Global economies have opened up, and India is leading the way in enabling businesses to "Make in India." Establishing a Liaison Office (LO), Project Office (PO), or Branch Office (BO) is the best choice for foreign businesses looking to conduct business and establish their presence in India. However, what happens if the businesses decide not to continue operating in India or if the goal of creating these offices is achieved?
Validity Period of Project Office in India
The Foreign Exchange Management Act and the rules and regulations issued under it apply to liaison and branch offices. It has a set duration of validity. The liaison office's validity lasts for three years on average. If necessary, it can be extended for an additional three years. When it comes to project offices, the duration of operation is determined by the ongoing nature of the project for which the office was established.
The Process followed in Closing Project Office
Notifying the Registrar of Office (ROC) and the AD Category-I Bank are two steps in the process of shutting the Project Office.
- Application for Bank of AD Category I - If the concerned applicant is eager to close the Project Office, they must apply to the relevant AD Category-I bank for closure of the Project Office and winding-up funds.
- The application and all required paperwork for the Project Office closure must be submitted together. Among them are:
- The Project Office closure can be established with the approval of the RBI or an AD Category-I bank.
- The following are attested to by the auditor's certificate: the process used to calculate the winding up proceeds, the asset and liability statement, and the asset disposal method before close the project office.
- Verification that all debts incurred in India have been settled, including unpaid gratuity and other employee benefits.
- Verification that any money received from sources outside of India has been returned to the country.
- Verification that the Project Office in India is not the subject of any ongoing legal actions.
- The application should be submitted along with all the necessary documents for closure of Project Office in India. These include:
- A report by the ROC regarding adherence to the 2013 Companies Act's provisions.
- any further documents that could be needed.
- The AD Category-I bank shall attest to the Project Office's compliance with all relevant provisions.
- The authorized individual must sign and execute each document. The documents must be properly notarized and apostille if they are completed and signed outside of India.
- The chosen AD Category-I bank shall submit a report to the RBI stating that the Project Office has received all necessary paperwork, reviewed it, and determined it to be in order.
- If necessary, the AD Category-I bank will send the RBI all the documents as well as any extra ones.
- The AD Category-I bank will shut down the Project Office and its bank accounts as soon as they determine everything is in order.
Application to the Registrar of Companies for closure of project office in India
The concerned applicant must also submit an application to the ROC for the closure of the Project Office if the Office is registered with them. It should, however, confirm that all annual compliances have been updated in the ROC's records prior to submitting such an application. The procedures to close the Project Office with the ROC are as follows:
- preparation of all the documentation, including board decisions, for the closure of Project Office in India.
- The authorized person must sign and execute each document for closing the project office in India. The documents must be properly notarized and apostille if they are completed and signed outside of India.
- For its closing the project office in India, the Project Office needs to submit the appropriate e-form to the ROC.
- The ROC will scrutinise the application along with other supporting documents.
Remittance of Winding Up Proceeds
- Together with the application for the Project Office closure, another one needs to be submitted for the winding-up proceeds to be remitted to the parent company. The proposal for the remittance of winding-up proceeds should only be considered for those organizations that have complied with the operational conditions. The remittance must satisfy the following conditions in order to be approved.
- It is necessary to receive a certificate from the statutory auditor that includes the following details
- Information on the assets that will be moved
- initial asset cost
- Depreciation up until this point
- recorded value
- Considering sales
- that the sales consideration does not surpass the book value and that the asset has not been revalued after it was first recognized.
- The Project Office ought to have received the assets through inbound remittance. In addition, there shouldn't be any intangible assets among the assets. Additionally, revenue expenses shouldn't be transferred under the winding-up/ closing the project office proceeds or capitalized.
- It is expected that all relevant taxes were paid.
- The bank account credits pertaining to these transactions ought to be regarded as authorized receipts for the purpose of remittance.
- After receiving copies of the sectoral regulators' clearance for the of of the Project Office in India, along with the necessary paperwork, the AD Category-I bank will permit the remittance of winding-up proceeds towards the project office closure
The project office that was established in India to carry out a specific assignment will formally close after the aforementioned processes are completed.