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Indian Subsidiary Company Registration: Unlock India’s Market Potential
Setting up an Indian subsidiary is a strategic move for foreign businesses aiming to tap into India’s vibrant economy. As of 2023, over 14,000 active foreign subsidiaries operate in India, reflecting its appeal as a business hub. Defined under Section 2(87) of the Companies Act, 2013, a subsidiary is a company where a parent company holds over 50% of the share capital or controls the board of directors. While legally distinct, the subsidiary operates under the parent’s strategic oversight, maintaining separate financial records for informed decision-making. The registration process involves multiple steps, and careful execution ensures a seamless entry into the Indian market.
An Indian subsidiary offers foreign companies a robust platform to establish a local presence, leveraging India’s growth opportunities while adhering to regulatory frameworks.
What is a Subsidiary Company?
A subsidiary company, as per the Companies Act, 2013, is an entity where the parent company either controls more than 50% of the shares or influences the composition of the board. Despite its independent legal status, the subsidiary aligns with the parent’s broader objectives, benefiting from its support while operating autonomously in India.
Advantages of Indian Subsidiary Registration
Registering a subsidiary in India provides numerous benefits for foreign businesses:
1. Independent Legal Identity
The subsidiary functions as a separate legal entity, capable of entering contracts, holding assets, and managing liabilities independently, distinct from the parent company.
2. Majority Ownership
A foreign parent can hold at least 51% of the subsidiary’s shares, ensuring significant control over operations and strategic decisions.
3. Limited Liability Protection
The parent company’s liability is restricted to its investment in the subsidiary, safeguarding its global assets from the subsidiary’s debts or legal obligations.
4. FDI Compliance
India’s Foreign Direct Investment (FDI) policies permit majority foreign ownership in most sectors, facilitating substantial investment opportunities for parent companies.
5. Flexible Financing
Subsidiaries can raise capital through local and international sources, including equity and debt, with financial backing from the parent enhancing stability.
6. Subsidiary vs. Branch
Unlike a branch, which is an extension of the parent, a subsidiary operates independently, offering greater operational freedom while leveraging parent support.
7. Profit Repatriation
Subsidiaries can remit profits to the parent company via dividends, providing a direct channel for returns on investment.
Tax Benefits of Indian Subsidiaries
| Tax Benefit | Indian Subsidiary | Foreign Parent Company | Indian Parent Company |
|---|---|---|---|
| Corporate Tax Rate | 25% for turnover up to ₹400 Cr; 30% otherwise | Varies by home country’s tax laws | 25% or 30%, same as subsidiary |
| Capital Gains Tax | Exempt on long-term share sales (held >2 years) | Subject to home country tax; mitigated by DTAAs | Exempt on long-term share sales |
| Loss Carry Forward | Up to 8 years to offset future profits | Limited to home country tax rules | Up to 8 years |
| R&D Incentives | 150% deduction on eligible expenses (Section 35(2AB)) | Not applicable unless R&D in India | 150% deduction if R&D in India |
| Depreciation | Allowed on assets per Income Tax Act, 1961 | Subject to home country rules | Same as subsidiary |
Prerequisites for Subsidiary Company Registration
To register a subsidiary in India, the following requirements must be met:
- Company Type: The subsidiary must be incorporated as a Private Limited or Public Limited company under the Companies Act, 2013.
- Shareholding: The foreign parent company must hold at least 50% of the subsidiary’s shares to establish control.
- Directors: A minimum of two directors is required, with at least one being an Indian resident who has stayed in India for 182 days in the previous year.
- Registered Office: A valid Indian address, commercial or residential, must be provided for official correspondence and compliance.
Eligibility Criteria for Subsidiary Registration
The following conditions ensure eligibility for registering an Indian subsidiary:
- Foreign Parent Company: The parent must be a legally incorporated entity in its home country, holding a minimum 50% stake in the subsidiary.
- Indian Director: At least one director must be an Indian resident, while others may be foreign nationals.
- Legitimate Business Purpose: The subsidiary must engage in lawful business activities permissible under Indian regulations.
- FEMA Compliance: Foreign investments must adhere to the Foreign Exchange Management Act (FEMA), governing cross-border financial transactions.
By meeting these criteria, foreign businesses can establish a compliant and effective subsidiary, positioning themselves for success in India’s competitive market.
Essential Documents for Indian Subsidiary Company Registration
Registering a subsidiary company in India requires a set of specific documents to ensure compliance with the Companies Act, 2013, and the Foreign Exchange Management Act (FEMA). These documents verify the legitimacy of the parent company, directors, and the subsidiary’s operational setup. Below is a detailed list of the required documents:
For the Foreign Parent Company
- Certificate of Incorporation: A certified copy of the parent company’s incorporation certificate, validating its legal existence in its home country.
- Board Resolution: A resolution from the parent company’s board approving the establishment of a subsidiary in India.
- Address Proof: Documents such as a lease agreement, utility bill (not older than two months), or bank statement confirming the parent company’s registered address.
- Director Details: Identity proof (e.g., passport) and address proof (e.g., utility bill) for all foreign directors of the parent company.
- Memorandum and Articles of Association (MOA and AOA): Copies of the parent company’s MOA and AOA, outlining its objectives and governance structure.
For Indian Directors
- Identity Proof: Documents like Aadhaar card, passport, or voter ID to verify the director’s identity.
- Address Proof: Recent utility bill, bank statement, or rental agreement (not older than two months) confirming the residential address of the Indian director.
For the Subsidiary Company
- Proposed Company Name: A unique name for the subsidiary, subject to approval by the Ministry of Corporate Affairs (MCA).
- Registered Office Address Proof: A document such as a lease agreement or utility bill (not older than two months) verifying the subsidiary’s registered office in India.
Checklist for Indian Subsidiary Registration
To ensure a smooth and compliant registration process, prepare and verify the following documents and steps:
-
Incorporation Documents:
- Draft the Memorandum of Association (MOA) and Articles of Association (AOA) for the subsidiary, detailing its objectives and internal regulations.
- Provide the parent company’s Certificate of Incorporation.
- Submit affidavits and declarations from directors and shareholders confirming compliance.
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Director and Shareholder Details:
- Collect valid identity and address proofs for all directors and shareholders.
- Secure Digital Signature Certificates (DSCs) and Director Identification Numbers (DINs) for directors.
- Include recent photographs of directors.
- Submit declarations of non-involvement in other companies by initial shareholders, if applicable.
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Registered Office Verification:
- Provide proof of the subsidiary’s registered office, such as a rental agreement or ownership deed.
- Include a recent utility bill for the office address.
- Maintain records of the office location for legal and compliance purposes.
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Name Approval:
- Propose a unique name compliant with MCA guidelines, optionally incorporating “India” to emphasize the subsidiary’s local presence.
- Reserve the approved name through the MCA’s RUN (Reserve Unique Name) service.
-
Bank Account and Tax Registration:
- Open a bank account in the subsidiary’s name post-incorporation.
- Obtain a Permanent Account Number (PAN) and Tax Deduction and Collection Account Number (TAN) for tax compliance.
By meticulously preparing these documents and following the outlined steps, foreign companies can streamline the subsidiary registration process, meet regulatory requirements, and establish a robust presence in India.
Procedure for Indian Subsidiary Company Registration
Registering a subsidiary company in India is a structured process governed by the Companies Act, 2013, and the Foreign Exchange Management Act (FEMA). This guide outlines the key steps to establish a compliant subsidiary, ensuring a seamless entry into the Indian market.
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Secure Digital Signature Certificates (DSCs)
All directors of the subsidiary must obtain DSCs from a certified authority to electronically sign documents submitted during the registration process.
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Apply for Director Identification Numbers (DINs)
Each director requires a unique DIN, issued by the Ministry of Corporate Affairs (MCA). The application is submitted through the SPICe+ form on the MCA portal.
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Obtain Name Approval
Propose a unique name for the subsidiary, ensuring it does not conflict with existing companies or trademarks. Submit the name for approval via the MCA’s RUN (Reserve Unique Name) service.
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Prepare Key Documents
Draft the Memorandum of Association (MOA) and Articles of Association (AOA) to define the subsidiary’s objectives and governance. Additionally, obtain a board resolution from the parent company authorizing the subsidiary’s formation.
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File Incorporation Forms
Submit the following forms online via the MCA portal, signed with DSCs:
- SPICe+ (INC-32): For company incorporation, including details of directors, shareholders, and capital structure.
- DIR-12: To appoint directors of the subsidiary.
- INC-22: To declare the registered office address, if not provided earlier.
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Pay Registration Fees
The registration fee, based on the subsidiary’s authorized capital, must be paid online during the form submission process.
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Receive Certificate of Incorporation
Upon MCA’s review and approval of the submitted documents, the subsidiary receives a Certificate of Incorporation, confirming its legal registration. The certificate includes a unique Corporate Identification Number (CIN).
-
Apply for Tax Registrations
Post-incorporation, apply for:
- Permanent Account Number (PAN) for tax filings.
- Tax Deduction and Collection Account Number (TAN) for TDS compliance.
- Goods and Services Tax (GST) registration, if the subsidiary’s turnover exceeds ₹40 lakh (goods) or ₹20 lakh (services).
-
Open a Bank Account
Establish a corporate bank account in India in the subsidiary’s name, operated by authorized signatories (typically directors), to facilitate financial transactions.
Ongoing Compliance for Indian Subsidiaries
After registration, subsidiaries must adhere to compliance requirements to maintain legal and operational integrity:
- Annual Filings: Submit financial statements, director’s report, and auditor’s report to the MCA annually, regardless of company size.
- Board Meetings: Hold the first board meeting within 30 days of incorporation, disclose member interests via Form MBP-1, and file Form DIR-8 for director disqualifications.
- Registered Office: Verify the registered office address by filing e-Form INC-22 within 30 days if not submitted during incorporation.
- Statutory Auditors: Appoint auditors at the first board meeting within 30 days and activate the bank account within two months.
- Share Allotment: Allot shares to shareholders within two months via a board resolution and issue share certificates using Form SH-1.
Why Choose Udyhyam for Indian Subsidiary Registration?
Udyhyam is your trusted partner for efficient and reliable subsidiary registration in India, offering:
- Expert Guidance: Our team, well-versed in Indian regulations, provides comprehensive support throughout the registration process, keeping you informed and compliant.
- Tailored Solutions: We customize our services to meet your specific business needs, ensuring a personalized and effective registration experience.
- Efficient Process: Our streamlined online platform simplifies document submission and registration, saving time and effort.
- Post-Registration Support: We offer ongoing assistance with tax registrations, compliance filings, and operational needs to ensure your subsidiary thrives.
With Udyhyam, you gain a dedicated ally to navigate the complexities of subsidiary registration, empowering your business to succeed in India’s dynamic market.
Frequently Asked Questions
What is the minimum cash needed for starting a subsidiary company in India?
There is no exact minimum capital requirement, but it is suggested to have at least USD 5000 as starting capital.How many directors are needed for a subsidiary company in India?
A minimum of two directors is required, with at least one director being a resident Indian.Can a foreign company be the sole partner of an Indian subsidiary?
Yes, a foreign company can hold 100% shares of an Indian business or have two foreign people as owners.What papers are needed for subsidiary business registration?
Essential papers include Memorandum of Association (MOA), Articles of Association (AOA), proof of name and address for directors and owners, and address proof of the registered office in India.Is it important to have a listed office in India for a subsidiary company?
Yes, every business in India must have a listed office address within the country.What are the legal needs after creating a subsidiary company?
Compliance includes having yearly general meetings, completing statutory checks, filing annual financial accounts, and sticking to tax rules.Can a foreign person be a member of an Indian subsidiary company?
Yes, foreign people can be directors of an Indian subsidiary company.Are there any limits on the business actions of a subsidiary company in India?
Business operations must meet with Foreign Direct Investment (FDI) laws and sector-specific recommendations.How long does it take to create a subsidiary company in India?
The filing process usually takes around 15–20 days once all necessary papers are filed.What are the tax effects for an Indian subsidiary company?
Subsidiary businesses are subject to corporate income tax, Goods and Services Tax (GST), and other relevant taxes as per Indian tax rules.We Provide Best Quality
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