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A foreign company can set up its operations in India in various form like Branch Office, Liaison office, Project office, Subsidiary Company, Limited Liability Partnership, or Joint Ventures. Amongst all these Business entities a subsidiary in India is one of the foreign companies’ most popular forms of Business entity registration.
The key conditions to incorporate a Subsidiary in India is having One Resident Director and having a Registered Office in India.
An Indian or Foreign business entity generally incorporates a ‘Subsidiary Company’ or a ‘Wholly Owned Subsidiary Company’ in India to expand its existing business. The difference between the two is that the ‘subsidiary company’ allows parent company to exercise more than fifty percent of the voting power of such subsidiary company while in case of wholly owned subsidiary, 100% of the control over the subsidiary company is exercised by the parent company.
A subsidiary company is defined under Section 2(87) of the Companies Act, 2013 as a "Subsidiary Company" or "Subsidiary” in relation to any other company (that is to say the holding company), means a company in which the holding company
Note that the subsidiary company of a foreign parent company is a separate legal entity, and the subsidiary company is obligated to function independently and comply with all the applicable laws, rules and regulations made thereunder.
Separate Legal Entity
As a juristic legal person, both the company and its members have separate legal identity that is distinct from each other. Even a subsidiary is required to manage its operations independently of its Parent Company.
No Prior Approval of RBI
No prior approval of RBI is required for incorporation, if the subsidiary company is related to the sectors in which 100% FDI is permissible under the automatic route.
Various opportunities to diversify/expand the business is available to Subsidiary Companies like additional investors to the business venture, any possible joint venture partner to invest in company, any possible merger and acquisition or hiving off any part of business in near future etc.
parent company can achieve operational efficiency by splitting a large company into smaller, more easily manageable subsidiary companies.
The proposed name selected should be unique and should not resemble to the name of an existing Company or Limited Liability Partnership. In case a Subsidiary Company wants to opt the name of the Parent Company it has to obtain NOC from the parent company.
Share capital of a company is divided into four parts:
Director is a person appointed to the Board of a company. Board of Directors of a company are entitled to exercise all such powers and to do all such acts and things as the company is authorized to exercise and do except those which are specifically required to be exercised by a company in general meeting. Minimum two directors are required to incorporate a private limited company and minimum three directors are required in case of a public limited company out of which at least one must be resident in India.
Subscriber means a person who has agreed to subscribe to the share capital of the company and on its registration, whose name is entered as a member in the Register of Members. Minimum two subscribers are required to incorporate a private limited company and Minimum Seven Subscribers are required to incorporate a Public limited Company. Subscribers of a company can be resident in or outside India. There is no restriction on a subscriber of a private limited company to be a director of the same company or vice versa.
In case of Wholly Owned Subsidiary, 99.99% of the Shares will be held by Foreign company through its Authorized Representative and 0.01% shares will be held by any person on behalf Foreign Company.
It is mandatory for every company to have a registered office capable of receiving and acknowledging all communications and notices as may be addressed to it. Registered office of the company must be situated in India.
Obtaining requisite Documents and information
Filing of Requisite forms with ROC
Certificate of Incorporation
Note 1: * Draft will be provided
Note 2: In case of foreign directors/subscribers, all the aforesaid documents should be notarized and apostilled or consularized. In case documents are not in english, translated copy in english should be notarized and apostiled or consularized. please read the attestation requirements of documents below in FAQs
Note 3: Since one or more Subscribers are foreign citizen(s), any contribution to capital would be considered as FDI and accordingly, requisite RBI compliance needs to be done accordingly.
Yes, one can incorporate an Indian Subsidiary of Foreign Company with 100% ownership, such a company is termed as a “Wholly Owned Subsidiary” of a Foreign Company.
As per the provisions of the Companies Act in India, there must be at-least 2 shareholders in any Indian Company, therefore, there must be at least one additional shareholder in case of Wholly Owned Subsidiary Company who shall have only 1 share in order to fulfil the requirement of minimum 2 shareholders. But, the Nominee can be an Indian National or a Foreign National.
An e-MOA and an e-AOA can not be used by Foreign Companies because, in compliance with Rule 13(5) of the Company (Incorporation) Rules, 2014, MOA and AOA signed by a person residing outside India, which should be apostilled or notarized by the notary of the country of origin.
The attestation requirement depends on the country in which registered office (in case of body corporate as a subscriber) /residence of the overseas subscriber and / or director is situated. The documents are required to be attested as follows:
a) Proof of Residence in a country which is part of the Common Wealth, by a notary public of that country;
b) Proof of Residence in a country which is party to The Hague Apostille Convention, 1961, attestation to be made by a notary public of the said country and duly apostilled in accordance with Hague Convention; or
c) Proof of Residence in a country outside the Commonwealth, and which is not party to Hague Convention, authenticated by a Diplomatic or Consular Officer empowered in this behalf under Section 3 of the Diplomatic and Consular Officers (Oaths and Fees) Act, 1948 (40 of 1948) i.e. attested by Public Notary and authenticated by Indian Embassy in the country of residence.
Under Rule 13(5), if foreign subscribers arrive on a "Business Visa" to India and sign the documents while staying in India, then the documents are not necessary to be Apostilled and Notarized or Consularised.
Step 1: Opening of a Bank Account
Step 2: Remittance of subscription amount in Indian bank a/c (within 2 months of incorporation) through wire transfer from foreign country bank account of the subscriber.
Step 3: Allotment of shares to subscribers and Issuance of Share Certificates
Step 4: Obtaining FIRC & KYC docs from the Bank
Step 5: Reporting in Form FC-GPR within 30 days of date of allotment through FIRMS Portal.