Digital/ Print Media Expansion in India - A Guide to Establishing a Subsidiary Company

Digital/ Print Media Expansion in India - A Guide to Establishing a Subsidiary Company. With a massive explosion in online content creation, digital news, entertainment and on-demand media services, India is projected to reach a digital media market of USD 8 billion by the end of this year. As a country with the world’s largest population of young people, India is fast becoming the new hotspot for digital media and print media companies. In this post, Compliance Calendar breaks down the process of setting up a subsidiary company in India for expanding your digital media and print media business.
Why should your print or digital media company enter Indian markets now

Massive rise in mobile audio, video and text streaming - India currently has the largest base of YouTube subscribers in the world, with an average Indian spending over five hours on the internet everyday. With a large base of digitally literate young population, the demand for news consumption through online mode in India is steadily growing with over 800 million internet users. It is also predicted that 87% of Indian households will have an internet connection by 2025.

One of the cheapest WiFi and mobile data rates in the world - With 1 GB data costing $0.04 or about 13 rupees, India has one of the cheapest internet rates in the world. This also leads the Indian digital market to be driven by strong undercurrents of a large user base and advertising revenues.

Rise of 5G in India and early embark on 6G journey - As per estimates, 5G connections in India is expected to reach near 369 million subscribers by 2026. Reliance Jio is planning for pan India 5G presence by end of 2023 while Bharti Airtel is aiming for a pan India footprint by end of March 2024. India has already embarked on its 6G journey well in time, and was also highlighted by the Prime Minister in his speech on India’s 77th Independence Day, 2023.

The culture of social media, influencers and consumption patterns in India - Statistics of digital transactions in India, such as UPI show that India is ahead of all the digital transactions in the USA, Canada and Germany put together. With a large base of the middle class that engages routinely in consuming news, information, and shopping via online media, the future of digital and print expansion in India is brighter than ever.

Opportunities for businesses in the digital media and print media expansion in India 
Given the rise of on-demand content consumption via digital platforms in India, opportunities are increasing for the following sub-sectors in the digital and print media ecosystem in India:

Content creation - This includes businesses engaged in content creation for digital media, print content, as well as content aggregators and publishing agencies.

Distribution networks - This line of business relates to apps available for streaming digital entertainment, news, videos and other content, telecom partners, streaming services etc. This also includes the rise in cross-platform creative companies for digital content.

Technology platform providers - The streaming of digital content is done via services provided by app developers, internet service providers, hardware companies (Smart TVs, streaming gadgets like Chromecast), and intermediaries.

Marketing and Advertising platforms - The ecosystem of digital and print data creation relies heavily on marketing and advertising platforms, which are sponsored by direct advertisers such as large MNCs, sponsors for specific content, search engine marketing and digital/radio/TV/print media partners.

Foreign Direct Investment in Digital Media and Print Media Business in India
The government of India allows FDI in India via two routes. The automatic route and the government approval route. In the former, FDI is freely allowed in the country with no involvement of RBI or government approvals. However, in case the FDI intended is above the threshold allowed for automatic route, the government’s prior approval is necessary.
To go back in time, it was the year 2002 when the Indian government first allowed FDI in the print and broadcast media industry, with up to 26% FDI in current affairs and up to 74% in non-news and current affairs. FDI in print media has led to an expansion in foreign media conglomerates and international digital broadcasting agencies in India.
Based on the latest FDI Policy of 2020, entities engaged in uploading / streaming of news and current affairs through digital media platforms are permitted to receive FDI up to 26% under the government approval route. This limit also applies to FDI in the print media sector in India. Several industry groups also critique the government for not upgrading the limit from 26% in the last two decades.
Exception carved out for journals, scientific research within Print Media FDI

Foreign investment (including FDI) is allowable up to 74% in Indian entities publishing scientific/technical and speciality magazines/ periodicals/journals.

Where only Indian editions of foreign scientific/technical/ speciality journals etc. are being published with no foreign investment (including FDI) being made, the Ministry of Information and Broadcasting will give approvals on a case by case basis subject to prescribed conditions.

Clarification on what constitutes “digital media” as per circular issued by the DPIIT, Ministry of Commerce
Given the rapid advancements in technology and digital networks, there emerged several challenges in determining what constitutes “digital media” for the purpose of determining FDI. On 16 October 2020, a clarification has been issued that states the following entities would be categorized as digital media for the purpose of determining FDI:

digital media entities streaming/uploading news and current affairs on websites, apps or other platforms;

news agency which gathers, writes and distributes/transmits news, directly or indirectly, to digital media entities and/or news aggregators;

news aggregator, being an entity which, using softwares, web application, aggregates news content from various sources, such as news websites, blogs, podcasts, video blogs, user submitted links, etc in one location.

OTT platforms not included in ‘digital media’ for the purpose of FDI
In a clarification issued on 10 March 2023 by the Ministry of Information & Broadcasting, it has been stated that the 26% upper FDI limit applicable to digital media platforms does not apply to OTT platforms. This effectively means that digital media including news channels, online live news etc can now be streamed by OTT platforms without adhering to the FDI restrictions applicable to digital media. This clarification comes as a major relief to OTT platforms like Disney+, Hotstar and others, which had to remove live news streaming from third party TV news channels from their broadcasting.
Seeking government approval for your FDI in a digital media company in India - Here’s the process
Since August 5, 2022, the FDI approval process has been simplified and all applications must be submitted via the government’s National Single Window System. This obviates the need for a company to apply to the concerned ministry and seek permissions. The Foreign Investment Facilitation Portal, maintained by the Department for Promotion of Industry & Internal Trade oversees the FDI application process and forwards the same to the concerned ministries for approvals.
Incorporation of the Subsidiary Company in India for your digital and print media business

The first step for entering the Indian market is to incorporate a subsidiary company in India. The regulating law for companies in India is the Companies Act, 2013 and its associated rules.

You need to register the company with the Registrar of Companies (ROC) under the Companies Act, 2013. Compliance Calendar has assisted thousands of companies in niche industries in filing for incorporation successfully.

The process requires obtaining a Digital Signature Certificate (DSC) and Director Identification Number (DIN) for the proposed directors. There must be at least one Resident Indian director on the board.

The draft of the company's Memorandum of Association (MOA) - enlisting specifics of the e-commerce business that the company plans to engage in, and Articles of Association (AOA) regulating the internal procedures, alongside necessary forms (that includes name, registered address, capital limits etc) has to be filed with the Registrar of Companies.

An Advanced Reporting Form needs to be filed with the RBI, when share capital is subscribed to, by foreign entities. Filing of Form FC-GPR with RBI must be done within 30 days from date of allotment of shares to subscribers/foreign holding company.

Apostillation and Notarisation requirements for foreign subsidiary company in India 
Apostillation refers to the process of certifying foreign company documents issued outside India for use within India. The following are the compliance requirements in this regard:

Translation of incorporation or registration certificates in English.

Copy of ID Proof of each authorized representative in India and number of shares subscribed by them

Copy of Charter of the Foreign Company

Form DIR-2 for consent to act as director, to be signed by each director.

NOC on the property, in case the property is on lease

Address Proof, such as rent agreement, lease deed along with copy of utility bills

For companies belonging to the Commonwealth : all signatures and addresses on MoA and AoA and proof of identity must be notarised by a Notary (Public) in that part of the Commonwealth.

For countries which are parties to Hague Apostille Convention of countries : the signatures and addresses on MoA and AoA must be notarised by the Notary (Public) of the country of his origin and be duly apostilled in accordance with Hague Convention.

For countries outside the Commonwealth and Hague Apostille Convention: the signatures and address on the memorandum and articles of association and proof of identity shall be notarized before the Notary (Public) of such country and the certificate of the Notary (Public) shall be authenticated by a Diplomatic or Consular Officer.

Post-registration compliance requirements for digital/print media foreign subsidiary company in India
After registering a company in India, there are several compliance requirements that need to be fulfilled to ensure legal and regulatory adherence. Here are some key post-registration compliance obligations for foreign subsidiary companies in India, operating in the digital and print media space, receiving FDI under permissible rules:

Filing Forms for beneficial ownership: Forms MGT-4, MGT-5 and MGT-6. All of these forms entail providing information on beneficial share ownership. Form MGT-4 with beneficial interest in any share along with a covering letter must be filed within one month from date of acquisition. While BEN-2 is for significant beneficial ownership change, i.e., indirect holding along with direct holding. MGT-6 is for beneficial indirect ownership. Even a single share held by a registered member on behalf of someone else will trigger the requirement for filing of MGT - 6. This must be done within 30 days of the date of receipt of declaration.

Form DIR-2 : for directors consent.

Form INC-9: for declaration by the first subscribers and directors.

INC-20 A: This is a mandatory form, required for obtaining a certificate of Commencement of Business. It must be filed within 180 days of the date of incorporation. A bank statement evidencing the receipt of subscription money by the company is necessary.

Documents required for filing form FC-GPR with RBI:

Board Resolution for Allotment of Shares / Compulsorily Convertible Preference Shares (CCPS)/ Compulsorily Convertible Debentures (CCD)

Memorandum of Association of the company in case the shares are allotted for the subscription to the Memorandum of Association (MOA)

Foreign Inward remittance Certificate (FIRC) from AD Bank

KYC from AD Bank

Valuation certificate regarding the value of shares from the Chartered Accountant

CS Certificate in the prescribed format

Declaration by Authorized representative of the Company

Debit Authorisation for debiting charges from the Bank

Declaration regarding issue price by the directors of the Company

Reason for delay in submission, if any

FLA Reporting to the RBI: The FLA return must be filed by Indian companies and LLPs receiving FDI during the current year. This form needs to be filed by July 15 of the subsequent financial year.

Other Restrictions Applicable on Digital Media Companies receiving FDI:

The majority of Board of Directors in the investee company should be Indian citizens

The CEO of the investee company should be an Indian citizen

The company is also required to obtain security clearance of all foreign personnel likely to be deployed in the country for more than 60 days in a year, whether by way of regular appointment, contract or consultancy.

India is expected to emerge as a trillion dollar economy by 2030, as per market projections. Changes in news consumption patterns to online modes, the colossal rise in 5G and a favorable investment climate in India, make investments in digital and print media spaces in India a worthy opportunity. Having assisted diverse corporate clientele in drafting user-agreements, incorporating a foreign subsidiary company in India and securing IPR, Compliance Calendar’s bouquet of services can make setting up your digital and print media company in India venture hassle-free.

Digital/ Print Media Expansion in India - A Guide to Establishing a Subsidiary Company

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