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CS Executive · Economic, Commercial and Intellectual Property Laws · Foreign Direct Investments - Regulations and Policy

A foreign company, Altona GmbH, plans to open a liaison office in Pune. Which statement correctly reflects FEMA on establishing a branch, office or other place of business in India by a person resident outside India?

The Reserve Bank may, by regulation, prohibit, restrict or regulate the establishment in India of a branch, office or other place of business by a person resident outside India. FEMA is not silent here, so Altona's liaison office is subject to Reserve Bank regulation.

  1. AThe Reserve Bank may, by regulation, prohibit, restrict or regulate such establishmentCorrect
  2. BAny non-resident may do so freely, as the Act is silent on it
  3. COnly the Central Government may regulate it, and the Reserve Bank has no role
  4. DThe Act regulates only the foreign exchange used, not the establishment itself

Explanation

Section 6(6) lets the Reserve Bank, by regulation, prohibit, restrict or regulate establishment in India of a branch, office or other place of business by a person resident outside India for carrying on activity relating to it. The Act is therefore not silent, and the Reserve Bank, not only the Central Government, holds this power.

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