Indian Subsidiary Registration

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Indian Subsidiary Registration

Overview

In this global scenario, there are lot of foreign entities or companies who have a keen interest to tap one of the largest and fastest growing economy of India and hence they plan to set up their business or operations in India. A Foreign National (other than a citizen of Pakistan or Bangladesh) or an entity incorporated outside India (other than entity incorporated in Pakistan or Bangladesh) can invest and own a Company in India by acquiring shares of the company, subject to the FDI Policy of India. In addition, a minimum of one Indian Director who is an Indian Director and Indian Resident is required for incorporation of an Indian Company along with an address in India.

A Subsidiary Company, also known as an Indian Subsidiary or a foreign company is governed by the Companies Act, 2013. According to this Act, a subsidiary company is a company in which a foreign corporate body owns more than 50% of the share capital. Further, that foreign corporate body exercises control over it and is identified as the parent or holding company. An Indian Subsidiary Company must follow the laws of India. In India, a foreign company is allowed to set up the businesses by following ways:

  • Liaison Office
  • Branch Office
  • Project Office
  • Joint Venture
  • Wholly owned Subsidiary Company (Indian Subsidiary)

Advantages

Following are the advantages of forming an Indian Subsidiary Company:

  • Limited Liability

Liability of Members and Directors of the private limited company is limited to their shares. It means that if the company suffers from any loss and faces financial distress because of primary business activity, the personal assets of shareholders / Members / Directors will not be at risk of being seized by banks, creditors, and government.

  • Continuity of Existence

The life of a business is not affected by the status of shareholders and even after the death of the shareholder the private limited company continues to exist.

  • Brand Value

Company’s brand value will get increased because employees feel secure in joining the private limited company, vendor feels secure in offering credit, investor feels secure in investing, the customer feels trust and confidence in brand in buying company product/services because of a sound corporate structure. This all makes big shape of the company and ensure an easy way for Start-up Company to become a multinational company. Start-up Company starts with zero revenue and rapidly reaches to multibillion dollar company in just a few years just because of high brand value of the company. Always take care of brand value.

  • The scope of expansion

Is higher because easy to raise capital from a venture capitalist, angel investor, financial institutions and the advantage of limited liability, The private limited offer more transparency in the company.

  • Foreign Direct Investment in India

100% Foreign Direct Investment (FDI) is allowed in several business activities/industries without any prior approval. Foreign direct investment is not allowed in Proprietorship or Partnership; LLP requires prior Government approval.

Minimum Requirements

Following are the minimum requirements to form an Indian Subsidiary:

  • No minimum paid up capital requirement
  • Minimum 2 directors and shareholders, one must be an Indian Resident
  • The parent company must hold at least 50% of the total equity capital
  • Right to transfer shares by shareholders is restricted
  • DSC for all the directors and subscribers
  • DIN for every directors

Documents Required

We can categorize the documents requirement in 2 parts:

  1. Documents required from Directors and Shareholders
  2. Documents requirement for proposed Registered Office

From Directors and Shareholders

  • A copy of Passport of foreign directors (duly notarized by the Indian embassy).
  • Scanned copy of incorporation certificate issued by the respective foreign government (LLC/ INC) (duly notarized by the Indian embassy).
  • Scanned copy of Voter’s ID/Passport/Driver’s License & PAN of Indian director.
  • Passport-sized photograph of all directors and shareholder.
  • A Resolution from LLC / INC for opening a subsidiary company in India. (Duly notarized by the Indian embassy).

For Proposed Registered Office

  • Any Utility bills
  • Scan copy of Rent agreement with NOC from owner

Registration Process

The process of registration is as follows:

  1. Obtaining DSC and DIN

DSC (Digital Signature certificate) and DIN (Director Identification number) are required to form the proposed director of Pvt/ltd company.

  1. Name approval

For the name approval minimum of one and a maximum of two names must be submitted to MCA (Ministry of corporate affairs).

  1. Company incorporation

Incorporation documents can be submitted to MCA (Ministry of corporate affairs) along with an application for incorporation. MCA (Ministry of corporate affairs) will usually approve the incorporation application in 5 to 7 days.

  1. Approval for FDI Compliance

After getting the certification of incorporation and verification of all the documents, Opening the bank account with the designated branch as per requirement approval is granted.

Indian Subsidiary Company Annual Compliances

Indian Subsidiary Companies are required to comply with Income Tax Act, Companies Act, transfer pricing guidelines and FEMA guidelines. From time to time, they had to file income tax return with the Income Tax Department, annual return with the Registrar of Companies and other mandatory filings with the Reserve Bank of India or Securities & Exchange Board of India (SEBI). They would also have to comply with other regulations such as TDS regulations, GST regulations and ESI regulations etc. The requirement is also based on the type of industry, number of employees and turnover.

FAQ

 

01.Do we need a resident Indian to be a director in an Indian company?

Every company to be registered in India must have at least one Indian resident individual as a director.

02. We do not wish to allot any shares to Indian Resident Director. Is that allowed?

It is not necessary that a director should also be a shareholder in Indian Company. A foreigner or foreign company can retain 100% ownership of Indian Company.

03. What is an apostille?

An Apostille is simply the name for a specialized certificate, issued by the Secretary of State. The Apostille is attached to your original document to verify it is legitimate and authentic so it will be accepted in one of the other countries who are members of the Hague Apostille Convention. India, since 2005, is a member of the Hague Convention of October 5, 1961 that abolished the requirement of legalization of foreign public documents.

Moreover, An apostille certificate can be used to authenticate public documents like passport copy, drivers license copy, business documents, judgements, extract of a register or a notarial attestation.

Any document Apostilled in one member country is acceptable in all the other 104 member-countries, signatory to the referred convention of 1961 thus greatly simplifying the process of attestation by making it needless to get the documents attested in each or for each of the countries separately.

04. What are the documents required for starting a business in India and registering a Company?

Here’s a list of required documents for Indian Subsidiary:

  • Photograph of all the Directors and shareholders.
  • PAN Card of all the Indian Directors and shareholders.
  • Apostille ID Proof of all the Directors (Driving License/Passport/Voter ID).
  • Electricity Bill or any other utility bill for the address proof of the Registered Office.

05. How do we register our business name in India?

The name of a Private Limited company shall end with the words ‘Private Limited’. Proposed Company Name shall comply with the Company Name Availability Guidelines under Companies Act 2013.

06. Can a non-resident be a director of an Indian Company?

Yes. An Indian company must have at least two directors (one of them must be Indian Resident director). You can have more than 1 person as Foreign Director on Indian Company’s board.

07. What are the documents required for a foreign director for incorporation of the company in India?

Following are the documents required for a foreign director for incorporation of the company in India.

  • Identity Proof- Copy of passport
  • Additional Identity Proof- Driving Licence/National ID Card
  • Address Proof- Telephone bill/ Electricity bill/Bank statement/Any utility bill, these bills should not be older than two months.