Business Structures Indian Subsidiary Startups

Indian Subsidiary Registration for Foreign Companies

Indian Subsidiary Registration for Foreign Companies is a simple online process through which you set up a Subsidiary of Foreign Company in India. Indian Subsidiary means a company registered under the provisions of Companies Act, 2013 having is wholly owned or partially owned by another company situated in a different country, under the laws of another country.

A wholly-owned subsidiary can be defined as a company whose entire share capital (i.e. 100% of shares) are held by another foreign company incorporated outside India. Such Foreign Company can be known as a foreign body corporate or a parent company.

Due to 100% holding of Foreign Company in the proposed, it has the right to appoint the board of directors in the subsidiary in order to maintain control in the proposed organization.

Subsidiaries can be a part of the same industry as the parent company or part of an entirely different industry. A company operating in more than one country may choose to operate a business through a wholly-owned subsidiary, but the Investment is subject to compliance of Foreign Direct Investment (FDI) Policy of Reserve Bank of India (RBI).

PURPOSE OF INDIAN SUBSIDIARY REGISTRATION FOR FOREIGN COMPANIES

Purpose of Indian Subsidiary Registration

The purpose of such an establishment is to carry on the same type of business in India which is already carried on by an existing Company in another Country.

There are a lot of reasons an existing Company decides to set up its subsidiary in another country (like India) and the reason is detailed in the subsequent paragraphs.

A foreign company can plan to set up its business in India in the following forms:

  • A Company can be incorporated in various forms like wholly-owned subsidiary (private limited company) or joint venture under the Companies Act, 2013
  • Establish or set up a Liaison Office
  • Establishment of Office in the form of a Branch or for a specific project of the foreign company which can undertake activities permitted under the Foreign Exchange Management Regulations, 2000.

We will discuss Indian Subsidiary Registration for foreign companies process in detail here for easy reference.

ADVANTAGES OF INDIAN SUBSIDIARY REGISTRATION

When a foreign company goes for Indian Subsidiary Registration, it brings following benefits to holding or parent company:

  • Foreign Subsidiary allows the holding company to expand and make an international presence of the Foreign Company in different markets.
  • The promotion of brand and business operations allows the Foreign Company to reach out to new customers and potential market places in the country.
  • As we all know that India is a country where one can find a cost-effective manufacturing and production industry, it allows a foreign company to set up and carry out business with less expenditure.
  • One of the biggest advantages of Indian Subsidiary Registration for foreign companies is that 100% foreign direct investment is allowed in many sectors under the automatic route (i.e. no special approval of RBI is required), which makes it easy and fast to set up a private limited company in India and to carry out the various types of business in India.
  • A wholly-owned subsidiary is regulated by under provisions of Companies Act 2013 and FEMA, 1999.
  • Various types of business activities are permitted to foreign companies whether in the service sector or marketing or production industry etc.
  • A wholly-owned subsidiary of a Foreign Company in India is treated as any other Indian company under the provisions of Income Tax Act, 2013 and is also allowed to avail benefits including all exemptions & deductions
  • A Foreign Company can make an investment under without approval of the Foreign Investment Promotion Board (FIPB) in the form of both share capital and Loan.
  • An Indian Subsidiary can set off its losses with the profits of its holding Company under the provisions of Income Tax Act, 1961.

MINIMUM REQUIREMENTS FOR INDIAN SUBSIDIARY REGISTRATION FOR FOREIGN COMPANIES

To get Indian Subsidiary Registration for foreign companies, below mentioned are the minimum requirements;

  • There is no minimum paid-up share Capital prescribed for the Foreign Subsidiary in India and can be low as Rs. 5, 000 (Rupees Five Thousand).
  • Minimum two Directors are required and both should be individuals. Also, at least one of them should be a resident of India who has stayed in India for a minimum period of 182 days in the previous calendar year.
  • It is mandatory for the Holding Company to appoint one representative of the Company who can be either Indian Resident or a Non- Resident Indian or a Foreign Resident through a Board Meeting duly conducted by the holding company.
  • Minimum two shareholders are required and one should be the Foreign Company who shall hold more than 50% shares in the proposed subsidiary. The condition of residential status is not applicable on the proposed shareholders of the Company and individuals can be the shareholders of the Company.
  • Details of place of business of the Company or the place where the registered office of the Subsidiary to be situated.

If you are a foreign company looking for expansion, then India might be one of those perfect destinations.

DOCUMENTS AND INFORMATION REQUIRED:

  1. Minimum two names of the proposed Foreign Subsidiary. There is an option to the proposed subsidiary to take the same name as of the holding company.
  2. The Main object of the proposed Indian Subsidiary. It can be the same object as of foreign holding company or it can be different from the Holding Company.
  3. Certificate of Incorporation or abstract from Registrar and memorandum & Articles of Association of the holding company or the Company proposes to hold more than 50% shares in the Subsidiary.
  4. Address proof of the Holding Company as a shareholder of the subsidiary.
  5. Name of Representative of the Foreign Company along with following set of documents:
    • Self-Attested copy of Passport of the representative
    • Address Proof such as Telephone bill, electricity bill, or bank account statement
    • Passport Size Photograph
  1. Name of the proposed Directors in the Foreign Subsidiary along with the following documents is required:
    • Proof of Identity (Self Attested PAN Card of Indian Nationals and for Foreign Nationals a Passport Copy)
    • Self-Attested Copy of Bank Statement, Driving License or any other utility bill (but it should not be not older than two months)
    • Permission letter issued to Foreigners, if residing in India.
    • Passport size photograph

The important point for Indian Subsidiary Registration for foreign companies is the fact that all the above documents for foreign Company & citizens and non-residents should be notarized by the public notary of their respective country and consularized or apostilled by the competent authority, as the case may be.

Note: if the documents are in any other language than English, in this case it is mandatory to get the documents translated from an official translator and to be notarized further.

STEP BY STEP PROCEDURE OF INDIAN SUBSIDIARY REGISTRATION FOR FOREIGN COMPANIES:

As Ministry of Corporate Affairs (MCA) has revised the incorporation process of all types of Company with effect from February 23rd, 2020, now the complete incorporation of a Foreign Subsidiary can be done with a new SPICe + and AGILE Pro forms.

Step by step procedure of Indian Subsidiary Registration

The entire process can be done in two ways which are as follows:

First: A separate application for name reservation can be filed and then post-approval of the name by MCA, a separate filing for the incorporation of the Company can be done in SPICe+ Form.

Second: A combined application can be filed for name reservation & incorporation along with various facilities provided by MCA in one application Form SPICe+ and AGILE PRO.

Following are the incorporation steps for Indian Subsidiary Registration:

  1. Acquiring Digital Signature Certificate (DSC):

The first step in the Indian Subsidiary Registration of Foreign Companies is to apply for the DSC (Digital Signature Certificate) of all the proposed Directors of the Company.

  1. Name Reservation with Ministry of Corporate Affairs (MCA)
    • An application for name reservation is applied in web form SPICe+ (Part-A) under the provisions of Companies Act, 2013 with MCA.
    • Maximum two name suggestions can be given for approval.
    • Post issuance of name approval certificate by MCA, a maximum period of 20 days is provided to file the complete incorporation of the Company.
  1. Application for Incorporation under New Web E-Form SPICe+ (PART- B) with MCA

The final step in the Indian Subsidiary Registration process is filing an application with MCA which contains the Memorandum of Association (MOA) and Articles of Association (AOA) of the Company digitally signed along with various other documents duly signed and executed by the proposed Directors and Shareholders.

List of Incorporation documents to be executed:Incorporation documents of Indian Subsidiary Registration

    • Subscriber Sheet of Articles of Association (AOA) duly signed by the representative of the holding foreign company
    • Subscriber Sheet of Memorandum of Association (MOA) duly signed by the representative of the holding foreign company
    • Declaration to be given by all the proposed Directors in Form DIR- 2
    • Legal Declaration by all the Directors of the Company
    • Board Resolution of the holding Company to appoint the representative
    • Authorization letter for bank account opening of the proposed subsidiary
    • Authorization letter for Employee Provident Fund (EPFO) & Employee State Insurance (ESIC) registration
    • Details & no. of employees of the proposed Indian subsidiary.

The important point for Indian Subsidiary Registration for foreign companies is the fact that all the above documents for foreign Company & citizens and non-residents should be notarized by the public notary of their respective country and the consularized or apostilled by the competent authority, as the case may be.

Note: if the documents are in any other language than English, in that case, it is mandatory to get the documents translated from an official translator and to be notarized further.

At last, application for incorporation shall be filed with MCA along with the application for PAN and TAN Allotment and registration under EPFO, ESIC, Opening of Bank Account and Professional Tax (in case of Maharashtra). Application for GSTIN may also be made using the same application form.

  1. There are two options available to the proposed subsidiary, either to file the details of the registered office of the Company along with the incorporation or to file separately within 30 days from the date of incorporation of the Subsidiary.

To file with incorporation, the following documents are required:

    • Rent Agreement (if rented)
    • No Objection Certificate (NOC) from the owner of the property
    • Latest Utility Bill (i.e. electricity bill/ water bill or any gas bill) as address proof of the registered office.
  1. Post-approval of the web e- form SPICe+ by MCA a Certificate of Incorporation (COI) will be issued and enables a company to start its business operations in India.
  2. Director Identification Number shall be allotted along with the COI of the Company.

FREQUENTLY ASKED QUESTIONS (FAQ’s)

 

FAQs for Indian Subsidiary Registration

  1. What is the difference between a wholly-owned subsidiary and a subsidiary of a Foreign Company?

A wholly-owned subsidiary is a Company in which 100% of the share capital is owned by a foreign company or a holding company.

The subsidiary of a Company means a Company whose more than 50% shareholding but not 100% is owned by a Foreign Company.

  1. Is Foreign Subsidiary in India is considered as Domestic Company?

Yes, a Foreign Subsidiary in India is considered as a Domestic Company since it regulates under the provisions of Companies Act, 2013 and the provisions of Income Tax Act, 1961 are applicable to such companies like any other Indian Company.

 

 

  1. Can two or more than two companies form a Subsidiary in India?

Yes, two or more than two companies can form a Foreign Subsidiary in India.

  1. Is it necessary for a representative or a proposed Director be physically present for the process?

No, it is not required for the proposed Director or the representative of the holding company to be physically present for any incorporation process.

  1. Is it necessary to have one resident Indian Director in the proposed subsidiary?

As per the rules and provisions of sub-section (3) of section 149 of the Companies Act, 2013, it is necessary to have one Indian Resident Director who has stayed in India for a total period of not less than 182 days in the previous calendar year. 

  1. Can a Director of a Foreign Holding Company become a Director in the proposed Indian Subsidiary?

Yes, a Director of a foreign holding Company can become a Director in the proposed Indian Subsidiary as per the provisions of Companies Act, 2013.

  1. Can I keep my registered office outside India?

No, as per the Companies Act, 2013, it is mandatory to be situated in India.

 

 

  1. Is it necessary to take an approval of Reserve Bank of India (RBI) to set up a Foreign Subsidiary?

No, it is not required to take approval from RBI for Indian Subsidiary Registration of foreign companies. Post incorporation compliances under FEMA, 1999 are required to be carried out.

  1. Can Foreign Nationals/ NRI’s become a Director in a Private Limited Company?

Yes, they can become a Director in a Private Limited Company.

  1. Is it mandatory to obtain a Digital Signature Certificate (DSC) by a representative of the holding company?

No, it is not mandatory for a representative of holding Company to obtain DSC as it is mandatory for the Directors of the proposed subsidiary to have a DSC.

Did you know? Once a Subsidiary of a Foreign Company is incorporated in India, there are certain annual compliances that need to be adhered to?

  1. Who can be the representative of the Holding Company or a company proposes to be the subscriber in subsidiary?

A representative can be a Director or an employee of the holding company.

  1. Are Foreign Residents required to visit India for registration of Company?

No, it is not mandatory for a Foreign Resident to visit India for Indian Subsidiary Registration

  1. What if my ID & Address proof is in a different language than English? What do I do?

If the documents are in a language other than English, then in such case documents are required to be translated by an official translator and the same is then to be notarized and apostilled or consularized (whichever case applicable).

  1. What do you mean by apostille and consularized?

APOSTILLE: It is done to verify that your document is legitimate and authentic so that it can be accepted in any other countries who is a member of the Hague Convention.

CONSURALIZED: It is done to authenticate any legal document by the consul office, by the consul signing and affixing a red ribbon to the document.

The documents are to be consularized in the case of countries which are not part of the Hague Convention.

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