Explore all the details you need about Indian Subsidiary Company Registration, tailored for your needs.
Setting up a subsidiary in India can be a transformative step for expanding your business operations and accessing one of the world's largest and most dynamic markets.
At Solocorp Verifocus Legal LLP, we specialise in providing comprehensive and tailored services for the incorporation of a foreign subsidiary in India. Our team of experts is here to guide you through the complexities of Indian subsidiary registration, from understanding the legal requirements and navigating regulatory approvals to assisting with compliance and documentation. Partner with us for the incorporation of a foreign subsidiary in India and unlock India's vast business potential to drive your company's growth and success.
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 registration process for a foreign subsidiary company in India 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.
In India, subsidiaries are categorized based on the level of ownership and control exercised by the parent company. Below are the two primary types:
In a wholly-owned subsidiary, the parent company possesses 100% ownership of the subsidiary's shares. However, wholly-owned subsidiaries can only be established in sectors that permit 100% Foreign Direct Investment (FDI).
In this category of subsidiary, the parent company owns 50% of the subsidiary's shares. Before proceeding with establishing a foreign subsidiary company in India, obtaining approval from the Reserve Bank of India is a crucial prerequisite to ensure compliance with foreign investment regulations.
India's competitive environment offers numerous investment opportunities, attracting foreign entrepreneurs to establish their subsidiary companies in the country.
FDI allows foreign companies to invest in Indian private companies through share subscriptions or acquisitions. The 2020 provision requiring prior approval for investments from bordering countries further emphasizes Indian subsidiary registration as a strategic choice.
This ensures a company's existence remains intact despite changes in management, transfers of membership, or insolvency, providing stability and continuity.
Shareholders and directors benefit from limited liability, protecting their personal assets. The company itself bears responsibility for its debts, shielding its stakeholders' personal wealth.
Establishing an Indian subsidiary enables foreign businesses to expand operations, contributing to the growth of the Indian economy and introducing diverse goods and services.
Under the Companies Act, a company is a distinct legal entity, enabling it to engage in contracts, initiate legal actions, and operate independently of its shareholders and directors.
As a legal entity, a subsidiary company can purchase or rent properties in India for business activities, ensuring seamless operations and aligning with perpetual succession principles.
The process of registering a subsidiary company in India is governed by several regulatory authorities to ensure legal compliance and proper oversight. Key authorities such as the Ministry of Corporate Affairs (MCA), Registrar of Companies (RoC), and Reserve Bank of India (RBI) play pivotal roles in overseeing the incorporation and operational compliance of foreign subsidiaries in India.
Decide on the type of company you want to establish for incorporation of a foreign subsidiary in India.
Since the registration process is conducted online, obtain a Digital Signature Certificate (DSC) for the proposed directors of the company. The DSC is used for electronically signing the necessary documents during the registration process.
Directors must obtain a Director Identification Number (DIN) from the Ministry of Corporate Affairs (MCA) by submitting the DIN application online.
Choose a unique name for your subsidiary company and apply for its approval through the MCA's online portal, adhering to the naming guidelines provided by the MCA.
Prepare these legal documents to outline the company’s objectives, rules, and regulations, following the Companies Act 2013.
After name approval, file incorporation documents, including the MoA, AoA, and other forms, with the Registrar of Companies (ROC) through the MCA’s online portal using the SPICe+ form.
Pay the required registration fees to the ROC based on the authorized capital of the subsidiary company.
If all submitted documents and information are in order, the ROC issues a Certificate of Incorporation, officially confirming the Indian subsidiary registration.
After receiving the CoI, apply for a PAN and Tax Deduction and Collection Account Number (TAN) from the Income Tax Department.
Open a bank account in the name of the foreign subsidiary company in India.
Register for GST to comply with taxation requirements if the company is engaging in business activities.
Once the incorporation process is complete, the subsidiary company can commence its business operations.
To establish a legal and valid Indian subsidiary company registration, adherence to specific regulations is mandatory. These regulations ensure legal compliance, transparency, and alignment with Indian corporate governance standards.
Foreign companies operating in India must adhere to the foreign exchange laws and regulations outlined in the Foreign Exchange Management Act, 1999, ensuring proper management of foreign currency transactions.
Indian subsidiary companies are required to comply with the provisions of the Companies Act, 2013, which governs the incorporation, operation, and dissolution of companies in India.
The Reserve Bank of India enforces several foreign exchange management compliances to regulate financial transactions involving foreign subsidiaries.
Subsidiary companies must file annual income tax returns under the Income Tax Act, 1961. The current corporate tax rate in India is approximately 25%.
Companies are required to file annual returns with the Ministry of Corporate Affairs (MCA) and the Registrar of Companies, ensuring compliance with statutory reporting obligations.
If the subsidiary lists its securities on a stock exchange, it must adhere to the Securities and Exchange Board of India (SEBI) regulations, ensuring transparency and investor protection.
Indian subsidiary companies are subject to specific taxation policies, which apply to income earned both within and outside India.
100% Foreign Direct Investment is allowed in most sectors. A few sectors, however, require prior approval from the Central Government for foreign investments. These sectors include private security agencies, civil aviation, mining, print media and broadcasting, satellite establishment and operation, pharmaceuticals, and trading of food products.
Foreign entities can establish wholly-owned Indian subsidiaries with 100% ownership, subject to specific qualifications.