Overview of Indian Subsidiary Registration
Foreign companies have interest to start their operations in India as it is one of the largest and fast-growing markets in the world. A Foreign National other than a citizen of Pakistan or Bangladesh or an entity incorporated outside India can make investment and can own their subsidiary company in India by acquiring shares subject to the FDI Policy of India. There is a minimum requirement of one Indian Director who must be Indian Resident and one is to be Foreign Director, which is needed for incorporation of an Indian Subsidiary Company.
Subsidiary Company Registration is governed by the Companies Act 2013. It defines a subsidiary as a company in which a foreign corporate body or parent company owns minimum 50% of the entire share capital. The parent company is the one wholly or partially having a control over a subsidiary company. Subsidiary companies must follow the laws of the country in which they are set up and running. Therefore, if the foreign subsidiary is incorporated in India, then it must follow the law in force in India.
Advantages of Indian Subsidiary Registration in India
- Foreign Direct Investment in India
The FDI is allowed 100% for the increasing growth of several business industries in India without any prior approval. However, in the business of Proprietorship, Partnership and LLP require prior Government approval for FDI.
- Limited Liability
The liability of the members and the directors are strictly limited to their shares in the company. 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.
- Scope of 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.
- Borrow funds
The wholly-owned subsidiary company in India can borrow funds in the form of loans from the financial institutions.
- 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.
- Acquire property in India
The foreign subsidiary company has an independent structure and hence, it is permitted them to buy properties in India.
Characteristics of Indian Subsidiary Companies
- There is no requirement of prior approval for the repatriation dividend for these companies
- Indian transfer pricing system regulation is applicable to the Indian subsidiary companies.
- Equity, debt and other internal accruals are the available funding mechanisms.
- It has to pay comparatively lower tax rate of 30% which in case of the foreign company has to pay tax rate of 40%.
- The Indian Subsidiary Company is treated same as the other Indian Company, the applicability of all laws and guidelines are same and also the tax taws are same for the Indian Subsidiary
- The dividend distribution tax is nil now as per the Union budget 2020.
Procedure of Indian Subsidiary Registration in India
Documents for Indian Subsidiary Registration
- PAN card details of all directors and shareholders
- Address Proof of all directors and shareholders
- Identity Proof such as Aadhaar Card, Driving License, Voter Id of all designated directors or partners and shareholders
- 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 who owns the property of the business place
- Incorporation certificate issued by the foreign government
- Resolution from foreign company required for opening the subsidiary company in India, mentioning the name of authorise representative
- For residential proof such utility bills such as telephone, water, gas, or electricity bill as of the registered office
Requirements of Indian Subsidiary Registration
No minimum capital required to form a Indian Subsidiary Company in India.
Minimum two directors are required for incorporation of the Company. Atleast one should be a resident of India.
Indian Subsidiary Company must have minimum of two shareholders. Shareholders can be either individuals or any entity or a combination of both.
- Equity shares:
The Parent Company must hold 50% of total equity share capital
Director Identification Number for all Directors
Annual Compliances of Indian Subsidiary Company
- Compliance with Companies Act, 2013
- Compliances with Income Tax Act, 1961
- Guidelines with MCA, Ministry of Corporate Affairs
- FEMA guidelines
- Annual return with the Registrar of Company (ROC)
- Income tax return
- Filings with the RBI, Reserve Bank of India
- Filings with the SEBI, Securities and Exchange Board of India