What is an Indian Subsidiary Company?
An Indian Subsidiary Company is a business entity registered under Indian law, in which a foreign parent company holds a majority stake (more than 50% of its shares) or controls the composition of its Board of Directors. It functions as an independent legal entity governed by Indian laws and regulations, while remaining under the control of the foreign parent company.
In India, a subsidiary company is considered a separate legal entity from its parent company. This means the subsidiary has its own identity, can sign contracts, own property, and be taken to court independently.
Types of Subsidiary Companies
A subsidiary can be of different types based on how much control and ownership the parent company has:
- Wholly-owned subsidiary: Completely owned and managed by the parent company (100% shares).
- Partially-owned subsidiary: Parent company owns more than 50% but less than 100% of the shares.
- Operational subsidiary: Handles specific tasks or parts of the business operations.
- Strategic subsidiary: Created to grow into new markets or try out new business ideas.
- Joint venture subsidiary: Owned by two or more companies together to reach shared business goals.
Why Should You Register a Subsidiary in India?
Setting up a subsidiary in India gives foreign companies many advantages:
- Market Access: Access to a vast, fast-growing market.
- Financial Benefits: Tax incentives, lower operational costs, and access to a skilled workforce.
- Limited Liability: The parent company's liability is limited to its investment.
- Operational Flexibility: Subsidiaries can make decisions locally and adapt quickly to market needs.
- Separate Legal Identity: Protects the parent company while ensuring compliance with Indian laws.
Eligibility and Minimum Requirements
- Shareholders: Minimum two shareholders (can be individuals or corporate bodies).
- Directors: Minimum two directors, at least one must be an Indian resident.
- Registered Office: A valid physical address in India.
- Capital: No minimum capital requirement, but foreign investment must comply with FDI norms.
Documents Required for Registration
Company-Related Documents
- Memorandum of Association (MOA) and Articles of Association (AOA).
- Proof of Registered Office (Rental Agreement/Ownership Deed + Utility Bill + NOC).
- Certificate of Incorporation of the Parent Company.
- Board Resolution from the Parent Company approving the subsidiary.
Director and Shareholder Documents
- Digital Signature Certificate (DSC) and Director Identification Number (DIN).
- Identity Proof (Passport/Voter ID) and Address Proof (Bank Statement/Utility Bill).
- Passport-size photographs.
- Notarized and Apostilled documents for foreign nationals/entities.
Step-by-Step Registration Process
- Obtain DSC: Get Digital Signature Certificates for all directors.
- Apply for DIN: Obtain Director Identification Numbers.
- Name Approval: Apply for a unique company name through the MCA portal (RUN service).
- File Incorporation Forms: Submit SPICe+ forms along with MOA, AOA, and other documents.
- Pay Fees: Pay the necessary ROC registration fees and stamp duty.
- Get Certificate of Incorporation: Receive the COI from the ROC.
- PAN & TAN: Apply for PAN and TAN for the new company.
- Bank Account: Open a bank account in India.
Post-Incorporation Compliances
Once registered, the subsidiary must comply with various regulations:
- Filing Form FC-GPR: With RBI within 30 days of receiving foreign investment.
- Auditor Appointment: Appoint a statutory auditor within 30 days.
- First Board Meeting: Hold the first board meeting within 30 days.
- Commencement of Business: File Form INC-20A within 180 days.
- GST Registration: If applicable.
- Annual Filings: File annual returns (MGT-7) and financial statements (AOC-4).
