As a foreign company, expanding your business to India can be a smart move. With its large and growing economy, India offers a wealth of opportunities for businesses of all sizes. One way to establish presence in India is by subsidiary incorporation in India.
A subsidiary company is a separate legal entity that is owned by a parent company. It operates independently, but is still controlled by the parent company. This allows the parent company to have a presence in India without having to set up a new company from scratch.
The process of subsidiary incorporation in India can be complex, but with the right guidance, it can be a smooth and successful endeavor.
At VenturEasy, we have a team of experts who specialize in helping foreign companies navigate the Indian business landscape. Our services include assistance with Incorporation of foreign subsidiary in india, compliance with Indian laws and regulations, and guidance on setting up a local office and bank account opening.
Meaning – Subsidiary company:
A subsidiary is a company with voting stock (that is more than 50%) controlled by another company, usually referred to as the parent company or the holding company. In cases where a foreign company owns a subsidiary, the subsidiary must follow the laws of the country where it is incorporated and operates. Hence, if a subsidiary company is incorporated in India, then it has to follow the applicable laws in India.
How to incorporate a foreign subsidiary in India?
Selecting the right type of Company:
According to FEMA guidelines, Foreign Direct Investment (FDI) is not allowed in the case of Proprietorships, Partnership Firms, and One Person Companies.
Hence, the easiest and fastest way to set up a business in India by NRIs and foreign nationals/entities is through the incorporation of a Private Limited Company or a Limited Liability Partnership, making it the preferred structure for subsidiary incorporation in India.
Minimum requirements:
- Capital: There is no minimum limit of capital required for subsidiary incorporation in India.
- Directors: Minimum two directors are required to incorporate a Private Company in India. Both should be individuals and at-least one of whom should be a resident of India. (A resident of India is a person who has stayed in India for at-least 182 days in the current FY).
- Shareholders: Companies Act, 2013 requires that a Private Limited Company have a minimum of two shareholders. There is no condition for residential status of shareholders. Shareholders can be either individuals or entities or a combination of both.
Documents Required for Subsidiary Incorporation in India
- For Indian Resident Director: Photograph, Copy of PAN Card, Copy of Aadhar Card, Copy of Voter ID/Driving License , Bank Statement/Electricity/Telephone bill in their address – not older than 2 months.
- For Foreign Directors/Shareholders and Authorized Representative of Foreign Company Photograph, Copy of Passport, Copy of Driving License, Bank Statement/Electricity/Telephone bill in the country of residence – not older than two months.
- For Indian Company: Address Proof of Proposed Place of Business (Rental Agreement of Registered Office), Utility Bill (Electricity, Telephone etc.) for the premises – not older than 2 months, NOC for use of premises as Registered Office.
Procedure of Subsidiary Incorporation in India:
Step 1. Name Approval
The first step towards incorporation of foreign subsidiary in India is reserving the Company name. In case of a subsidiary company, it is permissible to use the same name as that of the parent company with the addition of the word “India” to itThe name is approved, provided it is not identical to existing entities or considered undesirable by law.
Step 2. Procurement of DSC
In parallel, the Digital Signature Certificate (DSC) will be procured for the proposed directors of the Company. This DSC is required to submit the Incorporation application digitally and will also be used for future compliance reporting.
Step 3. Incorporation Application
This is the final step to the company registration in India. It requires filing of the Memorandum and Articles of Association of the Company along with various other documents duly executed by the proposed directors and shareholders to the Ministry of Corporate Affairs.
List of Incorporation documents to be executed:
- Articles of Association
- Memorandum of Association
- Declaration by Directors in form DIR 2
- Declaration of Directors/Shareholders and Authorized Representative in Form INC 9
- PAN Undertaking from foreign company and directors
Execution of subsidiary incorporation documents by foreign nationals or NRI’s:
If the documents are signed outside India, then the same have to be notarized by a Public notary of the residence country and consularized or apostilled by the competent authority, as the case may be.
If the documents are signed in India, then copy of Visa and stamped passport, proving his/her presence in India at the time of signing is required.
If the subscriber is a foreign entity, then the Incorporation documents should be signed by the representative of the foreign entity. An Authorization Letter duly stating the name of the Authorized Person and the number of shares subscribed should be notarized, consularized or apostilled, as the case may be in the home country of the subscriber company
Once the Incorporation application is approved, the Registrar would issue a Certificate with a Corporate Identification Number (CIN). The PAN, TAN and Labour law registration number of the Company would also be allotted simultaneously.
Treatment of Share Capital invested by the Holding Company and required compliances:
Foreign Investments in Indian Companies are regulated by FEMA Guidelines and the Reserve Bank of India (RBI). Whenever the holding company invests funds in the share capital of the Indian subsidiary, it has to follow RBI guidelines along with compliances under Companies Act 2013.
Post Subsidiary Incorporation Compliance with the RBI:
On receipt of remittance, the Indian subsidiary would need to register with the RBI and report the remittance received as Foreign Direct Investment under the relevant sector in Form FC-GPR (Foreign Currency Gross Provisional. The following documents would also be required to support the reporting:
- Certificate from the Company Secretary confirming compliance with Companies Act and FDI policy.
- Board resolution approving allotment of shares
- KYC report from the remitting bank
- FIRC (Foreign Inward Remittance Certificate) from the recipient bank
Annual Reporting: Further, the Foreign Liabilities and Assets (FLA) Return must be filed annually by July 15, reporting all foreign investments and liabilities.
- The process of subsidiary incorporation in India can be complex, but with the right guidance, it can be a smooth and a successful endeavour.
At VenturEasy, we have a team of experts to assist foreign companies navigate the Indian business landscape. Our services include assistance with Incorporation of foreign subsidiary in India, compliance with Indian laws and regulations including guidance on setting up a local office and bank account opening.
For queries or requirements related to the incorporation of a foreign subsidiary in India, you may reach us at [email protected]. We will be glad to provide clarity on the process and assist with the necessary compliances.
We also assist our clients regularly with Compliances for a Private Limited Company in India and Foreign Subsidiary Compliances in India
For any questions/ requirements, please email at [email protected]
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Hi, we’re a consulting company in the US incorporated in California as a LLC. We want to hire Indian nationals as our employees. Love to understand how the whole process work to form a subsidiary in India. Could we jump on a call.
Hello,
We would like to know the total fees and processing time for incorporating wholly subsidiary company of Singapore company.
We are looking forward to hearing from you soon.
Thank you