Setting up a representative office in the UK: Key steps

By Richard McBride and Dominic Gilmore, TLT
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Setting up a representative office is a popular first step for Indian businesses looking to enter the UK market. Among a host of issues to bear in mind, one critical area relates to the planned business activities of the office and whether they will fall within the Financial Services and Markets Act 2000 (FSMA) and be subject to the regulatory authority of the Financial Conduct Authority (FCA), which regulates the UK’s financial services industry.

When thinking of a move into the UK, here are some important steps to consider:

Regulated activities

(1) Any person, including an individual, corporate entity or partnership, that carries out a regulated activity by way of business in the UK must be authorized by the FCA. It is a criminal offence to operate without the appropriate authorization and if caught it could mean up to two years in prison as well as possible costly fines. Also, contracts entered into in breach of this prohibition may be unenforceable.

(2) Businesses first need to consider whether the proposed representative office would be acting “by way of business” and if so, whether it would be doing so in the UK.

Richard McBride
Richard McBride

The FCA’s general criteria for determining whether an activity is being carried out by way of business include: (a) the degree of continuity; (b) the existence of a commercial element; (c) the scale of the activity; (d) the proportion that the activity bears in relation to non-regulated activities carried on by the same person. More specific guidance can be found in the FSMA (Carrying on Regulated Activities by Way of Business) Order 2001.

Identifying whether an activity is being carried out in the UK is normally straightforward, particularly if the activity is clearly being carried out by a representative office in the UK. Further consideration would be needed if any potentially regulated activities originate from the Indian organization.

(3) Businesses should consider whether the representative office will conduct regulated activities. The FSMA (Regulated Activities) Order 2001 (as amended) lists many activities which, if carried out in conjunction with specific investments, would be regulated activities. For example, arranging for a person to enter into an insurance contract would be a regulated activity, as would advising a person on the purchase of shares, and so would entering into a regulated mortgage contract as lender.

(4) If a regulated activity is to be carried out, the business should identify any exclusions that might be available. For example, making arrangements for a person to buy a bond would not be a regulated activity if the transaction is to be entered into with or through an FCA-authorized person, provided certain conditions are met.

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Richard McBride is a partner and Dominic Gilmore is an associate at TLT.

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20 Gresham Street

London, EC2V 7JE

United Kingdom

Tel: 0333 006 0300

Fax: 0333 006 0311

Email: Richard.McBride@TLTsolicitors.com

Dominic.Gilmore@TLTsolicitors.com

www.TLTsolicitors.com

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