Indian Subsidiary Registration of Foreign Company

Registration Subsidiary of Foreign Company in India for Foreign Direct Investment. Benefits of Indian subsidiary, Required documents, Procedure for Registration and Legal Compliances.

What is a Indian Subsidiary of Foreign Company?

Registering Indian Subsidiary of a Foreign Company is to utilize the liberal Policy in India for Foreign Direct Investment. If the Foreign Company holds 100% shares of subsidiary, it is a company fully owned by a Foreign Company. It is a good option for a company which operates in more than one country and chooses to operate a business through a fully owned subsidiary in India, but the investment will be subject to FDI policies of India

As per Section 2(42) of Indian Companies Act 2013 "foreign company" means any company or body corporate incorporated outside India which -

(a) has a place of business in India whether by itself or through an agent, physically or through electronic mode; and

(b) conducts any business activity in India in any other manner.

As per Section 2(87) "subsidiary company" or "subsidiary", in relation to any other company (that is to say the holding company), means a company in which the holding company-
(i) controls the composition of the Board of Directors; or
(ii) exercises or controls more than one-half of the total share capital either at its own or together with one or more of its subsidiary companies:

Provided that such class or classes of holding companies as may be prescribed shall not have layers of subsidiaries beyond such numbers as may be prescribed.

The Process of registering Indian Subsidiary of Foreign Company, necessary documents and statutory compliances are explained below:

Benefits of Indian subsidiary of Foreign Company

Foreign Direct Investment (FDI)

100% FDI is allowed in India without any prior approval. However, in the business of Proprietorship, Partnership and LLP require prior Government approval for FDI.

Limited Liability

In a Company the liability of the members and the directors are strictly limited to their shares. Therefore no member or Director is responsible for any loss or financial distress if suffered by the company. The assets of personally held by Shareholders/Directors will not be at risk or not seized by any banks, creditors or government.

Perpetual Succession
The perpetual succession is continued existence of the company that means any changes in members such as death, bankruptcy, exit, transfer, etc. do not affect the existence of the company.

Opportunity for Expansion
The expansion of the business is comparatively higher as it is easy to raise the capital from any financial institutions, venture capitalist, and the investor. It has all the advantages of the Private Ltd Company, which gives more transparency.

Borrowing funds from Banks and Financial Institutions
The wholly-owned subsidiary company in India can borrow funds in the form of loans from the financial institutions.

Legal Status to Sue and sued
The Indian subsidiary company has the capacity to sue and can be sued. It has its own legal capacity being a legal person.

Freedom to acquire property in India

The foreign subsidiary company has an independent structure and hence, it is permitted them to buy properties in India.

Nature of Indian Subsidiary of Foreign Company

- No requirement of prior approval for the repatriation dividend for these companies

- Indian transfer pricing system regulation is applicable to the Indian subsidiary

- Equity, debt and other internal accruals are the available funding mechanisms.

- Income Tax Rate is lower than Foreign Company

- Parity treatment with other Indian Companies and same applicability of of all laws

- The dividend distribution tax is nil now as per the Union budget 2020.

Steps to Register Indian Subsidiary of Foreign Company

1. Complete Online Registration Form

2. Get Digital Signature Certificate (DSC) Registered for Directors

3. Get Director Identification Number (DIN) by filing Form

4. Apply for name approval from Registrar of Companies

5. File Memorandum, Articles of Association and other Documents with ROC

6. Issue of Certificate of Incorporation by the Registrar of Companies.

Requirements for Registration of Indian Subsidiary

Share Capital
No minimum capital required to form a Indian Subsidiary Company in India

DIN
Director Identification Number for all Directors

Directors
There should be Minimum two directors and atleast one should be a resident of India.

Shareholders
Minimum number of shareholders is 2. Individuals or entity or a combination of both.

Equity shares
The Parent Company must hold 50% of total equity share capital

Documents Required to Register Indian Subsidiary

To Register Indian Subsidiary the following documents are necessary:

- PAN card details of all directors and shareholders

- Address Proof of all directors and shareholders

- Identity Proof of all designated directors or partners and shareholders

such as Aadhaar Card, Driving License, Voter Id

- Passport and Photographs of directors and shareholders

- DIN or Directors Identification Number of designated directors or partners

- DSC or Digital Signature Certificate of designated directors or partners

- (MOA) Memorandum of Association and (AOA) Article of Association of the Company

- A No Objection Certificate (NOC) from the landlord for rented office

- Incorporation certificate issued by the foreign government

- Resolution from foreign company for opening the subsidiary company in India

with the name of authorised representative

- Residential proof of Registered office - telephone, water, gas, or electricity bill

Mandatory statutory Compliances of Indian Subsidiary

- Filing of Registrar of Companies Returns and other Forms

- Filing of Income Tax Return and Compliance with Income Tax Act, 1961

- Follow Guidelines of MCA, Ministry of Corporate Affairs

- Follow FEMA guidelines

- Filings with the RBI, Reserve Bank of India

- Filings with the SEBI, Securities and Exchange Board of India

- Compliance of Companies Act 2013

- Compliance of Income Tax Act 1962