SUBSIDIARY COMPANY REGISTRATION IN INDIA- 5 THINGS TO KNOW

Subsidiary Company Registration in India


Subsidiary company registration in India is one of the preferred modes of foreign company registration in India by the foreign companies looking to set up business in India.

In this write up, we would be discussing about 5 things which every foreign company should know about subsidiary company registration in India:

1)      Although, for becoming subsidiary company, parent company needs to hold more than 50% shares in the Indian company or have control over its board of directors, however, parent company can hold even 100% shares in the Indian company, in which case Indian company would become wholly owned subsidiary of the parent company. In such case, 100% shares would be hold by parent company and 1 share would be held by nominee shareholder.

 


2)      Any documents which would be required from the parent company or foreign directors or foreign shareholders, same needs to be apostilled and notarized in the home country where such parent company or foreign directors/shareholders are situated. This makes the entire process of subsidiary company registration time consuming and also expensive as the cost of getting the documents apostille and notarize is quite expensive in most of the countries.

 

3)      In order to use the same name as that of the parent company by the subsidiary company in India, no objection certificate from the parent company is required. Also, parent company needs to pass a board resolution authorizing the Indian subsidiary to use the same name as that of the parent company.

 

4)      Any money received from parent company or foreign shareholders in the Indian subsidiary company would be considered as Foreign Direct Investment (FDI) in India and accordingly, RBI needs to be intimated about such receipt of FDI by first creating a login ID on RBI portal and then filing the necessary form along with prescribed documents. This process needs to be repeated at the time of each receipt of FDI in India. Therefore, it is advisable to keep sufficient authorized and paid up capital in the Indian subsidiary from the very beginning so as to avoid the aforesaid procedure again and again which is not only time consuming but also involved costs of the professionals and other costs.

 

5)      In case the business activities of the Indian subsidiary falls in the sector which are not covered under automatic route, in such cases any investment made in the Indian company by the parent company would require prior approval of RBI and foreign investment facilitation centre. Also, in case the investor in Indian subsidiary belongs to any country which is landlocked with India like China, Pakistan, Hong Kong, Bangladesh etc., in those cases also, prior approval of RBI and FIFP are required which is quite a time consuming process and in some cases, it takes about 7-9 months in getting approval. In such cases, better option of getting funds is through Extra Commercial Borrowings mode rather than FDI mode.

 

Thus, aforesaid are some of the points which every company should keep in mind while opting for subsidiary company registration in India in order to have smooth and hassle free experience of business set up in India.

Location: India

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