Subsidiary Company Registration in India- Some Advantages
Subsidiary Company Registration in India
Subsidiary
company registration in India is one of the most
popular forms of entity registration by foreign companies when they want to set
up business in India in the form of incorporated entity.
As we know that foreign companies can Business set up in India in the form of Branch office, liaison office and project office which are unincorporated form of entity registration and also in the form of Private Limited Company, Public Limited Company and Limited Liability Partnerships which are incorporated form of company registration in India.
In this write up, we would try to understand the process of subsidiary company registration in India in a brief manner.
What is a subsidiary company
When a parent company
holds more than 50% shares or control in the Indian company, Indian company
becomes subsidiary of the parent foreign company. On the other hand, when
parent company holds 100% shares or control of the Indian company, Indian
company becomes wholly owned subsidiary of
the parent company.
The control can be
exercised by the parent company in the Indian subsidiary company in any of the
following manner:
a)
By controlling the
composition of the BOD (Board of directors)
b)
Or exercising control
on more than one half of the total voting power in that company either by
itself or together with one or more subsidiaries
What are the advantages of
registering Indian subsidiary company by foreign company?
Some
of the advantages of Indian subsidiary company registration are as under:
a) Indian company can retain
or use the brand name of the parent company.
b) Indian company is
considered as separate legal entity as compare to its parent, accordingly,
unlike branch office which automatically becomes permanent establishment of its
foreign company in India, Indian subsidiary company does not automatically
becomes PE of its parent company.
c) The legal status of Indian
subsidiary company is that of an Indian company, accordingly, it is taxable as
domestic company at tax rates of either 15% or 22% or 25% depending upon case
to case basis.
d) Indian subsidiary company
has lowest tax rates as compared to branch office which is taxable at 40% plus
surcharge and education cess and Limited liability partnerships which are taxable
at 30% plus surcharge and education cess.
e) Indian subsidiary company
has no restriction as far as business operations are considered. Unlike branch
office, project office and liaison office which got permission from RBI for
registration subject to engaging in only those activities which are permissible
by RBI, Indian subsidiary company can be engaged in all the business activities
which are permissible by its memorandum and article of association subject to
RBI guidelines which prohibits foreign direct investments in some sectors.
Also, for obtaining FDI in some sectors which are not covered in automatic
routes, prior approval of FIFP or government authorities are required. Most of
the sectors are covered under automatic route for FDI and only RBI needs to be
intimated once money is received in India. Only in some sectors, prior approval
of government authorities are required.
Thus, from the
foregoing, it may be seen that there are many advantages of subsidiary
company registration in India due to which India has
witnessed tremendous growth in more and more subsidiary company registration in
recent years.
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