Indian Subsidiary Company

Formation of a subsidiary is undoubtedly a smart and favored means for extending one’s business to foreign countries of choice. With a growth rate of more than 7 %, India is considered to be the most preferred destination for business. While operation from India, one can have access to 1.3 billion population with the world's most skilled manpower.

A subsidiary is an entity registered in a foreign nation. For setting up a subsidiary, the parent company must own at least 50% of the subsidiary. When the holding company owns 100% of the subsidiary then the subsidiary is known as a wholly-owned subsidiary of the parent company.

A subsidiary is a partially or even a wholly-owned company by another large corporation. This parent corporation must have its headquarters in another country. A subsidiary works as per the laws of the country in which it is incorporated.

The parent company, however, has to carry the financials of the foreign subsidiary on its books. The foreign subsidiary has to obey the laws of the country they are operating in.

For example, IBM India private limited is a subsidiary of IBM.

A foreign company can create an Indian subsidiary with the following company structure:

• Private limited company: - This company structure is not open to the public offering but enjoys other benefits over Public Company given by the Companies Act, 2013.
• Public limited company: - This company structure is where the public offering is possible but required to comply with few more rules and regulations as compared to Pvt. Ltd as specified by the Companies Act, 2013.
• LLP: - This company structure is where the liabilities of partners are limited.

• FDI: - 100% Foreign Direct Investment is allowed in many of the sectors without any Government approval
• Easy Transferability of Shares to any other person
• Access to huge Indian market
• Maximum chances to have ROI more than average 7%
• Separate Legal Entity to function with and to avail various Govt. Benefits
• Uninterrupted existence
• The subsidiary can acquire, own, enjoy and alienate, property in its own name

Liabilities of Indian Subsidiary Company

Subsidiary requires to file annual return with the Income Tax Department and Annual account audit by a CA is mandatory

Step 1: Obtain DSC (Digital Signature Certificate)

The initial step toward Foreign Subsidiary Company Registration in India is to applying for DIN (Director’s Identification Number) and DSC (Digital Signature) of the Directors. Following documents are required in order to obtaining the DSC and DIN:

• Photo ID Proof of Business Owner: Aadhar card | Arms License | Department Id | Driving License | Freedom
• Address Proof: Aadhar card | Arms License | Department ID | Driving License | Freedom Fighter ID Card | Pan Card | Passbook | Passport | Ration Card | Voter id card
• Proof of Possession of Premises: Sale deed | Rent agreement | Electricity Bill, etc.
• Photo: Passport size photograph

Note: Documents for non-residents and foreign citizens shall be notarized by the competent authority.

Step 2: Name Application Approval:

• One of the most important steps is to choose a unique and available name for the proposed Company.

Step 3: Name Application Approval:

• It is the final step for Foreign Subsidiary Company Registration Process. This requires filing of the Articles of Association of the Company and Memorandum along with several other documents by the proposed directors and shareholders.
• After the Incorporation application is approved, the Registrar will issue a Certificate with a Corporate Identification Number (CIN). The TAN and PAN of the Company will be issued.

FEMA regulates the Foreign Investments in Indian Companies and the Reserve Bank of India (RBI). In case holding enterprise invests funds in the share capital of the Indian subsidiary, this has to be followed by RBI guidelines along with compliances under Companies Act 2013.

RBI Compliances:

• By the time of receipt of funds: Such transaction has to be reported to RBI in details, within 30 days of receiving funds from foreign investor(s).
• The share of the company should be allotted within 180 days from the date of receiving funds.
• On allotment of shares: On allotment of the shares, company has to report in specified form (FC-GPR) to the RBI, within 30 days from the time of issue of shares.