What is a Foreign Subsidiary?
A Foreign Subsidiary is a company formed in India where more than 50% of its equity share capital is held by a foreign entity (parent company). If the foreign parent owns 100% of the shares, it is called a Wholly Owned Subsidiary (WOS).
Under Indian law, a foreign subsidiary is treated as a domestic Indian company (Private Limited Company). This gives it the same rights, tax benefits, and legal status as any other Indian company, with limited liability for its shareholders.
Wholly Owned Subsidiary vs. Joint Venture
| Feature | Wholly Owned Subsidiary (WOS) | Joint Venture (JV) |
|---|---|---|
| Ownership | 100% by Foreign Parent | Shared with Indian Partner |
| Control | Full Control | Shared Control |
| Profits | 100% to Parent | Shared as per ratio |
| Risk | Borne by Parent | Shared |
Key Requirements for Registration
- Directors: Minimum 2 directors. At least one must be a Resident of India (stayed in India for 182+ days in the previous financial year). The resident director does not need to be an Indian citizen.
- Shareholders: Minimum 2 shareholders. The foreign parent company can be one, and a nominee (individual or corporate) can be the second.
- Capital: No minimum paid-up capital requirement, but sufficient capital should be introduced to cover initial expenses.
- Registered Office: A physical address in India is mandatory for receiving official correspondence.
Step-by-Step Registration Process
- Digital Signature Certificate (DSC): Obtain DSC for all directors (foreign and Indian).
- Director Identification Number (DIN): Apply for DIN for all directors.
- Name Approval: Reserve the company name through the RUN service on the MCA portal.
- Incorporation Filing (SPICe+): File the integrated SPICe+ form along with MoA and AoA.
- Certificate of Incorporation: Receive the COI, PAN, and TAN from the RoC.
- Bank Account Opening: Open a corporate bank account in India.
- FDI Reporting (FC-GPR): Report the inflow of foreign capital to the RBI within 30 days of allotment of shares.
Documents Required
Important: Documents from the foreign country must be notarized and apostilled (or consularized by the Indian Embassy).
- Foreign Parent Company: Certificate of Incorporation, MoA, AoA, Board Resolution authorizing investment.
- Foreign Directors: Passport (Identity), Address Proof (Bank Statement/Utility Bill), Passport Photo.
- Indian Director: PAN Card, Aadhaar/Voter ID, Address Proof.
- Registered Office: Rent Agreement, NOC from owner, Utility Bill (Electricity/Water).
Post-Incorporation Compliance
- Auditor Appointment: Appoint the first statutory auditor within 30 days of incorporation.
- Commencement of Business (INC-20A): File this form within 180 days of incorporation after depositing share capital.
- FEMA Compliance: File ARF (Advance Remittance Form) and FC-GPR with RBI for share allotment.
- Annual Filings: File AOC-4 (Financials) and MGT-7 (Annual Return) with RoC annually.
- Tax Filings: File Income Tax Returns and GST Returns (if registered).
