A subsidiary (sub) is a business entity or corporation that is partially controlled or owned by another company, it may be termed as the parent, company, or holding company.
Foreign companies have the interest to start their operations in India as it is one of the largest and fast-growing markets in the world.
An entity incorporated outside India can invest and can own its subsidiary company in India by acquiring shares subject to the FDI Policy of India. There is a minimum of two director requirements out of two, one is Indian Director and one is to be Foreign Director, which is needed for incorporation of an Indian Subsidiary Company.
Subsidiary Company Registration is covered under the Companies Act 2013. It defines a subsidiary as a company in which a foreign corporate body or parent company owns a minimum of 50% of the entire share capital. It must follow the laws of the country in which they are set up and running.
Advantages of Indian Subsidiary Registration in India
• Perpetual Succession
IT is the continued existence of the company that means any changes in members such as death, bankruptcy, addition, exit, transfer, etc. don’t affect the existence of the company.
• Liability is Limited
The liability of the members and the director are strictly limited to their shares in the company. Therefore, no member is responsible for any loss if suffered by the company.
• Foreign Direct Investment in India
The FDI is allowed 100% for the increasing growth of several business industries in India without any prior approval.
• Scope of Expansion
The expansion of the business is higher as it is easy to raise the capital from any financial institutions, venture capitalist, and the investor. It enjoys all the advantages of the Private Ltd Company, which gives more transparency.
• Borrow funds
Subsidiary companies in India can borrow funds in the form of different sources such as loans from financial institutions.
• Sue and sued
The Indian subsidiary company has the right to sue and can be sued.
• Acquire property in India
The subsidiary company has an independent structure and hence, it is permitted for them to buy properties in India.
Characteristics of Indian Subsidiary Companies
- There is no prior approval required for the repatriation dividend for these companies.
- The transfer pricing system applies to the Indian subsidiary companies.
- DDT is nil now as per the Union budget 2020.
- It has to pay a lower tax rate of 30% which in the case of the foreign company has to pay a tax rate of 40%.
- The Indian Subsidiary Company is treated the same as the other Indian Companies who are working in India.
- the applicability of all laws and guidelines are the same and also the tax laws are the same for the Indian Subsidiary
The procedure of Indian Subsidiary Registration in India
- Filing of the form
- Obtain DSC and DIN
- Name approval
- Document submission
- Issue of certificate
Documents for Indian Subsidiary Registration
- PAN card details of all shareholders and directors
- Identity Proof such as Aadhaar Card, Driving License,
- Address Proof of all directors and shareholders
- Passport and Photographs of directors and shareholders
- DIN of designated directors or partners
- DSC of designated directors or partners
- (MOA) Memorandum of Association and (AOA) Article of Association of the Company
- A No Objection Certificate (NOC) from the landlord who owns the property of the business place
- Incorporation certificate issued by the appropriate government
- Resolution from foreign company required for opening the subsidiary company in India, mentioning the name of authorizing a representative
- For residential proof such utility bills such as telephone, water, gas, or electricity bill as of the registered office
Requirements of Indian Subsidiary Registration
- Capital: There is No minimum capital concept, required to form an Indian Subsidiary Company in India.
- Directors: Minimum 2 directors are required for the incorporation of the Company. Out of the two directors, one should be a resident of India.
- Shareholders: The Indian Subsidiary Company must have a minimum of two shareholders. Shareholders can be individuals or any entity or a combination of both.
- Equity shares: The Parent Company must hold 50% of total equity share capital
- DIN: Director Identification Number for all Directors
Annual Compliances of Indian Subsidiary Company
- Compliance with Companies Act, 2013
- Compliances with Income Tax Act, 1961
- Guidelines with MCA, Ministry of Corporate Affairs
- FEMA guidelines
- Annual return with the Registrar of Company (ROC)
- Income tax return
- Filings with the RBI(Reserve Bank of India)
- Filings with the SEBI(Securities and Exchange Board of India)
