Indian Subsidiary of Foreign Company Registration in India

If you’re a foreign company looking to make a mark in India, establishing a subsidiary in the country can be a great way to enter the market. Not only does it allow you to have a physical presence in the country, but it also offers a way to comply with local regulations. However, the process of registering a subsidiary in India can be overwhelming for many. From legal paperwork to tax compliance, there are several factors to consider. In this blog post, we’ll take a closer look at the Indian subsidiary of foreign company registration process, and provide you with key insights to help you navigate through it smoothly.

1. Introduction to subsidiary company registration in India

India has become a hub of investment and accommodating global businesses in recent times. It is one of the fastest-growing economies globally, attracting a tremendous amount of foreign direct investment and private equity capital. As per reports, the foreign direct investment in India touched a high of $34.9 billion in the financial year 2015, indicating a massive increase in investment opportunities.

To establish a business entity in India, foreign nationals and foreign companies can adhere to various entry strategies, including the incorporation of a private limited company or a limited company. Incorporation of a Private Limited Company or Limited Company is the quickest and easiest form of entry strategy and requires no central government permission if foreign direct investment is up to 100%.

On the other hand, incorporating a Limited Liability Partnership, Proprietorship Firms, or Partnership Firms require prior RBI approval and are not suitable for a foreign national or foreign company investment into India. Additionally, registration of Branch Office, Liaison Office, or Project Office requires RBI and/or government approval, increasing the overall cost and time of registration.

Overall, opting for an Indian Subsidiary Company Registration is highly recommended for foreign nationals and foreign companies as it offers a separate legal entity, limited liability, and perpetual succession. Such entities have control over their subsidiary company and hold the power to expand and invest in the Indian market without prior approval. 

2. Understanding the legal requirements for registering a subsidiary of a foreign company in India

Expanding a foreign business to India can bring several benefits with its growing economy and diverse consumer base. To establish a presence in India, foreign companies can consider registering a subsidiary company, which is a separate legal entity that operates independently under the control of a parent company. VenturEasy has a team of experts to assist foreign companies in navigating through Indian laws and regulations for subsidiary company registration, local office set-up, and bank account opening. Private Limited Company is the most common type of company for foreign companies, with a minimum of two directors, one of which should be an Indian resident, and two shareholders. The initial cost for subsidiary company registration in India is approximately USD 1,400, which includes professional fees and government fees.

To comply with Indian laws, foreign companies must submit the requisite documents, such as copies of passports, PAN and Aadhar cards, and bank statements, among others. They should also follow formal procedures for company registration, starting with name approval from the Ministry of Corporate Affairs through their online portal. After obtaining a Certificate of Incorporation, they need to proceed with bank account opening and other tax registrations. Foreign companies can benefit from setting up a subsidiary in India, such as improved market access and increased revenue potential, enhanced brand visibility, and reputation in the Indian market, access to local resources, talent, and business networks. 

3. Benefits of registering a subsidiary company in India

Expanding a foreign company’s business to India can be a lucrative opportunity. One way to establish a presence in India is by registering a subsidiary company. A subsidiary company is owned by the parent company and operates independently but is still controlled by the parent company. This allows the parent company to have a presence in India without starting from scratch. Registering a subsidiary company in India involves selecting the type of company, meeting minimum capital and director requirements, providing necessary documents, and reserving the company name. Benefits of registering a subsidiary company in India include access to India’s booming economy and abundance of capital, compliance with Indian laws, and tax benefits. Subsidiary companies also generate job opportunities, contributing to economic growth. With expert guidance from professionals, the process of registering a subsidiary company in India can be smooth and successful. 

4. Step by step guide to registering a subsidiary company in India

Expanding business to India can be a smart move for foreign companies. One way to establish a presence is by registering a subsidiary company. A subsidiary is a separate legal entity owned by a parent company, which allows parent companies to have a presence in India without setting up a new company from scratch. The process of registering a subsidiary can be complex, but with the right guidance, it can be a smooth and successful endeavor. Here is a step-by-step guide to registering a subsidiary company in India:

1. Select the type of company – the easiest and fastest way is to incorporate a private limited company.

2. Ensure minimum requirements – no minimum capital is required, two directors (one a resident of India) and a minimum of two shareholders are necessary.

3. Obtain Director Identification Number and Digital Signature Certificate for each proposed director.

4. File incorporation documents including Memorandum of Association and Articles of Association with the Ministry of Corporate Affairs.

5. Wait for approval and receive a certificate of incorporation.

6. Open a bank account, register for taxes and obtain necessary compliance registration.

Note that specific requirements and procedures may vary based on the business type and subsidiary location. 

5. Challenges and roadblocks you may face during the registration process

Expanding business to India can be a smart decision for foreign companies. Registering a subsidiary company in India can be an efficient way to have a presence in the country. However, the process might be complex for foreign companies, but with proper guidance, it can be successful. Registering a subsidiary company requires compliance with Indian laws and regulations, setting up a local office, and opening a bank account. This process can be challenging for foreign companies. As per FEMA guidelines, foreign direct investment is not allowed in proprietorship, partnership firm, or one-person company. Incorporating a private limited company is the easiest way for NRI’s and foreign nationals/entities. A minimum of two directors, with at least one of them being a resident of India, are required to incorporate a private limited company. A subsidiary company is a separate legal entity controlled by the parent company, following the laws of the country where it is incorporated and operates. 

6. Tips for successful subsidiary company registration in India

Setting up a subsidiary in India can be a complicated and time-consuming process for foreign companies. However, it can provide access to a rapidly emerging market with a developing middle class, skilled and low-cost labor, tax incentives, and a strategic location. There are various types of subsidiaries foreign businesses can establish in India, including wholly-owned subsidiaries, joint ventures, liaison offices, branch offices, and project offices.

To set up a subsidiary company in India, foreign companies must follow certain legal requirements. These include having a minimum of two directors, with one being a resident Indian, checking if FDI for their business is allowed in India, and providing an office address. After submitting the necessary documents to the Ministry of Corporate Affairs, foreign companies will receive a Certificate of Incorporation, allowing them to commence business operations in India. They must then proceed with bank account opening and other tax registrations.

To ensure a smooth and successful process, professional support is essential. A consultation with a business setup team can help answer any questions and provide a quotation for registration and yearly expenses. Secure nominee director services are available for termination anytime. Registration fees, bank account opening, and payroll and tax filing fees can cost approximately USD 1400 initially and USD 500 per month. 

7. Requirements for registering a subsidiary company in India

For foreign companies looking to expand their business in India, registering a subsidiary company is a popular choice. A subsidiary company is a legally independent company that is at least partially owned by a foreign company. In order to register a subsidiary company in India, there are several requirements that must be met. First and foremost, the foreign company must have a minimum of one Indian resident director. This director must be an Indian citizen and must have lived in India for at least 182 days in the previous year. Additionally, the subsidiary company must have at least two shareholders, with no limit on the maximum number of shareholders. It is also required that the company has a permanent address in India, which can be either a residential or commercial address. Finally, the subsidiary company must obtain a digital signature certificate and director identification number for all of its directors in order to comply with Indian laws.

8. Types of companies allowed for foreign investment

Foreign companies and nationals seeking to invest in India have several options to choose from in terms of types of companies allowed for investment. The simplest and fastest entry strategy is the incorporation of a Private Limited Company or Limited Company. Under the automatic route, foreign direct investment of up to 100% into a private limited or limited company is permitted without prior Central Government permission. Another option is through incorporation of a Limited Liability Partnership, which is allowed 100% FDI since 2015. However, an LLP cannot have shareholders and must be represented by partners. Proprietorship and partnership firms are also available, but require prior RBI approval for foreign investment. The more time-consuming options are the registration of a branch office, liaison office, or project office, which require RBI and/or government approval and are limited to foreign companies only. Overall, incorporating a private limited company as a wholly-owned subsidiary or joint venture remains the cheapest, easiest, and fastest option for foreign investment in India. [15][16]

9. Minimum requirements for registering a Private Limited Company

To an Indian subsidiary of a foreign company, there are minimum requirements that need to be met. A private limited company must have a minimum of two shareholders and two directors, with at least one of the directors being an Indian citizen and resident. Shareholders can be individuals or corporate entities, and foreign nationals are welcome to become directors of the company. Registering a limited liability partnership is also an option with up to 100% FDI allowed. However, a partnership must have partners and not shareholders, which make it an ideal choice for investment vehicles and professional firms. Proprietorship or partnership firms are not suitable for foreign investment into India because they require prior RBI approval. 

10. Documents required for registration of foreign companies in India

Foreign companies looking to establish their operations in India need to comply with the Companies Acts of India, the Companies (Registration of Foreign Companies) Rules of 2014, and FEMA guidelines. Under the Companies Act 2013, a foreign company is defined as a corporation incorporated outside India, but with a business presence in India, either through an agent or by itself, either physically or via electronic mode. There are several ways a foreign company can register in India, such as forming a private limited company and investing FDI of up to 100% under the automatic route policy. A foreign company can also establish a joint venture, wholly-owned subsidiary, liaison office, project office or branch office, which requires approvals from either RBI or Government. To register, a foreign entity needs to submit several documents like proof of identity and residential address, utility bills, apostilled copies of the resolution, charter, ID proof, and certain declaration forms. 

11. Appointment of Indian Resident Director

Indian laws require every company to have at least one director who is an Indian resident. As per Section 149(3) of the Companies Act 2013, a director must have resided in India for a total of 182 days or more in the preceding calendar year. Therefore, it is necessary to appoint an Indian resident as a director for every company. A resident director is responsible for overseeing the company’s operations and ensuring compliance with Indian laws. The resident director is also required to have a Director Identification Number (DIN), which is essential for appointment as a director in an Indian company. Having a resident director helps foreign companies understand the local laws, regulations, and business practices that are necessary for conducting business in India effectively. 

12. Required proof for Directors/Shareholders and Authorized Representative

When incorporating a foreign subsidiary or wholly owned subsidiary in India, there are several requirements to be fulfilled. Proof of identity and residential address, such as self-attested PAN and Adhar, is needed for Nominee Shareholders and Directors. For those without a DIN, they need to provide self-attested passport or driving license and a bank statement not older than two months for proof of identity and residential address. In addition, Authorized Signatories must provide an Apostilled copy of proof of identity, such as PAN, Adhar, and Passport, and proof of residential address, such as utility bills and phone bills with complete addresses.

For the foreign company, they need to provide an Apostilled copy of the resolution of the foreign company, which lists the name of their authorized representative and number of subscribed shares, and a copy of the Charter of the Foreign Company. They also need to provide the name of one Resident Director and the name of the Nominee, if applicable. In case the Director does not have a DIN, they need to attach proof of identity and residential address of the subscribers, a declaration of not having PAN, and a NOC from the owner of the property. Proof of Office address such as conveyance, lease deed, or rent agreement is also required.

Once all necessary documents and information are submitted, the process of incorporating the subsidiary can begin. The steps include receipt of subscription money from foreign subscribers, filing of e-form 20A for Declaration of Commencement of Business, collecting FIRC Certificate from the bank, issuing share certificates to the subscribers, and filing FCGPR with RBI as per FDI Guidelines. A Practicing Company Secretary can handle these works, which include GST registration and returns, private and public company registration, LLP registration, and more. 

13. Proof of Proposed Place of Business for Indian Company

Expanding business to India can be a smart move for foreign companies due to its large and growing economy. To establish a presence in India, registering a subsidiary company is a possible option. A subsidiary company is a separate legal entity owned and controlled by the parent company, enabling the parent company to have a presence in India without setting up a new company from scratch. However, the registration process can be complex, but with the right guidance, it can be successful. At VenturEasy, a team of experts can assist foreign companies with subsidiary company registration and compliance with Indian laws and regulations.

Incorporating a private limited company is the easiest and fastest way for NRIs and foreign nationals/entities to set up a business in India. The minimum requirements for incorporating a private limited company in India are: there is no minimum capital required, a minimum of two directors (one of whom should be an Indian resident) is required, and a minimum of two shareholders is required, with no residential status condition. However, foreign direct investment (FDI) is not allowed in proprietorship, partnership firm, and one person company, and for LLPs, prior approval of the Reserve Bank of India is required according to FEMA guidelines.

The documents required for registration of foreign companies in India include copies of ID proofs and bank statements that are not older than two months. Indian resident directors must provide a copy of their PAN and Aadhar card, while foreign directors/shareholders and authorized representatives of foreign companies must provide a copy of their passport and driving license.

For Indian companies, a rental agreement of registered office and the latest utility bill for the premises, not older than two months, are required. Additionally, a No Objection Certificate (NOC) for using the premises as a registered office is required.

The first step towards registering a subsidiary company in India is reserving the company name. In the case of foreign subsidiaries, it is permissible to use the same name as the parent company. Stakeholders can apply for five different services, including name reservation, allotment of Director Identification Number (DIN), incorporation of a new company, allotment of Permanent Account Number (PAN), and allotment of Tax Deduction and Collection Account Number (TAN) in one form by applying for SPICe form (INC-32) – Simplified Proforma for Incorporating Company electronically.

In case eMoA and eAoA are not applicable users, pdf attachments of MoA and AoA are required. A section 8 company (companies with charitable objects) can also be incorporated using the SPICe form after reserving a name using INC-1. In exceptional cases, incorporation through INC-7 is possible.

To register a section 8 company, the applicant is required to file Form INC-1 for name availability. After the name’s approval, the applicant is required to file Form No. URC-1 along with filing e-forms INC-7, INC-22, and DIR-12, or e-forms INC-7 and DIR-12, as the case may be. After obtaining the license number, the applicant can proceed to incorporate a company by filing e-forms SPICe or INC-7 (in case the number of subscribers is more than seven), along with linked forms as the case may be. 

14. Procedure for registration of subsidiary companies in India

Establishing a subsidiary company is a smart move for foreign companies expanding their business to India. This separate legal entity, owned by a parent company, allows for a presence in India without the need to start a new company from scratch. The process of registering a subsidiary company can be complex, but with the right guidance, it can be a smooth and successful endeavor. To register a subsidiary company in India, the foreign company must select the type of company they wish to establish, with a Private Limited Company being the easiest and fastest option. Minimum requirements include two directors, one of whom must be a resident of India, and two shareholders. Necessary documents for registration include proof of identity, address, and incorporation location. Name approval is the first step, followed by filing incorporation documents with the Registrar of Companies. With the help of experts like VenturEasy, foreign companies can navigate India’s business landscape to establish a successful subsidiary company. 

15. Frequently Asked Questions about Registration of Subsidiary company in India by foreigners

Are you a foreigner looking to register a subsidiary company in India? 

Here are some frequently asked questions to help you understand the process.

Foreign companies can start a business and retain 100% ownership by subscribing shares of an Indian subsidiary company. However, every Indian company must have at least one Indian resident individual as a director. We can help with this process.

It is not necessary for a director to be a shareholder in an Indian company. Thus, foreigners can retain 100% ownership of the Indian company.

An apostille is a certificate issued by the Secretary of State that verifies the legitimacy and authenticity of original documents for their acceptance in other countries under the Hague Apostille Convention. India is a member of this convention since 2005.

To register an Indian subsidiary company, you will require the photograph, ID proof, and address proof of all directors and shareholders along with the apostille of Indian directors and shareholders. The company name must comply with the Companies Act 2013.

Post-incorporation compliance and management of the subsidiary company require bookkeeping in accounting systems like Zoho books or Quickbooks. The financial statement should be audited by a chartered accountant, and CAs will assist with this service.

A subsidiary company registration in India costs about USD 1400, which includes professional fees and government fees.

India offers several advantages like a large and diverse consumer base, a skilled and cost-effective workforce, and favorable government policies promoting foreign direct investment.

Foreign companies must fulfill certain legal requirements like having at least two directors, of whom one should be a resident Indian, and a mandatory office address to set up a business in India.

The step-by-step guide to company registration includes submitting documents to the Ministry of Corporate Affairs, opening a bank account, and registering for taxes. Our professional support can help ensure a smooth and successful process.