Subsidiary Company Registration in India- A brief overview

Subsidiary Company Registration in India


A foreign entity looking for business set up in India has many options both as incorporated entity and unincorporated entity.

One of the best options available for foreign company is in the form of subsidiary company registration in India.


Meaning of subsidiary company

Subsidiary company is a company which is hold or controlled by another company. The entity having a hold or control is called as holding company or parent company. As per Indian company’s rules, when parent company holds more than 50% shares or controls in another company, such another company becomes subsidiary company. One another manner in which Indian company becomes subsidiary of parent company is when parent company controls the composition of the board of directors of the Indian company.



 Meaning of wholly owned subsidiary

When parent company or holding company holds more than 100% shares of another company, the company in which such shares are hold, become wholly owned subsidiary of its parent company.

Such subsidiary company or wholly owned subsidiary company may be newly incorporated or it may be existing company in which shares are acquired by parent company.

Some examples to demonstrate the holding subsidiary relationships are as under:


a)      Company X holds 50% shares or more of Company Y

 

b)      Company X holds 50% shares or more of Company Y and Company Y holds more than 50% shares of Company Z then both Company Y and Company Z becomes subsidiary of Company X

 

c)      Company X has power to appoint or remove majority of the directors of Company Y

 Subsidiary Company Registration in India is the most popular form of entity registration. The reasons for same are as under:

 

a)      Subsidiary company can retain the brand name or trademark of its parent company.

 

b)      Both subsidiary company and holding company have separate legal entity status unlike branch office or liaison office, when branch has status of foreign company.

 

c)      Subsidiary companies are taxable at lesser rates as compared to branch office or LLPs

 

d)     Subsidiary companies do not automatically become permanent establishment of its parent company unlike branch office.

 

Procedure of subsidiary company registration in India

Subsidiary company is registered in India like any other Indian company wherein first of all digital signature certificates of all the directors need to be prepared, then company name is applied by drafting objects of the company and providing 2-3 proposed names of the company. Once company name is approved, final incorporation documents like memorandum of association and article of association are drafted and final incorporation form SPICE+ is filed online with the ROC/MCA. At the time of filing application, details of proposed banker are also provided. Further, PAN, TAN, ESI and PF of the proposed company is also applied simultaneously. Finally, Certificate of incorporation is granted.

Post subsidiary company registration in India, all the shareholders need to bring the share subscription money in the company’s bank account and intimate RBI about receipt of such foreign direct investment by filing necessary forms online on the portal of RBI.

Further, prior approval of FIFP is also required in case the proposed FDI is in those sectors which are not covered under automatic route or where FDI is coming from land locked countries with India.

Concluding remarks:

Subsidiary company registration in India is one of the most popular form of entity registration in India as it acts as an extended arm of the parent company but has separate legal entity as compared to its parent in India.

Location: India

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