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Registration of Subsidiary Company

Subsidiary Company Registration in India

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Incorporation of Subsidiary Company Registration

Subsidiary Company RegistrationIndia is a growing market with a huge population that with the right business strategy can bring in a good sum of profit to the companies like Subsidiary Company Registration. This being a major factor gathers a ton of international attentions in terms of investment and holdings opportunities. With the new rules that encourage direct foreigners investment and NRI’s investments into the Indian market has made it a blooming practice.

This allows them to tap into the endless market and business culture Indian Sub continent brings to the table. The basic rule is that any citizen other than one who belongs to certain listed countries can own a business in India. This is entirely different from the concept of Branch office, as here the total business is acquired by buying in the shares of the company.

A subsidiary company is often referred to as a sister company, while the company that exercises control over it is known as the parent company or holding company. The parent company holds the authority to control the subsidiary company, either in part or entirely.

The process of Subsidiary Company Registration in India for an Indian subsidiary company is governed by the Companies Act of 2013. According to the Companies Act of 2013, a subsidiary company can be defined as a company in which a foreign corporate body or parent entity holds a minimum of 50% of the total share capital. In essence, the parent company exerts a significant influence and control over the subsidiary company.

The companies who are willing to start the subsidiary in India must do proper market research and also be aware of the liability and taxability status of the board. The Subsidiary Company Registration must at least contain one Indian member as the board director, and it must be linked with an existing Indian Address for the company to be eligible in India.

Table of Content

One Person Company Compliances

Advantages of Opening of foreign company subsidiary in India

Subsidiary Company Registration
  1. LIMITED LIABILITY – As the incorporation is represented as an Indian company the directors can enjoy the benefit of unpaid shares only for their specific shares and not for the mistake of others.
  2. CONTINUITY – The company can exist as long as it is legally taken apart or the board decides to dissolve the company. The company’s presence is not affected by the passing of the directors as such
  3. PROPERTY RIGHTS – The company can acquire and use properties under its name and this would be under the control of any of the shareholders and cannot be used for personal purpose.
  4. SHARES TRANSFERABILITY – The shares can be transferred easily between the shareholders and a single company can hold the 100% of the shares legally.
  5. FDI – Foreign Direct investments can be made without any prior government approval this acts as a easy to invest medium.
  6. CONTROL – The parent company gets to control all the activities of the company. As the members are also controlled in turn.

Documentation for Opening Subsidiary Company in India

Passport size Photograph

Copy of PAN Card

Copy of Electricity Bill

Sale Deed (if owned)

Copy of Aadhar Card

Address Proof

Copy of rent agreement (if rented)

NOC

OPC Compliance

Procedure for Incorporating a subsidiary company in India

  • Step-1: Acquire a Digital Signature Certificate (DSC)
  • Step-2: Director Identification Number (DIN)
  • Step-3: Name Reservation for the Company (SPICe+ Part A)
  • Step-4: Submission of Company Details (SPICe+ Part B)
  • Step-5: Preparation and Submission of Incorporation Forms (SPICe+ MOA and AOA)
  • Certificate of Incorporation

Requirements for Opening of foreign company subsidiary in India

  • The subsidiary is purely based out of the equity basis.
  • - Wholly owned company is different from a subsidiary company as it might or might not have the full 100% share status as such of a wholly owned company.
  • - At Least 50% of the Indian Company’s shares must be held in order to have the subsidiary status
  • - The members of the board can also be controlled to gain the power.
  • - At Least 2 directors must be presented provided one of the director must be an Residing Indian citizen.
  • - All the subsidiary companies fall under the same Provisions of companies Act 2013 and are treated as an indian company

Compliance Requirements for Indian Subsidiary Registration

To establish a legal and valid Indian subsidiary company, compliance with specific regulations is mandatory:

  1. Foreign Exchange Management Act (FEMA): – Foreign companies based in India must adhere to foreign exchange laws and regulations outlined in the Foreign Exchange Management Act, 1999.
  2. Companies Act, 2013: – All Indian subsidiary companies must comply with the Companies Act, 2013 provisions.
  3. Reserve Bank of India (RBI) Compliances: – : RBI imposes several foreign exchange management compliances on Indian subsidiary companies.
  4. Income Tax Act, 1961: – Indian subsidiaries must file income tax returns every year. The corporate tax rate in India is currently 25%.
  5. Annual Returns: – Companies are required to file annual returns with the MCA and the Registrar of Companies.
  6. SEBI (Listing Obligations and Disclosure Regulations): – If the subsidiary lists its securities on a stock exchange, it must comply with SEBI regulations.

Importance of incorporating a WoS in India

  1. Creation of Separate Legal Entity: –
    After registration, the WoS is a separate legal entity from its parent company and also liA wholly Owned Subsidiary (WoS) refers to an independent and separate legal entity or a corporation with 100% of its shares held by another corporation, termed as themits the liability of each shareholder or member up to the unpaid amount of shares.
  2. Strategic control by the parent company
  3. Global Goodwill:-
     The WoS can reap the benefits of the pre-established goodwill and brand image of a foreign company. 
  4. Expansion and diversification are made simpler for overseas companies.
  5. Hassle-free winding up is lucrative for companies without outstanding liabilities looking to exit the mark

Types of approval route for foreign subsidiary

  1. Investment under automatic route:
    In terms of the automatic route for the investment to happen there are no prior steps to be taken by the foreign resident, they can just straight up invest in the company but, after the equity is done for it to be valid the filings has to be done within the 30 days of investment by following the procedure of Reserve Bank of India (RBI).


  2. Investment Under Government route:
    In most cases automatic rules can be applied but for certain cases the involvement of the Foreign Direct Investment (FDI) rules involvement is required. Here the rules has to followed and only after which the equity can be bought.
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Process involved in registering a Pvt. Company Registration

  • DIN and DSC of all the Directors
  • Minimum 2 Directors
  • Minimum 2 shareholders
  • There should be some amount as paid up share capital
  • At-least one Indian resident Director out of two.
  • Registered office address in India

Process involved in registering a Pvt. Company Registration

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  • DIN and DSC of all the Directors
  • Minimum 2 Directors
  • Minimum 2 shareholders
  • There should be some amount as paid up share capital
  • At-least one Indian resident Director out of two.
  • Registered office address in India

Benefits of registering a Private Company

Branch Office Registration
  • Protection for shareholders in proper legal terms.
  • Open for funding from outside India.
  • Proper role segregation in terms of shareholders and directors.
  • Minimum two shareholders are enough where as in public limited registration a minimum of 7 shareholders are mandatory.
  • No need to disclose the financial reports unlike publicly registered corporations.
  • Various exemptions under provisions of Companies Act, 2013.

Mandatory Compliances of Private Company every year

  • Statutory audit by a chartered accountant
  • Annual filings to registrar of companies
  • Maintaining Minutes and statutory registers
  • Filing of ITR
  • Minimum number of board and general meetings as prescribed under the Act
  • Appointment of Auditor
FAQ

Frequently Asked Questions

A foreign company can set up a wholly owned subsidiary in India by investing in sectors where FDI is allowed as per the provisions of RBI/FEMA and Companies Act 2013.

The parent company can hold 100% of the shares, or at least two foreign nationals can be shareholders. An Indian resident shareholder is not mandatory.

A minimum of two directors is mandatory, with at least one director being an Indian resident. Nominee directorship services can be provided if necessary.

The MCA has notified the Companies (Amendment) Act 2015, removing the minimum capital level required to form a company. Therefore, there are no minimum capital requirements to form a company and the law stipulates that the articles of incorporation may set the minimum share capital.

No, it is not possible as by law there must be at least one Indian Director who should be residing in India and the proofs must be produced for the same.

The following documents are required:
-Identity Proof
- Copy of passport
-Additional Identity Proof
- Driving Licence/National ID Card
-Address Proof
- Telephone bill/ Electricity bill/Bank statement/Any utility bill, not older than 2 months.

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