project Office with RBI & ROC must be completed before it starts operating. There are certain conditions which need to be fulfilled before an application is moved for Project Office Registration. To register a project office an application is made with the Category 1 AD Bank with a complete set of documents including the copy of the project agreement and an undertaking that the project shall be funded with inward remittance from abroad or through an arrangement with the bilateral or multilateral international finance agency. After approval of the application by the RBI, the project office needs to be registered with the ROC and local police within 30 days of such approval. Eligibility for opening a project office 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. Explanation: For the purpose of this Regulation, ‘a bilateral or multilateral International Financing Agency’ means the World Bank or the International Monetary Fund or similar other body. “Public Financial Institution” is a public financial institution as defined in Section 4A of the Companies Act, 1956. A person from any country other than Pakistan who has been awarded a contract for a project by a government authority/ Public Sector Undertaking may open a bank account with an Authorised Dealer Category-I bank without any prior approval from the Reserve Bank. ‘Foreign company’ means a body corporate incorporated outside India and includes a firm or other association of individuals. Application to AD category-I Bank for opening of Project Office A person resident outside India desiring to establish a branch office or a liaison office or a project office or any other place of business in India shall submit an application in Form FNC to an Authorised Dealer Category-I bank Bank 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. Information and Documents required along with application Name and address of applicant along with registration and contact details Details of capital and free reserves as per last audited balance sheet Description of the activities of the applicant Value of goods imported or exported form/to India Details of bankers in home country For Project-Date of award, Awarding authority, amount of contract, Tenure of project office, Nature of project, Address of project office. Copy of the Certificate of Incorporation / Registration; Memorandum of Association 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. Power of Attorney in favour of signatory of Form FNC in case the Head of the overseas entity is not signing the Form FNC. Additional information and documents also required if application falls under regulation 5 Prior approval of RBI required in below cases (Regulation 5) 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

A Liaison Office (LO) functions as a place in India that represents a foreign company, primarily to understand and explore the general business environment, conduct market research for the products of the parent company, and provide and seek information from potential customers or vendors. A liaison office can be set up for representing the parent company or group companies in India, promoting export or import from or to India, promoting technical or financial collaborations between parent or group companies and companies in India, and acting as a communication channel between the parent company and Indian companies. A liaison office of the foreign company cannot engage in any commercial activities, and the parent company shall meet all its expenses. However, if it generates any income by conducting activities that constitute a business connection with the parent company, such income will be taxed under the Income Tax Act of 1961. Since a liaison office is not considered a separate entity from its parent foreign company, the taxes imposed are the same as those on a foreign company. As of now, the tax on the profit of the foreign company is charged at a rate of 40% of the total income generated. Establishment of Liaison Office in India by Foreign Entities Liaison Office/ Representative office : Liaison office/ Representative office  acts a channel of communication /facilitator of trade between the foreign parent company and the market in India. It promote import/export and also facilitate collaborations between parent company and companies in India. Permissible Activities:  A Liaison Office can undertake the following activities in India:  i.   Representing in India the parent company / group companies.  ii.   Promoting export / import from / to India.  iii.   Collecting market information and providing information about the products to Indian customers  iv.  Promoting technical/financial collaborations between parent/group Companies and companies in India.  v.  Acting as a communication channel between the parent company and parties in India Establishment of Liaison Office: Liaison Office can be established in India with the permission of Reserve Bank of India (RBI). Permission is initially granted for a period of 3 years and may be extended from time to time. Application in Form FNC is made to obtain permission from the Reserve Bank under provisions of FEMA 1999. Permission can be given under two routes:  Reserve Bank Rout- Where 100 per cent Foreign Direct Investment (FDI) is permissible under the automatic route, application is considered under this route.  Government Route- Where 100 per cent FDI is not permissible under the automatic route and applications from Non – Government Organizations / Non – Profit Organisations / Government Bodies / Departments are considered by the Reserve Bank in consultation with the Ministry of Finance, Government of India. Eligibility Criteria: A profit making track record during the immediately preceding three financial years in the home country. Net worth not less than USD 50,000 or its equivalent (Net worth means total of paid-up capital and free reserves less intangible assets as per the latest audited Balance Sheet or Account Statement certified by a Certified Public Account ant or any Registered Accounts Practitioner by whatever name) Applicants who do not satisfy the eligibility criteria and are subsidiaries of other Companies can submit a Letter of Comfort from their parent company in the prescribed format subject to the condition that the parent company satisfies the eligibility criteria as prescribed above. Other Conditions- After receiving the permission for setting up of Liaison Office, Designated AD Category- I Bank will be informed as to the date on which the Liaison Office has been established. Documents required: The following documents are required to open a branch office in India:  Ø Request letter from the principal officer of the Parent company to RBI  Ø Letter of authority from the parent company in favor of Local Representative  Ø Resolution from parent company for setting up liaison office in India.  Ø English version of the Certificate of Incorporation (attested by Indian Embassy/ Notary Public in the Country of Registration) or  Ø English version of Memorandum & Articles of Association (attested by Indian Embassy / Notary Public in the Country of Registration)  Ø Audited Balance Sheet of the applicant entity duly translated and notarized for the last five years  Ø Bankers’ Report from the applicant’s banker in the host country / country of registration  Ø Latest identity and address proof of all the Directors duly authenticated Ø List of Directors/ Secretaries of parent company Process for Liaison office Registration in India STEP 1 – Application for Digital Signature of Authorised Signatory-The process of Liaison Office registration begins with application for Digital Signature Certificate. A digital signature is the equivalent of physical signature under the Information Technology Act. As per new guidelines, all applications to the Registrar of Companies are filed in digital format and are therefore required to be authenticated using a digital signature of the authorized signatory. STEP 2 – Filing Application for AD Bank’s approval- After the authorized representative or signatory has obtained a Digital Signature Certificate, the next step is to seek approval for opening a liaison office. For opening a liaison office, approval can be sought from the AD Category-I Bank itself if 100% FDI is allowed in the sector to which it belongs. For this, the concerned foreign company will have to submit Form-FNC to the AD Category-I Bank (AD). We are networked with many banks in India, which operate as an AD Category-I Bank for foreign companies. Contact us, (direct to the form) if you need our assistance. STEP 3 – Verification of KYC from Banker of Parent Company- After the FNC Form is filed with the AD Bank, it sends a request for verification of documents filed with the form to the banker of the foreign company in its country of origin. This process is also known as swift-based verification. Only after the documents are verified by the banker, the AD bank will be able to grant approval for setting up a liaison office. STEP 4 – Approval of RBI for Liaison Office Registration in India- As mentioned before, liaison

Appreciation is an increase in the value of an asset over time. The term is widely used in several disciplines, including economics, finance, and accounting. In accounting, appreciation refers to the positive adjustment made to the initially booked value of an asset. Moreover, accountants determined additional criteria to define the concept: The new value of an asset is higher than its depreciable cost. The value of an asset increases due to some market or economic conditions. The increase in the value of an asset does not result from improving or adding to the asset. What Is Appreciation? Appreciation, in general terms, is an increase in the value of an asset over time. The increase can occur for a number of reasons, including increased demand or weakening supply, or as a result of changes in inflation or interest rates. This is the opposite of depreciation, which is a decrease in value over time. Appreciation can be used to refer to an increase in any type of asset, such as a stock, bond, currency, or real estate. For example, the term capital appreciation refers to an increase in the value of financial assets such as stocks, which can occur for reasons such as improved financial performance of the company. Just because the value of an asset appreciates does not necessarily mean its owner realizes the increase. If the owner revalues the asset at its higher price on their financial statements, this represents a realization of the increase. Another type of appreciation is currency appreciation. The value of a country’s currency can appreciate or depreciate over time in relation to other currencies. How to Calculate the Appreciation Rate The appreciation rate is virtually the same as the compound annual growth rate (CAGR). Thus, you take the ending value, divide by the beginning value, then take that result to 1 dividend by the number of holding periods (e.g. years). Finally, you subtract one from the result. However, in order to calculate the appreciation rate that means you need to know the initial value of the investment and the future value. You also need to know how long the asset will appreciate. Appreciation vs. Depreciation Appreciation is also used in accounting when referring to an upward adjustment of the value of an asset held on a company’s accounting books. The most common adjustment on the value of an asset in accounting is usually a downward one, known as depreciation. Certain assets are given to appreciation, while other assets tend to depreciate over time. As a general rule, assets that have a finite useful life depreciate rather than appreciate. Depreciation is typically done as the asset loses economic value through use, such as a piece of machinery being used over its useful life. While appreciation of assets in accounting is less frequent, assets such as trademarks may see an upward value revision due to increased brand recognition. Real estate, stocks, and precious metals represent assets purchased with the expectation that they will be worth more in the future than at the time of purchase. By contrast, automobiles, computers, and physical equipment gradually decline in value as they progress through their useful lives. FAQs What Is an Appreciating Asset? An appreciating asset is any asset which value is increasing. For example, appreciating assets can be real estate, stocks, bonds, and currency. What Is Appreciation Rate? Appreciation rate is another word for growth rate. The appreciation rate is the rate at which an asset’s value grows. What Is a Good Home Appreciation Rate? A good appreciation rate is relative to the asset and risk involved. What might be a good appreciation rate for real estate is different than what is a good appreciation rate for a certain currency given the risk involved. 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