Setting Up an Indian Subsidiary: Registration Steps, FDI Rules & Compliance

A A subsidiary company is a company whose control is held by another company, known as the parent or holding company. The holding company owns a majority of the subsidiary's shares or controls its board of directors.

A Subsidiaries can be classified based on the extent of control:
• Wholly-owned subsidiary: The parent company owns 100% of the subsidiary's shares.
• Majority-owned subsidiary: The parent company owns more than 50% of the subsidiary's shares.
• Partially-owned subsidiary: The parent company owns a significant portion of the shares but not a majority. Control may be exercised through other means.

A Advantages include:
• Limited Liability: The subsidiary has a separate legal identity, limiting the parent company's liability to its investment in the subsidiary.
• Market Access: A subsidiary allows foreign companies to establish a presence in the Indian market.
• Operational Flexibility: The subsidiary can operate with a degree of independence while still benefiting from the parent company's resources and expertise.
• Brand Building: A subsidiary can establish a local brand identity.
• Access to Funding: Indian subsidiaries can raise funds locally.
• Compliance with Local Laws: A subsidiary helps ensure compliance with Indian regulations.

A Foreign companies can establish various types of subsidiaries in India, including:
• Private Limited Company
• Public Limited Company
• Limited Liability Partnership (LLP)

A The Ministry of Corporate Affairs (MCA) through the Registrar of Companies (RoC) regulates the registration and administration of companies in India, including subsidiaries.

A Yes, the name must be unique and comply with the Companies Act, 2013, guidelines. It cannot be similar to existing company names or suggestive of government patronage. The name must end with "Private Limited" or "Limited" depending on the type of company.

A A private limited company requires a minimum of two shareholders, while a public limited company requires a minimum of seven.

A While the Companies Act, 2013, removed the concept of minimum paid-up capital, it is advisable to have an adequate authorized capital based on the business needs.

A A private limited company requires a minimum of two directors, and a public limited company requires a minimum of three. At least one director must be an Indian resident.

A The registered address is the official address of the company for all legal and communication purposes. All official correspondence and notices are sent to this address.

A The registration process typically takes a few weeks, depending on the completeness of documentation and MCA processing times.

A Yes, the company registration process is primarily online through the MCA portal. Physical presence is usually not required.

A Key requirements include:
• Unique company name
• Minimum number of shareholders and directors
• Registered office address in India
• PAN card for directors and shareholders (Indian nationals)
• DIN (Director Identification Number) for directors
• Preparation of Memorandum of Association (MoA) and Articles of Association (AoA)
• Digital Signature Certificates (DSC) for directors

A Yes, foreign entities can establish wholly-owned subsidiaries in India, subject to FDI regulations and sectoral caps.

A Certain sectors require prior government approval for foreign investment, including sectors related to national security, atomic energy, and others as specified by the government. The DPIIT website provides the most up-to-date list.

A An AGM is a yearly meeting of shareholders to discuss the company's performance, approve financial statements, and appoint directors and auditors.

A Compliance requirements include:
• Annual filing of returns (MGT-7, AOC-4) with the MCA
• Maintaining financial records and conducting audits
• Conducting board meetings and AGMs
• Complying with tax regulations (income tax, GST, etc.)
• Adhering to other applicable laws and regulations

A Perpetual succession means the company continues to exist even if there are changes in its shareholders or directors. This provides stability and continuity for the business.

A Yes, as a separate legal entity, an Indian subsidiary can purchase or rent property in its own name.

A Indian subsidiaries are subject to corporate income tax on their profits. They must also comply with GST regulations and other applicable tax laws. The tax rates can vary based on certain criteria like turnover, etc. Consult a tax professional for specific details.

A FEMA regulates foreign exchange transactions in India, including FDI. Subsidiaries with foreign parent companies must comply with FEMA regulations regarding fund transfers, repatriation of profits, and other cross-border transactions.

A A surcharge may be levied on corporate income tax depending on the company's income level. Consult a tax professional for current rates.

A Yes, the government offers concessional tax rates for certain sectors to promote investment. Check with a tax advisor for the latest applicable rates.

A Return Filings can provide professional assistance with:
• Company name reservation
• Document preparation and filing
• Obtaining DSC and DIN
• Liaisoning with the MCA and RoC
• Post-registration compliance

A Covered in the registration process details.

A Discussed in the advantages section.

A A branch office is an extension of the foreign company, while a subsidiary is a separate legal entity.

A Costs vary depending on professional fees, stamp duty, and other expenses.

A Covered in the compliance section.

A Subject to FEMA regulations.

A Yes, it can be a wholly-owned subsidiary.

A Involves a winding-up process as per the Companies Act.

A As per the company's AoA and the Companies Act.