What is a foreign subsidiary company?

A foreign subsidiary company is a company incorporated in India with a foreign company holding its majority of shares.

Can a foreign company own 100% of the shares in a subsidiary company in India?

Yes, under the current foreign direct investment (FDI) policy, a foreign company can own 100% of the shares in a subsidiary company in India subject to some specific industry restriction. However, MGT-6 is mandatory to file in this case with the MCA.

Is it mandatory to have an Indian resident director in a foreign subsidiary company?

Yes, it is mandatory to have at least one Indian resident director in a foreign subsidiary company in India as per the Indian Companies Act, 2013.

What is the minimum capital required for a foreign subsidiary company in India?

The minimum share capital required for a private limited company including foreign subsidiary company has been done away. Now, you can form a company with any capital of your choice.

How long does it take to register a foreign subsidiary company in India?

The registration process for a foreign subsidiary company in India usually takes around 3-4 weeks, subject to all documents being available and government processing time

What are the compliance requirements for a foreign subsidiary company in India?

A foreign subsidiary company in India must comply with various legal and regulatory requirements, including the filing of annual returns and financial statements, conducting annual general meetings, and obtaining necessary licenses and permits.

Can a foreign subsidiary company in India open a bank account?

Yes, a foreign subsidiary company in India can open a bank account in its own name after obtaining the Certificate of Incorporation. Compliance Calendar have partnered with various Global Banks where they offer seamless banking experience including issuance of KYC and FIRC in the process of FDI Reporting.

Can a foreign subsidiary company in India repatriate profits to its parent company?

Yes, a foreign subsidiary company in India can repatriate profits to its parent company subject to compliance with applicable regulations and procedures.

What are the tax implications of setting up a foreign subsidiary company in India?

The tax implications of setting up a foreign subsidiary company in India depend on various factors, such as the nature of the business, the location of the company, and the applicable tax laws. It is advisable to consult a tax professional for guidance on the specific tax implications.

Can Compliance Calendar help us in Foreign Subsidiary Company Registration?

Yes definitely. We have a dedicated team of professionals who can help you at each and every step of Foreign Subsidiary Registration process including FEMA Reporting and Compliance. For any query, you are welcome to reach out at info@ccoffice.in or connect at 9988424211 in order to book a professional consultation.

Foreign Subsidiary Registration

Foreign companies looking to enter the Indian market often opt for setting up a foreign subsidiary company in India. A foreign subsidiary company is a company that is owned by a foreign company or individual and is registered in India. If you are looking forward to setting up a Foreign Subsidiary or WOS, Compliance Calendar can help you with the requirements and process for registering a foreign subsidiary company in India.

In the present era of Indian economy where paramount importance is given to the business sectors, foreign investors are attracted by the huge market and cheap labour invest in India to expand their businesses. India is among the fastest growing economies of the world with plenty of business opportunities which make it a preferred destination for investment from NRIs, Foreign Nationals, and Foreign Companies. Among several ways to invest in this fastest-growing economy, incorporating a foreign subsidiary or wholly owned subsidiary company in India is one of the most successful and sought-after ways.

A subsidiary company is a company that is controlled, directly or indirectly, by another company i.e., its parent company or the holding company. Where a Foreign Company holds more than 50% shares or control over the company incorporated in India, the latter company is said to be the Foreign Subsidiary of the Former Company. Where the holding is 100%, it is said to be a Wholly Owned Subsidiary (WOS) Company. In cases, where a parent company owns a foreign subsidiary, the subsidiary must follow the laws of the country where it is incorporated and operates. Hence, a foreign subsidiary company incorporated in India must follow the applicable laws in India.

Registering a foreign subsidiary company in India involves complying with various legal and regulatory requirements. However, the benefits of doing so can be significant, as it provides foreign companies with a local presence in India and access to its growing market. It is recommended that foreign companies seek the advice of experienced professionals to ensure compliance with all legal and regulatory requirements.

While Incorporating a Foreign Subsidiary Company in India, we shall adhere to the Companies Act, 2013 and FEMA Act, 1999 along with the relevant rules and regulations prescribed under these Acts.

Why registering a Foreign Subsidiary Company in India is recommended to Foreign Investors?

According to FEMA guidelines, Foreign Direct Investment (FDI) is not allowed in case of Proprietorship, Partnership Firm, and One Person Company. FDI may be done through investment in LLP, but it is subject to the approval of the RBI.

Hence, the easiest and fastest way to set up a business in India by NRI’s and Foreign Nationals/entities is through the Incorporation of a Private Limited Company.

Requirements for Registration of Foreign Subsidiary Company in India: -

Capital Requirement: There is no minimum capital prescribed under the law to incorporate a Private Limited Company in India including Foreign Subsidiary Company / WOS Registration.
Directors: Minimum two directors are required to incorporate a Private Company in India. Both should be individuals and at least one of whom should be a resident of India.

Note: While Incorporating Foreign Subsidiary Company, the point that at least one director shall be a Resident in India should be taken with utmost importance. A resident of India is a person who has stayed in India for at least 182 days in the previous year. However, in the case of a newly incorporated company this requirement shall apply proportionately at the end of the financial year in which it is incorporated. [Refer Section 149(3) of Companies Act, 2013]

Shareholders: The Companies Act, 2013 requires that a Private Limited Company have a minimum of two shareholders. There is no condition for residential status of shareholders. Shareholders can be either individuals or entities or a combination of both.
Registered Office: A foreign subsidiary company must always have a registered office in India after its registration capable of receiving all communication.
Filing of Documents: To register a foreign subsidiary company, it is must to file various documents with the Ministry of Corporate Affairs, including the Memorandum of Association (MOA) and Articles of Association (AOA), Board Resolutions, and other statutory documents as required. Know the documents required in detail as below.

Documents Required for Foreign Subsidiary Registration

The documents required for Foreign Subsidiary Registration (FPO) registration in India are as follows:

Identity proof of all directors and shareholders, such as PAN for Indian National/ Passport for foreign national
Address proof of all directors and shareholders, such as Aadhaar card, bank statement or utility bill.
Certificate of incorporation and articles of association of the foreign parent company, duly attested by the Indian embassy or consulate.
Board resolution of the foreign parent company approving the establishment of a subsidiary company in India.
Power of attorney in the form of board resolution in favour of a person authorized to act on behalf of the foreign parent company.
KYC will be required for the authorised person acting on behalf of the parent holding company.
Memorandum of Association (MOA) and Articles of Association (AOA) of the Indian subsidiary, duly signed and notarized.
No-objection certificate (NOC) from the owner of the registered office of the subsidiary.
Declaration from the Indian resident director that he or she is not a director in more than the prescribed number of companies.
Declaration from all directors and shareholders of the subsidiary that they are not disqualified to act as directors or hold shares.
Bank statement of the foreign parent company to show the minimum authorized share capital.
Letter from the Indian parent company, if any, giving consent for the use of its name by the subsidiary.
Such other further documents as may be required from time-to-time by the Department.

Note : It is advisable to consult a legal and compliance professional for guidance on the specific documentation required for registering a foreign subsidiary company in India, as the requirements may vary depending on the type of company and other factors. You can connect with Compliance Calendar as we have depth experience in dealing with the Foreign Subsidiary Company Registration in India.

Legal Procedures of Foreign Subsidiary Registration

Step 1: Application for Name Reservation

Application for Name Reservation is filed in SPICe+ Part A. For filing the application, Company must choose the appropriate name for the Proposed Company.

Point to consider while selecting the Name of Company:

a) In case of Subsidiary or WOS, foreign Company can use coin word of its name for Incorporation of Company in India to take the Benefit of Its goodwill in foreign Country.
b) Foreign Company can apply the same name (name in foreign country) in India by using word “India” in its name.
c) If foreign Company having any registered Trademark, then it can use such trademark for Incorporation of Company in India.
d) Any other name as decided by the Foreign Company.
In case of Foreign Company using its “Trademark” following Documents/information is required:
- a) NOC from the Foreign Company to use ‘Trademark” in the form of Resolution. Such resolution shall be apostilled in foreign Country.
- b) Apostilled copy of Charter of Foreign Company (translated in English language).
- c) Copy of trademark registration documents.

In case where no trademark is used in Proposed name, no mandatory documents are required to be attached with the Application for name reservation. However, one may attach the detailed copy of Main Objects in attachment.

After Reservation of Company Name, it is mandatory to proceed with the filing of FORM SPICe+ Part B with the Ministry of Corporate Affairs:

Step 2: Compilation of documents

Required documents of Proposed Company:

Address Proof of Proposed Place of Business (Conveyance/ Lease deed/ Rent Agreement etc. along with rent receipts)
Utility Bill (Electricity, Telephone, Gas Bill etc.) for the premises – not older than 2 months,
NOC from owner for use of premises as Registered Office

Required documents of Indian Resident Director/Shareholder:

Photograph
Copy of PAN Card
Copy of Aadhar/ Passport/ Voter ID/ Driving License
Copy of Bank Statement/ Mobile Bill/ Telephone Bill/ Electricity Bill – not older than 2 months

Apostille / Notarized documents of Foreign Directors/Shareholders and Authorized Representative of Foreign Company

Photograph
Copy of Passport
Copy of Driving License, Bank Statement, or any utility bill in the country of residence – not older than two months
Apostille / Notarized copy of resolution of foreign Company ‘mentioning the name of authorized representative, no. of subscription of shares’
Apostille/ Notarized copy of ID Proof of authorized representative if such person is non–resident of India.
Apostille/ Notarized copy of Charter of Foreign Company.
Name of Nominee (in case of WOS incorporation)

STEP – 3: Preparation of Documents for Incorporation of Company

For Incorporation of Company, the following documents are required:

Memorandum of Association of Company (In case of Foreign Subsidiary Physical copy of MOA shall be prepared, which is duly apostille or notarized in country of origin)
Article of Association of Company (In case of Foreign Subsidiary Physical copy of MOA shall be prepared, which is duly apostille or notarized in country of origin).
INC-9 declaration by first subscriber(s) and director(s) (Duly apostille or notarized in country of origin). If all the subscribers having PAN/DIN then INC-9 shall be e-INC-9 download from dashboard.
DIR-2 declaration from first Directors (In case of Foreign Director, it shall be Duly apostilled or notarized in country of origin)
INC-8 Certification in FORM INC-8 is required either from Practicing Company Secretary, Practicing Chartered Accountant, Practicing Cost Accountant, Advocate

STEP – 4: Fill the Information in Form SPICe+ Part B

Once all the above-mentioned documents/ information is available. It is required to fill the information in the e-form “Spice+ Part B” and submit the same with certification.

STEP – 5: Filing of Form AGILE PRO

After submitting SPICE+ Part B, AGILE PRO is also required to be submitted with the MCA. All the information which are common in SPICE PART B and AGILE PRO shall be auto fill in AGILE Pro and contain the following details:

GST: If Company wants to apply for GST it has to select YES in the form and fill the information in the form.
EPFO/ ESIC: It is mandatory to apply for ESIC and EPFO. However, as per their concerned department company not required to file return till the date applicability of provisions of same on such company.
Bank Account: One must select the bank name in this form. Bank account branch shall be assigned according to nearest branch to the Registered office of the Company. However, it is important to note that after Company Incorporation, you can choose any other bank of your choice and may skip the one selected in AGILE Pro.

STEP – 6: Fill details of INC-9

INC-9 is a web-based form and need DSC affixation of Directors/ subscribers. It shall not be generated web-based in one situation where at least one director/ subscriber is not having DIN and PAN both.

STEP – 7: Download PDF of all the web-based forms

After filing of all web-based form i.e., Spice+, Agile Pro and INC-9. Download PDF of such forms from dashboard given link. After downloading of PDF affix DSC on all the forms accordingly including that of Professional.

STEP – 8: Filing of forms with MCA

Once all forms ready with the applicant, upload all four document as Linked form on MCA website and make the payment of the same.

STEP – 9: Certificate of Incorporation

The incorporation certificate shall be generated with CIN, PAN & TAN details over it, subject to the approval of CRC.

Features & Benefits of Foreign Subsidiary Registration

Registering a foreign subsidiary company in India can offer several benefits for foreign businesses looking to expand their presence in the Indian market. Here are some of the key benefits of registering a foreign subsidiary company in India:

Limited Liability: Registering a foreign subsidiary company in India provides limited liability protection to the parent company. This means that the parent company's assets will be protected in case of any legal disputes or financial losses incurred by the subsidiary company in India.

Access to the Indian Market: India is a rapidly growing market with a large population and a growing middle class. Registering a foreign subsidiary company in India can provide businesses with access to this vast market, which can help increase revenue and profitability.

Tax Benefits: Registering a foreign subsidiary company in India can provide tax benefits, including lower tax rates and tax exemptions, depending on the nature of the business and the location of the subsidiary.

Easy to Set Up: The process of setting up a foreign subsidiary company in India is relatively straightforward and can be completed within a few weeks. Additionally, the Indian government has taken several measures to simplify the process of registering a foreign subsidiary company in India.

Credibility: Registering a foreign subsidiary company in India can enhance the credibility of the parent company in the eyes of Indian customers and suppliers. This can help establish a positive reputation and build trust, which is essential for long-term success in the Indian market.

Localized Operations: Registering a foreign subsidiary company in India allows the parent company to have a localized presence in the Indian market. This can help businesses understand local market dynamics and tailor their products and services to meet the needs of Indian customers.

In conclusion, registering a foreign subsidiary company in India can provide several benefits, including limited liability protection, access to the Indian market, tax benefits, easy setup, credibility, and localized operations. However, it is essential to carefully consider the legal and regulatory environment in India and seek professional advice to ensure compliance with all applicable laws and regulations. Connect with Compliance Calendar if you have any questions regarding Foreign Subsidiary/ WOS Registration in India.

Post Incorporation Compliances

1. Appointment of First Auditor:

The company shall conduct a meeting of Board of Directors within 30 days from the date of incorporation of the company. In this meeting, company shall appoint the First Auditor of the Company, which holds such position till the conclusion of first AGM of the company. The appointed auditor shall be the Practicing Chartered Accountant or Firm having the majority of CA.

2. Issue Share Certificate to the subscribers:

The company has to issue the share certificates to the Subscribers of the MOA within 60 days from the date of Incorporation. Depending on the states, it is also mandatory to get e-stamping of share certificates.

3. INC-20A: Declaration of Commencement of Business

The newly incorporated company must file eForm INC-20A within 180 days from the date of Incorporation. For filing INC-20A with ROC, Receipt of Subscription Money from all the Subscribers to the MOA is mandatory. It should be noted that no company shall start its business operation before filing INC-20A with ROC.

4. Declaration of Registered and Beneficial owner:

It is most seen in the case of Wholly owned Foreign Subsidiary that one share of the Foreign Parent Company is held by another person as a nominee to fulfil the requirement of minimum number of shareholders. In such case the following disclosures are mandatory:

FORM MGT-4: The person or a company (as the case may be), who holds the beneficial interest in any share shall submit the declaration as prescribed by The Companies (Management and Administration) Rules, 2014 in Form MGT 4 along with the covering or request letter to the company in which they hold the beneficial interest within one month from the date of acquisition or change in beneficial interest.
FORM MGT-5: The person or the company (as the case may be), whose name to be entered into the register of members of the company shall submit the declaration as prescribed by The Companies (Management and Administration) Rules, 2014 in Form MGT 5 within one month from the date of acquisition or change in beneficial interest.
FORM MGT-6: On receipt of declaration in Form MGT 4 & 5 by the company, the same shall be placed before the board for approval. The company are also required to intimate the Registrar of companies in e-form MGT 6 (Available in MCA Portal) within one month from the date of receipt of declaration in Form MGT 4 & 5.

5. Declaration of Significant Beneficial owner (SBO):

As per Section 90 of the Companies Act, 2013, Every individual who is a SBO in the Reporting Company or whose Significant Beneficial ownership undergoes any changes, is required to file a declaration with the Reporting Company in FORM BEN-1 within 30 days of such acquisition or change. In turn, the Reporting company will be required to file the said disclosure to ROC in FROM BEN-2 within 30 days of receiving it from the SBO.

SBO in simple words means a person who has significant control, directly or indirectly, in the Company. In case of foreign subsidiary company, the subscriber/shareholder/owner of the Foreign Parent Company may have significant influence on the subsidiary company. In such case this disclosure is mandatory.

6. FORM FC-GPR: Reporting of allotment of Shares to Foreign Investor

The company shall report to the RBI with respect to the allotment of Shares to Foreign investors and receipt of FDI by way of investment in the equity share capital of the Indian Company. FC-GPR shall be filed within 30 days from the date of allotment of shares. For filing of FC-GPR, Company must collect Foreign Inward Remittance Certificate (FIRC) from Bank as per FDI guidelines.

7. FLA Reporting to RBI:

FLA Return is required to be filed by all the Indian Company and LLP which have received FDI (Foreign Direct Investments) and/or made FDI abroad in any of the previous years including the current year. The Due date for filing FLA Return is July 15 of next financial year.

At Compliance Calendar, we have dedicated team of Professionals who can guide you with the checklist of documents required, process involved and any other question, you may have regarding Foreign Subsidiary/ WOS Registration in India. Feel free to reach out at info@ccoffice.in or connect at 9988424211. Do not forget to read our below most frequent Frequently Asked Questions (FAQs).