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Opening of a branch office

S. 2(9)-Opening of a branch office-Board Resolution "RESOLVED that the company's sales depot situated at ________, be and is hereby declared as a 'branch office' within the meaning of section 2(9) of the Companies Act, 1956 and not a 'sales depot' and Mr __________ be authorised to take all such actions as may be necessary for the establishment of this branch office." PRACTICE NOTES 1. Meaning of Branch Office.-Section 2(9)(a) defines 'branch office' in relation to a company to mean (i) any establishment described as a branch office by the company, or (ii) any establishment carrying on similar or identical activity in relation to the head office of a company, or (iii) any establishment engaged in any production, processing or manufacture. It also says that this does not include any establishment specified in any order made by the Central Government under section 8.

2. Declaration of an establishment as branch office.-The Board may, by passing a resolution, describe any establishment other than the registered office or have any establishment which may be prevented by the Central Government under section 8 from being declared as the branch office not to be a branch office. Declaring any establishment of a company to be a branch office can be done by passing a Board Resolution but declaring any establishment not to be a branch can be done only under the order of the Central Government under section 8.

3. Advantage of declaring an establishment as branch office.Considering the purport of sub-clauses (a), (b) and (c) of clause (9) of section 2, any factory located in any town or village, any establishment carrying on either the same or substantially the same activity as that carried on by the head office of the company may be treated as a 'branch office'.

There is a definite advantage of declaring an establishment not covered by the definition contained in sub-clauses (b) and (c) of the section to be a branch office because in the case of a branch office, only summarised quarterly returns or returns at shorter intervals may be sent to the registered office pursuant to the provisions of section 209(2) of the Companies Act. Pursuant to section 228, the audit of the accounts of a branch office need not be done by the company's Auditor, but may be done by another qualified Auditor appointed by the company in a General Meeting. If the branch office is situated outside India, then the accounts of such branch office may be audited either by the company's Auditor or by the other person appointed in a General Meeting to be a branch Auditor or by an Accountant duly qualified to act as an Auditor of the branch office in accordance with the laws of that other country.

4. Exemption from Branch Audit.-Under the provisions of section 228(4) a company may be entitled to exemption from the audit of a branch office under the Companies (Branch Audit Exemption) Rules, 1961, either automatically or by obtaining Central Government's approval by making an application in the form prescribed under the said Rules.

5. Power of Central Government to declare an establishment not to be branch office.-To prevent the abuse of the aforesaid provisions, section 8 gives power to the Central Government to declare by order an establishment not to be a branch office, so that the concessions granted under sections 209(2), 228 or 229 to a 'Branch Office' are not available in every case.

Establishment of a new branch S. 2(9)-Establishment of a new branch-Board Resolution WHEREAS the company has been engaged in business of heavy engineering consisting of a forgeshop and graded steel casting foundry since July, 2000, and have so far concentrated mainly on the western region. AND WHEREAS the company has now assessed that substantial demand of the company's products comes mainly from the south and central region of the country.

AND WHEREAS there is no sophisticated unit producing such products in any region which may cater to the needs of the south and central region of the country.

AND WHEREAS the contemplated region is in close proximity to the sources of raw materials and cheap labour from the eastern and the southern regions. AND WHEREAS the cost of freight on procurement of raw materials and cost of freight on distribution of the finished products to such south and central market areas will be most economical, compared to cost of distribution from the existing manufacturing unit of the company at Thana.

AND WHEREAS expert technical consultant has completely studied the technical and feasibility of setting up a new factory at such site as per the report of such consultant which is hereby tabled and it appears from such report that the recommendations made therein are quite logical and economical.

AND WHEREAS the company by making an application under the Industries (Development and Regulation) Act, 1951, have obtained necessary licence for the establishment of a factory at _________ (near Bangalore) with a capacity of 10,000 tones per year.

NOW THEREFORE, IT IS-"RESOLVED that the company may take immediate action for the establishment of manufacturing unit at __________ (near Bangalore), and that the project division of the company be advised to complete all technical and mechanical drawings forthwith and place orders for the construction and fabrication of the workshop buildings and equipments for the setting up of the manufacturing facilities as licensed for a capital outlay of Rs. 320 lakhs and to do all such things as may be deemed necessary and incidental to the establishment of a manufacturing unit in the village __________ in the vicinity of the Bangalore city in the State of Karnataka and for the purpose of setting up the factory, the Managing Director of the company be

and is hereby authorised and directed to initiate immediately negotiation to buy a suitable plot of land near about the said location, and submit his recommendation to the Board of Directors for the latter to consider the suitability of the proposed purchase of land, terms and conditions of such purchase and the consideration of such plot of land.

RESOLVED FURTHER that the company prefer a land on outright purchase basis as, lease-hold property will not be suitable, for the company.

RESOLVED FURTHER that the Managing Director and Mr. PKW a director of the company be entrusted with the overall responsibility and authority of implementation and completion of the project preferably within the amount budgeted therefor, and that Mr. PKW be and is hereby advised to submit his progress report to the Board of Directors beginning with negotiation for the purchase of land to the completion of the setting up of the factory, plant and machinery."


1. Place of manufacture treated as Branch Office.-Pursuant to the provisions of section 2(9)(b), any establishment carrying on either the same or substantially the same activity as that carried on by the head office of the company, shall be termed as a branch of the company.

It is construed that under the definition of a branch, as covered by the aforesaid provisions, a factory or manufacturing facility located in any town or village, other than the place where the registered office is situated will be identified as a 'branch office'.

2. Part of Head Office.-If an establishment is not a branch office of the company, it will form part of the head office and will be dealt with as such for audit and other purposes [Letter No. 8/16(1)/61-PR, dated 9-5-1961].

Establishment of company not treated as branch office

S. 2(9) read with S. 8-Establishment of company not treated as branch office-Board Resolution

"RESOLVED that the sales office of the company situated at 124 Panchkuian Road, New Delhi, which performs the same activity as the head office of the company situated at 123 Panchukuian Road, New Delhi be not treated as the branch office of the company and that the order of the Central Government issued vide letter No . ________ dated _________ be and is hereby noted."


1. Branch Office-meaning.-An office is different from a shop of the company and a branch office must at least possess the character of an office of the company. Eastern Distillary Sugar Factory v. Municipal Council, (1933) 3 Corn Cases 310, 313 Mad.

2. Head office and branch office.-Section 8 empowers the Central Government to declare that an office shall not be treated as a branch office. The term 'head office', though it may be the registered office, need not necessarily be so. It is usually the place where the substantial business of the company is carried and its negotiations conducted.

3. Audit.-An establishment which is not branch office of a company will form part of the head office for audit purposes. See letter No. 8/16(1)/61-PR, dated 9-5-1961.

4. Application to Central Government.-For making the application to the Central Government, necessary authorisation should be obtained from the Board. There is no prescribed form of the said application to be made to the Central Government and therefore, application should be made on a plain paper giving full details and adequate justification for the order prayed for

declaring the branch office not to be treated as a branch office. Application fee should be accompanied by way of treasury challan or demand draft as required by Companies (Fees on Applications) Rules, 1999.

5. Limitation.-Central Government will not declare the branch office as part of the head office if the company itself has already declared it as a branch office.

6. Foreign branch is also a branch office.-Anything done by a company's branch office outside India cannot be said to be done by foreign concern and such a branch office is a part and parcel of the company's life and anything done by it will be deemed to be done by the company itself. Union of India v. G.A. Randarian Ltd., (1992) 75 Com Cases 486 (Cal).

NOTE: Any resolution approved by unanimous written consent in lieu of holding a meeting must be signed by each Director and kept with the Corporations records. Otherwise, the text of the resolution is often included in the minutes of the meeting at which the resolution was approved: BOARD OF DIRECTORS RESOLUTIONTO OPEN BANK ACCOUNT FOR Upon a motion duly made, seconded, and unanimously carried, it was adopted that <Enter Resolution Details> RESOLVED, that the Treasurer, <Treasurers Name>, be authorized and directed to open a bank account for the Corporation with <Name of Bank>, in the City of <City>, which hereby isauthorized to honor the deposits of the Corporation, and checks drawn against such

depositssigned by <Name of Officer(s)>, as long as there funds in the account. The undersigned, <Secretarys Name>, certifies that he/she is the duly elected Secretary of thisCorporation, and that the above is a true and correct copy of the resolution that was duly adoptedat a meeting of the Board of Directors, which was held in accordance with State law and theBylaws of the Corporation.