Indian Subsidiary Company Registration
Setting up a subsidiary company in India is a strategic step for businesses looking to expand their operations into one of the world's fastest-growing markets. It enables foreign companies to establish a strong presence in India while complying with the country's regulatory framework.
At LegallensIndia, we provide comprehensive assistance for Indian subsidiary company registration. Our experienced professionals guide you through every stage of the incorporation process, including legal requirements, documentation, regulatory approvals, and compliance, ensuring a smooth and hassle-free registration experience.
What is a Subsidiary Company?
A subsidiary company is a company that is controlled by another company, known as the parent company or holding company. The parent company exercises control over the subsidiary by holding a majority stake in its share capital, either partially or wholly.
Under the Companies Act, 2013, a subsidiary company is one in which the parent company or foreign corporate body holds at least 50% of the total share capital, thereby exercising significant influence and control over its management and operations.
Types of Subsidiaries in India
A foreign company can establish different types of subsidiaries in India depending on its ownership structure and the applicable Foreign Direct Investment (FDI) regulations.
- Wholly-Owned Subsidiary: In a wholly-owned subsidiary, the parent company owns 100% of the shares of the Indian subsidiary. Such subsidiaries can be established only in sectors where 100% Foreign Direct Investment (FDI) is permitted under Indian regulations.
- Subsidiary Company: In this type of subsidiary, the parent company owns at least 50% of the total share capital, enabling it to exercise significant control over the subsidiary's management and operations.
- Regulatory Approval: Before establishing a foreign subsidiary company in India, obtaining approval from the Reserve Bank of India (RBI), wherever applicable, is an important regulatory requirement to ensure compliance with India's foreign investment regulations.
Advantages of Indian Subsidiary Company Registration
Establishing an Indian subsidiary company offers numerous benefits for foreign businesses looking to expand their presence in India. From market access and foreign investment opportunities to limited liability and perpetual succession, an Indian subsidiary provides a strong foundation for long-term business growth.
- Entry into the Indian Market: India offers a competitive business environment with abundant investment opportunities, making it an attractive destination for foreign companies to establish subsidiary companies.
- Foreign Direct Investment (FDI): Foreign companies can invest in Indian private companies through share subscriptions or acquisitions. Indian subsidiary registration provides a structured route for foreign investors to establish their presence in India while complying with FDI regulations.
- Perpetual Succession: A subsidiary company enjoys perpetual succession, ensuring that its existence continues regardless of changes in management, ownership, or membership.
- Limited Liability: The liability of shareholders is limited to their investment in the company. The company is responsible for its obligations, protecting the personal assets of shareholders and directors.
- Scope for Diversification: Establishing an Indian subsidiary enables foreign businesses to diversify their operations, expand into new markets, and contribute to the growth of the Indian economy.
- Separate Legal Identity: A subsidiary company is recognized as a separate legal entity under the Companies Act, allowing it to own assets, enter into contracts, initiate legal proceedings, and conduct business independently.
- Property Ownership and Rental: As a separate legal entity, a subsidiary company can purchase or lease property in India in its own name for conducting business activities.
Regulatory Authorities for Indian Subsidiary Company Registration
The registration and operation of an Indian subsidiary company are governed by various regulatory authorities that ensure compliance with corporate, financial, and foreign investment laws in India.
- Ministry of Corporate Affairs (MCA): Responsible for framing and administering the rules and regulations relating to company registration, incorporation, and statutory compliance.
- Registrar of Companies (RoC): Handles the incorporation process, maintains company records, and ensures compliance with the provisions of the Companies Act.
- Reserve Bank of India (RBI): Regulates foreign exchange transactions and oversees compliance with foreign investment regulations applicable to foreign subsidiary companies in India.
Requirements and Key Facts for Indian Subsidiary Company Registration
Before registering an Indian subsidiary company, foreign businesses should understand the essential legal and regulatory requirements prescribed under the Companies Act, 2013. Meeting these requirements ensures smooth incorporation and ongoing compliance.
- Company Name: The proposed company name must be unique and should not conflict with any existing company name or registered trademark.
- Shareholders: The parent company may hold 100% of the shares, or any combination of two foreign nationals may act as shareholders. An Indian resident shareholder is not mandatory.
- Share Capital: There is no minimum capital requirement for registering a subsidiary company in India.
- Directors: A minimum of two directors is required, with at least one director being an Indian resident. Nominee director services may be obtained if required.
- Registered Office Address: Every company must have a registered office address in India. A virtual office address may also be used, wherever permitted.
- Annual General Meeting (AGM): Every company must conduct at least one Annual General Meeting and the required Board Meetings in accordance with the Companies Act.
- Company Secretary & Auditor: Secretarial filings must be completed annually, and a statutory auditor must be appointed to ensure regulatory compliance.
- Taxation: After incorporation, the company is subject to applicable corporate income tax and other statutory taxes.
- GST Compliance: Companies liable for GST must obtain GST registration and file periodic GST returns as prescribed.
- Annual Compliance: Indian subsidiary companies are required to undergo statutory audits and submit annual filings with the Registrar of Companies (RoC).
How to Register an Indian Subsidiary Company
The incorporation of a foreign subsidiary company in India involves a series of statutory procedures prescribed under the Companies Act, 2013. Following these steps ensures legal incorporation and regulatory compliance.
Step 1: Determine the Type of Company
Select the appropriate type of subsidiary company to be incorporated in India based on the business requirements and applicable foreign investment regulations.
Step 2: Obtain a Digital Signature Certificate (DSC)
Obtain a Digital Signature Certificate (DSC) for the proposed directors, as all incorporation documents are filed electronically through the Ministry of Corporate Affairs (MCA) portal.
Step 3: Obtain Director Identification Number (DIN)
Apply for a Director Identification Number (DIN) for the proposed directors through the Ministry of Corporate Affairs (MCA).
Step 4: Company Name Approval
Reserve a unique company name through the MCA portal, ensuring compliance with the prescribed company naming guidelines.
Step 5: Prepare MOA and AOA
Draft the Memorandum of Association (MOA) and Articles of Association (AOA), defining the company's objectives, internal rules, and governance structure in accordance with the Companies Act, 2013.
Step 6: File Incorporation Documents
Submit the incorporation documents, including the MOA, AOA, and prescribed forms, to the Registrar of Companies (RoC) through the SPICe+ portal.
Step 7: Payment of Registration Fees
Pay the applicable registration fees based on the authorized share capital of the subsidiary company.
Step 8: Obtain the Certificate of Incorporation
Upon successful verification of the incorporation documents, the Registrar of Companies issues the Certificate of Incorporation (COI), officially establishing the Indian subsidiary company.
Step 9: Apply for PAN and TAN
After incorporation, obtain the Permanent Account Number (PAN) and Tax Deduction and Collection Account Number (TAN) for the company from the Income Tax Department.
Step 10: Open a Company Bank Account
Open a bank account in the name of the Indian subsidiary company to carry out business transactions and financial operations.
Step 11: Obtain GST Registration
Apply for Goods and Services Tax (GST) registration wherever applicable to comply with indirect tax regulations and carry out taxable business activities.
Step 12: Commence Business Operations
After completing all statutory registrations and regulatory formalities, the Indian subsidiary company can legally commence its business operations.
Compliance Requirements for Indian Subsidiary Company Registration
To establish and operate an Indian subsidiary company legally, compliance with various regulatory requirements prescribed under Indian laws is mandatory.
- Foreign Exchange Management Act (FEMA): Foreign subsidiary companies must comply with the provisions of the Foreign Exchange Management Act, 1999, governing foreign exchange transactions and investments.
- Companies Act, 2013: Every Indian subsidiary company must comply with the provisions relating to incorporation, governance, annual filings, and statutory compliance under the Companies Act, 2013.
- Reserve Bank of India (RBI) Compliance: RBI regulations relating to foreign investment, reporting requirements, and foreign exchange management must be followed wherever applicable.
- Income Tax Act, 1961: Indian subsidiary companies are required to file annual Income Tax Returns and comply with applicable corporate taxation provisions.
- Annual Returns: Companies must file annual returns and financial statements with the Ministry of Corporate Affairs (MCA) and the Registrar of Companies (RoC).
- SEBI Regulations: If the subsidiary company lists its securities on a recognized stock exchange, it must comply with SEBI (Listing Obligations and Disclosure Requirements) Regulations.
Taxation of Indian Subsidiary Companies
Indian subsidiary companies are subject to taxation in accordance with the applicable provisions of the Income Tax Act and other relevant tax laws.
- Taxes are applicable on income earned both within and outside India, including dividends received from foreign subsidiaries.
- Royalty received for technical services from the Government or Indian entities is taxable at 50%, while other income is taxable at 40%, as applicable.
- A surcharge of 2% applies where taxable income exceeds Rs. 1 Crore but does not exceed Rs. 10 Crores, while a surcharge of 5% applies for income above Rs. 10 Crores.
- A Health and Education Cess of 4% is levied on the total tax payable.
- Concessional tax rates may be available for specific sectors such as oil exploration, air transportation, and shipping businesses.
Foreign Direct Investment (FDI) in Private Limited Companies
India permits 100% Foreign Direct Investment (FDI) in most business sectors. However, certain sectors require prior approval from the Central Government before foreign investment can be made.
- 100% Foreign Direct Investment is permitted in most sectors under the applicable FDI policy.
- Certain sectors such as private security agencies, civil aviation, mining, print media, broadcasting, satellite establishment and operation, pharmaceuticals, and trading of food products require prior Government approval.
- Foreign entities can establish wholly-owned Indian subsidiaries, subject to applicable sector-specific regulations and eligibility conditions.
- Private Limited Company Requirements:
- No minimum capital requirement.
- Minimum of 2 directors, including at least one resident Indian director.
- Minimum of 2 shareholders.
- Public Company Requirements:
- Minimum of 3 directors.
- Minimum of 7 shareholders.
How LegallensIndia Can Assist with Indian Subsidiary Company Registration
LegallensIndia provides complete assistance throughout the Indian subsidiary company registration process, helping foreign businesses establish their presence in India efficiently while ensuring full regulatory compliance.
- Assistance in selecting and reserving a unique company name.
- Support in obtaining Director Identification Numbers (DIN) and Digital Signature Certificates (DSC).
- Preparation and filing of incorporation documents with the Ministry of Corporate Affairs (MCA).
- Assistance with PAN, TAN, and company bank account opening.
- Guidance on compliance with the Foreign Exchange Management Act (FEMA), Companies Act, 2013, Reserve Bank of India (RBI) regulations, and Income Tax Act, 1961.
- Support for filing annual returns and complying with SEBI (Listing Obligations and Disclosure Requirements) Regulations wherever applicable.
- Professional assistance in understanding and complying with Indian taxation policies.
- Dedicated end-to-end support to help establish and grow your Indian subsidiary business with confidence.