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L.B. Singhal
Director General


EPCES CIRCULAR NO. 33 DATED 19.1.04

Sub : Permission to establish branch offices/Units in Special Economic Zones

RBI has issued A.P. (DIR Series) Circular No. 58 dated 16-1-2004. As per
this Circular, RBI has granted general permission to foreign companies to
establish branch office/units in Special Economic Zones to undertake
manufacturing and service activities. This permission has been granted
subject to the following conditions:-

i) Such units are functioning in those sectors where 100% FDI
is permitted.
ii) Such units comply with part XI of the Companies Act (Section
592 to 602).
iii) Such units function on a stand-alone basis.

Circular also prescribe guidelines for winding-up of business for such
branches/units. A copy of this Circular is enclosed along with.

This is for your information please.

_____________________________________

RESERVE BANK OF INDIA
EXCHANGE CONTROL DEPARTMENT
CENTRAL OFFICE
MUMBAI-400001

January 16 , 2004
RBI/2004/17/

A.P (DIR Series) Circular No.58

To
All Authorised Dealers in Foreign Exchange
Madam / Sirs,

Establishment of Branch Offices/Units in Special Economic Zones

Attention of Authorised Dealers is invited to A. P. (DIR Series) Circulars
Nos. 28 dated March 30, 2001  dated April 1, 2003 and 29 dated October 18,
2003, extending various facilities to units in Special Economic Zones.

2. It has been decided to grant General Permission to foreign companies
to establish Branch Offices/Units in Special Economic Zones to undertake
manufacturing and service activities, subject to the following conditions:
i. such units are functioning in those sectors where 100% FDI is
permitted,
ii. such units comply with part XI of the Companies Act (Section 592 to
602),
iii. such units function on a stand-alone basis,
iv. in the event of winding-up of business and for remittance of
winding-up proceeds, the branch/unit shall approach an Authorised Dealer
with the following documents prescribed under Regulation 6 (1) (iii) of
Notification No. FEMA 13/2000-RB dated 3rd May 2000, viz.

* Auditor's certificate,-

i) Indicating the manner in which the remittable amount has been arrived and
supported by a statement of assets and liabilities of the applicant, and
indicating the manner of disposal of assets;

ii) Confirming that all liabilities in India including arrears of gratuity
and other benefits to employees etc. of the branch/office have been either
fully met or adequately provided for;

iii) Confirming that no income accruing from sources outside India
(including proceeds of exports) has remained unrepatriated to India;

* No-objection or Tax clearance certificate from Income-Tax authority
for the remittance; and

* Confirmation from the applicant that no legal proceedings in any
Court in India are pending and there is no legal impediment to the
remittance.

"Stand alone basis" means such branch offices would be isolated and
restricted to the Special Economic Zone alone and no business
activity/transaction will be allowed outside the Special Economic Zones in
India, which includes branches/subsidiaries of its parent office in India.

3. Necessary amendments to the Foreign Exchange Management (Establishment in
India of Branch or Office or other Place of Business) Regulations, 2000
notified vide Notification No.FEMA.22/2000-RB dated May 3, 2000, have been
issued vide Notification No. FEMA 102/2003-RB dated October 3, 2003 (copy
enclosed).

4. Authorised Dealers may bring the contents of this Circular to the notice
of their constituents concerned.

5. The directions contained in this circular have been issued under Sections
10 (4) and 11 (1) of the Foreign Exchange Management Act 1999 (42 of 1999).


Yours faithfully,
 
Grace Koshie
Chief General Manager

Encl : As above

RESERVE BANK OF INDIA
EXCHANGE CONTROL DEPARTMENT
CENTRAL OFFICE
MUMBAI
3rd October 2003
Notification No. FEMA 102/2003-RB
Foreign Exchange Management (Establishment in India of branch or office or
other place of business) (Second Amendment) Regulations, 2003
In exercise of the powers conferred by sub-section (6) of Section 6 of the
Foreign Exchange Management Act, 1999 (42 of 1999), and in partial
modification of its Notification No. FEMA 22/2000-RB dated 3rd May 2000, the
Reserve Bank makes the following amendments in the Foreign Exchange
Management (Establishment in India of Branch or Office or other Place of
Business) Regulations, 2000, as amended from time to time namely:

Short title and commencement:-

1. (i) These Regulations may be called the Foreign Exchange Management
(Establishment in India of Branch or Office or other Place of Business)
(Second Amendment) Regulations, 2003.

(ii) They shall come into force from the date of their publication in the
Official Gazette of Government of India.

Amendment of the Regulations:

2. In the Foreign Exchange Management (Establishment in India of Office or
other Place of Business) Regulations 2000, in Regulation 2, the following
clause shall be inserted after (g) namely: -

(h) 'Stand alone basis' means such branch offices would be isolated and
restricted to the Special Economic Zone alone and no business activity/
transaction will be allowed outside the Special Economic Zones in India
which includes branches/subsidiaries of its parent office in India. The
existing clause (h) may be renumbered as (i).

3. In Regulation 3, the following proviso shall be added.

"Provided that no approval shall be necessary from RBI for a company to
establish a branch/unit in Special Economic Zones (SEZs) to undertake
manufacturing and service activities. Provided further that:

I. such units are functioning in those sectors where 100% FDI is permitted,
II. such units comply with part XI of the Companies Act (Section 592 to
602),
III. such units function on a stand-alone basis,
IV. in the event of winding-up of business and for remittance of winding-up
proceeds, the branch shall approach an Authorised Dealer in Foreign Exchange
with the documents except (A) listed in Regulation 6 (I) (iii) of
Notification No. FEMA 13/2000-RB dated 3rd May 2000 ."

(Usha Thorat)
Executive Director
G.S.R. 847(E) dated October 29, 2003