How Can a Foreign Company Open a Subsidiary in India

Section 2(42) of the Companies Act, 2013, defines a foreign company as a company incorporated or registered outside India, but having a place of business in India and doing business in India through itself either by being physically present in India or through electronic means or through agents or it behaviors its business activities in India through any other means. As per Section 2(87) of Companies Act, It is a company whose composition of Board of A subsidiary is a company whose more than 50% of the shareholding is held by another company.

Advantages of an Indian Subsidiary Registration

Full control

Having full strategic and operational control over the company would be good for the holding foreign company.

Greater Cooperation

The holding and subsidiary companies can pool their finances and share other expenses such as administrative expenses.

New markets

The holding company can use its name in the subsidiary and hence explore new markets. For instead H&M India is a subsidiary of H&M Global by which it explores the Indian markets.

Documents required for Indian subsidiary registration

• PAN for Indian citizens and passport copy for foreign nationals
• Copy of Driving License, Bank Statement or any utility bill (not older than 2 months)
• Residence permits foreigners if living in India.
• Passport size photograph

Minimum requirement

• Minimum 2 directors
• Minimum 2 shareholders
• One director should be a resident in India for at least 182 days.
• Minimum authorized share capital of INR one Lakh rupees.

Registration Process

Obtain DSC (Digital Signature) and DIN (Director Identification Number).
Primary documents required for obtaining these are:
• Identity Proof (PAN for Indian citizens and Passport Copy for Foreign Nationals)
• Driving License Copy, Bank Statement or any utility bill (not older than 2 months)
• Residence permits foreigners if living in India.
• Passport size photograph

Name Approval

Selecting a unique company name is important. The name should be in line with the company’s objective, should not be offensive and should be unique.
Incorporation Application:

This is the final step in the Company Incorporation process. It needs filing of the Memorandum and Articles of Association of the Company digitally with few other documents accordingly executed through the proposed directors and shareholders.

List of Incorporation documents to be executed:
• Subscriber sheet of Articles of Association
• Subscriber sheet of Memorandum of Association
• Declaration by Director in form DIR 2
• Declaration of Director in Form INC 9

When the Incorporation application is approved, the Registrar shall issue a Certificate with a Corporate Identification Number (CIN). The PAN, as well as TAN of the Corporation, shall also be allotted simultaneously.

FAQs

What compliances need to be followed for setting up of an Indian subsidiary?

Foreign Investments in Indian Corporations are controlled by FEMA Guidelines as well as the Reserve Bank of India. Every time the holding company invests funds in the share capital of the Indian subsidiary, it requires following RBI guidelines as well as the compliances under Companies Act 2013.

Our incorporation documents required to be self-attested?

Usually, the incorporation documents are essential to be self-attested by Indian Nationals. But, in the case of Foreign Nationals, the procedure required are:

• If the documents are signed out of India, then the same is required to be notarized through a Public notary of the residence nation and consumerized or apostilled by the competent authority, as the case might be.
• When the documents are signed in India, then a copy of Visa, as well as stamped passport, proving the individual’s presence in India at the time of signing, is needed.
• In case the subscriber is a foreign entity, then the Incorporation documents are required to be signed by the representative of the foreign entity. An Authorization Letter accordingly specifying the name of the Authorized Individual and the number of shares subscribed must be notarized consumerized or apostilled, as the case might be in the home nation of the subscriber corporation.

What does Wholly Owned Subsidiary Company in India by Foreign Company mean?

If a foreign firm makes 100% FDI (Foreign Direct Investment) in India through an automatic route, the Indian corporation becomes the Wholly Owned Subsidiary Company of that Foreign Firm. For instance ABC Inc. USA owns 100% shares in XYZ Pvt. Ltd. Then XYZ Pvt. Ltd. becomes the Subsidiary Company.

What is the Digital Signature Certificate (DSC)?

The Ministry of Corporate Affairs (MCA) commands that the Directors of the company must sign the application documents by making use of their Digital Signature. Therefore, a Digital Signature is necessary for every director of a proposed Corporation.

What is the Director Identification Number (DIN)?

Director Identification Number is referred towards a unique identification number allocated towards all existing as well as proposed Directors of a Corporation. It is compulsory for all present or proposed Directors towards having a Director Identification Number. Director Identification Number never expires and an individual could have only one Director Identification Number.