Foreign Subsidiary Company Compliances in India

Essential Compliances

• Form FC-1 under Section 380: The FC-1 form is important as the form has to be filed within thirty days of the incorporation of the subsidiary company in India. The form is not to be submitted alone, it must be accompanied by the required files, certifications etc. from other regulatory bodies in India such as the RBI.

• Form FC-3 under Section 380: This form needs to be submitted to the respective Registrar of Companies (ROC) depending upon where the company is incorporated in India. The form must contain the details of the areas where the business is going to conduct operations as well as the financial records of the company.

• Form FC-4 under Section 381: This form is concerned with the annual returns of the company. It has to be filed within sixty days from the end of the preceding financial year.

• Financial statements: The company has to submit financial statements on its Indian business and operations. This must be submitted within six months of the end of the financial year. They must contain: – Statements on the transfer of funds – Statements of earnings repatriated – Statements on related party transactions such as statements on sales, transfer of property, purchases etc.

• Audit of accounts: All accounts of the foreign subsidiary company must be audited by a Practicing Chartered Accountant. These accounts should be properly arranged and made available by the company for the audit.

• Authentication and translation of documents: All the documents that are submitted by the company to the ROC must be validated by a practicing lawyer in India. These documents also need to be translated into English before its validation and submission.
  

Compliances under the Income Tax Act and the GST Act

• FC-TRS: This concerns the transfer of foreign subsidiary company’s shares between an Indian resident to a non-resident investor or vice-versa. Such a transfer may be done by way of sale or gift. The Foreign Direct Investment policies require that such a transaction should be reported within sixty days from the date of the transfer. The obligation of filing this form rests upon the Indian resident, or the investee company as the case may be. This is regardless of whether the Indian resident is the transferor or the transferee.
• FC-GPR: This is concerning the remittance received by the shareholders of a foreign subsidiary company. The form specifies the mode of transfer of the remittance by the company to its shareholders.
  

Importance of Meeting Compliances

• Notwithstanding anything given under Section 391, if a foreign company is found to have contravened any provisions under Chapter XXII of the Act, the company will be punished by way of fine that shall be no less than Rs 1 lakh and may extend up to Rs 3 lakh. If the offence is continuing, then a fine of Rs 50,000 will be added for every day, the offence continues.
• Every officer of a foreign company who is in default is punishable by imprisonment for a period of up to 6 months and/or a fine of minimum Rs 25,000, which may extend to up to Rs 5 lakh. It is important for a company to meet all its compliances to ensure that they are able to continue with its business operations properly without the interference of the authorities.