Indian Subsidiary is any company that is owned by a foreign company is known as an Indian Subsidiary. The Companies Act,2013 governs the registration process for the Indian Subsidiary Company.

Indian Subsidiary Registration

Indian Subsidiary is any company that is owned by a foreign company is known as an Indian Subsidiary. The Companies Act,2013 governs the registration process for the Indian Subsidiary Company.

Many foreign companies want to start operating in India as India is one of the largest and fast-growing markets. A foreign national or an entity except for a citizen belonging to Pakistan or Bangladesh can invest and own a company in India by acquiring shares of the particular company, subject to India’s Foreign Direct Investment Policy. The Economic liberalisation of 1991 acted as a catalyst for the Foreign Direct Investment in India.

At least one director needs to be an Indian director with an Indian address for the incorporation of an Indian subsidiary company. One person should be appointed as the representative of a foreign Company in India.

When a foreign company owns and controls a significant stake in India’s Company, it is called an Indian subsidiary company.

Documents required for Indian subsidiary registration

An applicant who is a foreign national has to submit the following documents:

  • Passport
  • Driving license
  • Identity proof of the country they are staying in
  • The Indian Director has to submit the following documents:
  • PAN Card
  • Aadhar card
  • Any utility bill.
  • The representative of the foreign company has to submit the following documents:
  • Passport
  • Driving license
  • Identity proof of the country they are staying in

How to obtain DSC for Foreign National Directors?

A digital signature is required to file the Incorporation documents and the compliance documents for a company. Digital signatures must be obtained for one or more directors of the company. Here are the documents required for obtaining the digital signature for a foreign national:

  • Foreign nationals residing in the native country
  • If the country is a signatory of the Hague Convention:
  • Identity proof
  • address proof
  • The photo on the DSC application (should be notarised by the public notary of that country and apostilled by the competent of that country.
  • If the naive country is not a signatory of the Hague convention:
  • identity proof
  • address proof
  • The photo on the DSC application (should be notarised by the public notary of that country and consularized by that foreign country’s competent authority.
  • Passport copy and application form with the photo (attested)
  • By foreign nationals residing in India:
  • Resident permit certificate issued by the assistant foreigner regional registration officer, an officer of the bureau of
  • Immigration India.
  • Passport
  • Visa
  • Application form with an attested photograph

Procedure for Incorporating an Indian subsidiary registration

1 Consider the name

While incorporating an Indian subsidiary, the requirements of the SPICe+ form have to comply. The company has to choose a unique name and the same to be reserved for a specific time. The title should be unique and comply with the provisions related to the Intellectual property Law force in India.

2 Apply for DSC and DIN

The DIN is issued by the regulatory authority for the appointment of directors. In addition to this, the entity must also apply for the Digital Signature Certificate. Documents can be electronically signed and sent online.

3 Apply for the PAN and TAN number

After applying for the DSC AND DIN, it is necessary to apply for the PAN and TAN. This is a mandatory requirement.

4 Open a bank account for the Subsidiary

After applying for the DSC AND DIN, it is necessary to apply for the PAN and TAN. This is a mandatory requirement.

5 GST Number

A GST number will be provided to the company. It is mandatory for all the companies established in India to apply for GST registration.

6 Start Operations

After the completion of the procedure mentioned above, the company can start carrying out business operations.

Incorporating an Indian Subsidiary

With the DSC application process, the company’s name approval can be obtained for the proposed company. The name should be unique, and it should end with the words ‘Private Limited’. Read more about Naming an Indian Private Limited Company.

Once the name’s approval is obtained, the Incorporation documents can be filed with the Ministry of Corporate Affairs to incorporate the company. The incorporation documents include the affidavits and declaration from the directors, Memorandum of Association, Articles of Association, and Registered office address proof.

The affidavit and declarations from the Directors contain certain declarations from the Directors. The testimony and the declaration should be executed independently for each of the directors and notarized.

Memorandum of Association (MOA) & Articles of Association (AOA)

The shareholders show their intention for becoming a shareholder in the company to be incorporated by subscribing to the MOA and AOA.

if the foreign company is a subscriber to the MOA and AOA of the proposed Indian Company, the following documents must be submitted:

1. Board resolution of the foreign entity authorizing the investment in the shares of the Indian Company.

2. Copy of the certification of incorporation of the foreign entity.

3. Copy of address proof of the foreign company.

4. After submitting the above documents and the application for incorporation of a company, the registrar will issue a certificate of incorporation for the Private Limited Company if the submitted documents are acceptable.

5. Once the Incorporation certificate is obtained, the Indian Company can apply for a PAN card and take the necessary steps to open a bank account for India’s company.

Private Limited Company Indian entry strategies for Foreign Company

In order to incorporate a Private Limited Company in India, the following documents need to be submitted.

1. Supporting documents, minimum of two directors ( one needs to be an indian director who is also an Indian resident)

2. An acceptable name for the company.

After the name approval is obtained, it is necessary to draft the Memorandum of Association and file it within 60 days to complete the incorporation process.

A minimum of two shareholders is required for a private limited company. Hence, the holding company in a foreign country must pass a Board resolution for the Incorporation of the Company in India and the subscription of shares of the proposed company.

The Foreign Company can hold around 99.99% of the total shares of the Indian Company, while 0.01% of the company’s issued shares can be controlled by an Indian in trust with the foreign company.

Once the company is incorporated, it is necessary to open the Bank accounts and obtain the required licenses. Simultaneously, it is necessary to make filings with the RBI to indicate India’s foreign investment through the automatic route.

Foreign Direct Investment

FDI in Private Limited Company is allowed for foreign entities subject to the FDI guidelines. FDI in a Private limited company falls under two categories automatic route and approval route.

Currently, 100 % of FDI is permitted in most sectors, exempting the capped and restricted sectors.

If automatic approval is not allowed, it is necessary to obtain prior consent from the Foreign Investment Promotion Board of the Indian government. Further, citizens or entities from Bangladesh or Pakistan can invest in India only under the approval route.

In a Private Limited Company, FDI can be through various equity instruments. Indian companies can issue equity shares, preference shares, and convertible debentures again, subject to the norms and the guidelines.

The equity shares of a private limited company issued under the FDI must be at a fair value. If an NRI newly incorporates a company or subscription to the association’s memorandum during the company incorporation, the shares can be issued at face value.

Here’s a list of the industries that require government approval for investment by Foreign Company or Foreign National:

  • Petroleum sector ( except private sector oil refining), Natural gas / LNG pipelines.
  • Investing in companies in Infrastructure
  • Defense and strategic industries
  • Atomic minerals
  • Print media
  • Broadcasting
  • Postal Services
  • Courier Services
  • Establishment and operation of satellite
  • Development of Integrated township
  • Tea sector
  • Asset Reconstruction Companies

Management and Shareholding Structure

A private limited company must have a minimum of two shareholders and two directors. A shareholder can be any person or even a corporate entity. Foreign nationals can become the directors of the private limited company. But it is to be noted that at least the director should be Indian with Indian residency.

There is no requirement for the Indian director to be a shareholder in the company. Most foreign companies prefer to incorporate a company in India with three directors- two foreign national directors and one Indian Director.

The 100% shares of the Indian Company can be held by a combination of foreign companies or nationals. One corporate entity or person cannot have all the shares of an Indian private limited company.

Compliances related to Indian subsidiary companies

There are certain compliances which the Indian subsidiary companies need to adhere to mandatorily.

Companies Act, 2013 – A company formed in India would have to comply with compliance under the Companies Act, 2013.

Foreign Exchange Management Act,1999 – It is necessary to comply with India’s respective foreign exchange laws when a foreign company has is planning to establish in India.

RBI Compliance – The Indian Subsidiary of a foreign company also has to comply with the respective RBI compliances.

Income Tax – All the companies currently operating in India have to file Income Tax returns. It is necessary for the Indian subsidiary company has to comply with the individual tax rates.

Annual returns of ROC and MCA – The companies established in India must file the yearly compliances with the Registrar of Companies and the Ministry of Corporate affairs.

SEBI- If the Indian subsidiary company lists its securities in a stock exchange, then the compliance must be followed as per the laws under the Securities Exchange Board of India.

Benefits of Indian Subsidiary Registration

Separate Entity

The Indian Subsidiary of the foreign Company is separate from its foreign parent. Even though there is control on the management of the Indian Subsidiary still there, it has different and independent legal existence from its foreign parent.

Purchase Property in India

A company under the respective conveyance law can purchase properties in India. This is an add-on benefit for the Indian subsidiaries.

Huge scope for diversification

Through an Indian subsidiary company, a foreign entity can achieve its aim of expansion. They can also launch new areas and products through this process.
Before launching new products, it is essential to conduct market research.

Can use

As the company is a separate legal person, it can enter into contracts and even agreements. Under the Companies Act, 2013, an individual can enter into legal contracts. Such an entity can enter into contracts and even file legal cases.

Perpetual Succession

The Indian Subsidiary will succeed even after there are many changes in the management of the company. The operations cannot be halted, and the functions can be easily carried on once the company is established.