Subsidiary Company Registration in India- Process

 

Subsidiary Company Registration in India

 

With an objective of diversifying the businesses and have global reach for their goods and services, various companies incorporated outside India are willing to carry on their business in India which in turn helps them to have recognition in a different country and also help them to have a wide shareholder base.

With this perspective, the concept of a subsidiary of the foreign company was introduced pursuant to which various companies opt for business setup in India in the form of the subsidiary of a foreign company, such companies are required to primarily follow the Indian laws.

Subsidiary company registration in India is one of the most widely used and preferable mode of entity registration in India by the foreign companies.

A subsidiary of Foreign Company in India

In general words, A foreign company refers to a company or a body corporate incorporated outside India but has its place of business in India or conducts any of its business activity in India.

Also, the subsidiary company, in relation to any other company (i.e., holding company), means a company in which the holding company-

(i) controls the composition of the Board of Directors; or

(ii) Controls or exercises more than one-half of the total voting power either on its own or together with one or more of its subsidiary companies:

Now on considering the meaning of the above two definitions, it can be inferred that a foreign subsidiary company refers to the company where 50% or more of its total voting power is held by a company or body corporate incorporated outside India, the said foreign company shall here be referred as the holding Company or the foreign Company, however in case to acts as a subsidiary of a foreign company the subsidiary company is required to incorporate in India, no matter in which country its parent Company is incorporated.

Process of registration subsidiary of foreign company in India   

The subsidiary company of a foreign company is incorporated in India as a private limited company of public limited company which is the fastest and easiest way for a foreign national or a company to start its business in India, as FDI in a private limited company is allowed up to 100% under automatic route i.e. without any approval of the central government in most of the sectors barring some prohibited sectors as well as sectors where prior government approval in required.

Steps to be followed during subsidiary company registration in India

Following steps are involved in subsidiary company registration in India:

·         Proper shareholding structure and management: - In order to incorporate a private limited Company in India, a minimum of two shareholders and two directors are required where one of the directors shall be an Indian citizen and resident. Also, in order to have administrative convenience and ease on day to day operations, it is advisable to register an Indian subsidiary company with three directors where two directors may be Indian resident and one or more may be foreign nationals.

 

·         Obtaining Digital Signature Certificates ( DSC) of all the Directors: - DSC of all the directors are necessary since all the documents and forms which need to be filed before ROC/MCA for  incorporation need to be digitally signed by the directors or authorized representatives.

 

·         Application for name approval: - The subsidiary company may have the same name as its parent company with the addition of the word ‘India’; however, the same shall not be identical with the existing entity already in existence in India, in which case, new name have to be given for approval by ROC/MCA. Normally, 2-3 names are applied and any one name at the discretion of ROC/MCA gets approved.

 

·         Incorporation application along with DIN: - The final step in the registration process is the filing of the incorporation application along with MOA and AOA and the necessary documents as executed by proposed directors and shareholders. Also, director identification number (DIN) is applied. Further, PAN, TAN, ESI and PF numbers are also applied in common form called as SPICE+

·         Final Certificate of Incorporation - Finally, the company gets incorporated and certificate of incorporation is allotted.

·         Share subscription money: Bank account of newly incorporated subsidiary company needs to be opened and both the shareholders have to bring share subscription money into the said bank account in proportion of their shareholding.

 

·         Reporting of FDI with RBI- In case of share application/subscription money received from foreign shareholders, same is considered as Foreign Direct investment (FDI) in India. Accordingly, reporting to such money received need to be made with RBI by filing form FCGPR and filling Single master form within prescribed time. Also, allotment of shares in done and share certificates are issued and ROC need to be intimated about the same.

 

·         Appointment of first Auditors

 

Within 30 days of incorporation of the Indian subsidiary, board meeting need to be held and first auditors of the company need to be appointed.

 

·         Applying for certificate of commencement of business

 

Finally, once the share subscription money has been brought by both the shareholders into the Indian bank account, certificate of commencement of business may be applied with ROC/MCA.

 

This completes the process of subsidiary company registration in India.

 

Conclusion

 

Subsidiary companies are the best form of foreign company registration in India owing to its less tax rates as compared to other form of entities as well as the fact that Indian subsidiary may also enjoy the brand name of foreign companies subject to availability of such brand name in India.

 

It may be inferred from the above, that the process of subsidiary company registration in India is very much similar to incorporation of normal Indian private limited company with some difference relating to reporting of share subscription money received from foreign shareholders.