Overview of Indian Subsidiary Company Registration

Foreign investors want to invest in India due to growing opportunities. Due to this, foreign investment in India is booming, with more amount of investment in different areas. Ever since Economic Liberalisation occurred in 1991, the Indian economy has boomed with the increase in the amount of foreign direct investment in the country. As one of the world's fastest-growing economies, India has portrayed a very vibrant and growing economic set-up that can foresee and survive any turbulence from various factors around the world. The Indian Government has also worked towards propelling the concept of Ease of Doing Business to attract global entrepreneurs into the country.

With the introduction of the Foreign Exchange Management Act 1999 (FEMA), the government repealed the Foreign Exchange Regulation Act (FERA). Through FEMA investing in India became more straightforward. The Reserve Bank of India (RBI) has also, in recent times, relaxed the Foreign investment regulations to facilitate the easy transfer of important capital from foreign countries.

The Government of India has been making remarkable efforts in order to ensure that the FDI flow in the country shall be maintained at a healthy rate in the coming challenging times. The projected FDI flows for the FY 2023-24 stand at 100,000 million compared to USD 81,793 million in the present financial year. The major sectors that sought the interest of maximum foreign investors were as follows:

• Technology sector
• Health sector
• Manufacturing sectors

MNCs have also significantly impacted the FDI structuring by investing money in home-grown start-ups to attract better prospects of growth and diversity to the clients. The businesses in the country have made specific significant changes, and the M&A Transaction saw an upwards inclination of about 83%.

Statutory Meaning of the Indian Subsidiary Company 

Under section 2(87) of the Companies Act 2013, a subsidiary company is understood as a company which another company controls. To further emphasise the meaning of a subsidiary company, it is crucial to understand the meaning of a holding company.

Under section 2(46) of the Companies Act 2013, a holding company is an entity which controls more than 50% stake in another company. Hence, if there is control over the management of another company, the former company is known as a holding company.

Indian Subsidiary Company has been defined under the Companies Act 2013. An Indian subsidiary company can be understood as a company which a foreign company controls. Hence the foreign company will own more than 50% of the paid-up share capital of the Indian Subsidiary.

In other words, the foreign entity will be understood as the holding company, and the foreign entity will control the Subsidiary. If a subsidiary is established in India, then it is mandatory to follow the laws in force in India.

When it comes to the status of an Indian Subsidiary Company, then the principle of a separate legal entity would also apply to the subsidiary company. Hence the status of the shareholders and directors of the Subsidiary is different from that of the company. Under the Companies Act 2013, an Indian subsidiary can be either registered as a private or public limited company.

Advantages of Indian Subsidiary Company Registration

The advantages of registering your Indian Subsidiary Company are as follows:

Presence and Entry into the mighty Indian market

The Mighty Indian market offers many investment opportunities for foreigners; hence, setting up a subsidiary company might benefit your business. It offers benefits that provide entry to foreign players into the market. 

Foreign Direct Investment in India (FDI)

Foreign Direct Investment can be understood as a form of direct or indirect investment made by a foreign company in a private limited company. The foreign company acquires or subscribes shares of a private limited company in India. However, the government has changed the policy requirements for FDI in India. Prior approval will be required from the government if an investment is coming from a country that shares land borders with India. However, registering the Indian subsidiary company would attract a lot of foreign investment in the country.

Perpetual Succession

When a foreign entity establishes a subsidiary, it can succeed even after many changes in the management of the company. The status of the subsidiary company will not come to a halt. Once a company is established in India, the operations can be easily carried out.

Limited Liability

The principle of limited liability, which would apply to private and public limited companies, would apply to an Indian Subsidiary company. Limited liability means the liability of the members is limited to a specific amount. Members of the company would include directors and shareholders. The principle of limited liability would protect the directors and shareholders from any loss faced by the company. Limited liability would make the company liable for the debts owed to third parties. However, under this principle, any third-party creditor cannot go after the personal assets of directors and shareholders.

Scope of Diversification

When a foreign entity wants to expand its activities in India, then the same can be achieved through an Indian subsidiary company. New areas and products can be launched through this process. However, it is important to conduct prudent market research before taking this step. New activities can be achieved through this process.

Separate Legal Identity

As the company is a separate legal person, it can enter into contracts and agreements. Under the Companies Act 2013, an individual (natural person or artificial person) can enter into legal agreements. Such an entity has the power to enter into contracts and also file legal cases (sue) other parties for any form of breach of obligations. Limited liability of the shareholders and officeholders gives a company the status of a separate legal entity as it possesses the power to file a case and represent itself via its representatives.

Purchase or Rent Property in India

The subsidiary company is an artificial person who can buy or rent the property under its name to conduct business activities seamlessly. It is an important fact all businesses, whilst having a perpetual existence in law, must hold property in the name of the business to avoid any conflict amongst the officeholders of the business.

Regulatory Body for Indian Subsidiary Company          

The primary regulatory authority for Indian Subsidiary company registration is the Ministry of Corporate Affairs (MCA). Apart from this, the Registrar of Companies (ROC) would handle all matters relating to company incorporation procedures. Another regulatory authority which manages Indian Subsidiary compliance is the Reserve Bank of India.

What are the compliances related to Indian Subsidiary Registration?

Different compliances must be mandatorily adhered to in the Indian Subsidiary Registration Process. The following compliances have to be regularly followed by the such entity:

• Companies Act, 2013- Any company which is formed in India would have to comply with compliances under the Companies Act, 2013.
• Foreign Exchange Management Act, 1999- A foreign company planning to establish itself in India must comply with respective foreign exchange laws in India.
• RBI Compliance- With compliance under the Foreign Exchange Management Act, the Indian Subsidiary company has to also comply under respective RBI Compliances.
• Income Tax Act, 1961- All companies that are present in India have to file Income Tax Returns. The current corporate tax rate prevalent in India is 22%. Hence a foreign company that establishes an Indian subsidiary company has to comply with respective tax rates.
• Annual Returns for ROC and MCA- Companies also have to file annual compliance with the Registrar of companies and the Ministry of Corporate Affairs.
• Securities Exchange Board of India- If an Indian subsidiary company lists its securities in a stock exchange, then compliance has to be followed under respective SEBI laws. Under the SEBI (Listing Obligations and Disclosure Regulations) compliance has to be maintained.

Procedure for Indian Subsidiary Registration

Registering a Name for Indian Subsidiary

Under the Ministry of Corporate Affairs, companies that are incorporated in India can be registered as per the requirements of MCA. When incorporating a subsidiary, the requirements of the SPICe+ form have to adhere to. During this process, the company has to consider a unique name. After considering the name, the same has to be reserved for a specific period of time. The company's name must be unique and not go against provisions related to Intellectual Property Law in force in India.

Apply for Director Identification Number and Digital Signature Certificate

The regulatory authority for the appointment of directors issues the DIN. Apart from this, the entity must also apply for the Digital Signature Certificate. The DSC will help in electronic signature processes for companies. Documents can be electronically signed and sent through the system of digital interfaces.

Apply for the PAN and TAN Number

Once the DSC and DIN have been applied for then, the subsidiary company has to make an application for PAN and TAN. This is a mandatory requirement that has to be filed per a company's requirements.

Open a Bank Account for the Subsidiary

An Indian Subsidiary Company has to open a bank account. This is mandatory for carrying out different transactions on behalf of the Subsidiary. Enterslice has a team of Pan India experts to help open bank accounts for foreigners.

GST Number

After this GST (Goods and Services Tax) number will be provided to the company. When carrying out different services this number would be applicable. All companies that are established in India have to mandatorily apply for GST registration.

Initiating Operations

Once the above procedure is complete, the company can start carrying out business operations.

Documents for Indian Subsidiary Company Registration

• PAN Card
• Aadhaar Card
• Any form of Address Proof
• Passport, Visa for foreign national
• Any identification proof provided by the foreign national must be attested and certified by an Indian Embassy.
• DIN – Directors Identification Number
• Digital Signature Certificate
• Any utility bills for the premises- If the company
• owns the premises
• If the company does not own the premises, the lease agreement must be produced.
• Address Proof of the Registered Office
• Memorandum of Association (MOA) and Articles of Association (AOA) for incorporating the Indian Subsidiary
• Certificate of Incorporation

Enterslice Advantage- Indian Subsidiary Company Registration

• Enterslice's main aim is to add value to your business.
• Our team of professionals comprising of Chartered Accountants, Company Secretaries, Lawyers, and Financial Executives.
• We have experience in registering different forms of entities.
• Constant monitoring and 24*7 customer service.