Foreign Subsidiary of Indian Company

Foreign Subsidiary of Indian Company

The Companies that are incorporated outside India are known as Foreign Companies. 

Foreign Company Registration in India

There are the following options available for foreign company registration in India.

A foreign company planning to set up business operations in India may: 

  1. Incorporate a company under the Companies Act, 2013, as a Joint Venture or as foreign company registration in India by an Indian subsidiary.
  2. Set up a Liaison Office / Representative Office or a Project Office or a Branch Office of the foreign company which can undertake activities permitted under the Foreign Exchange Management (Establishment in India of Branch Office or Other Place of Business) Regulations, 2000. (Discussed In another Article)
A company can be registered as private limited or public limited. A private limited company is a closely held company and enjoys the privileges given by the Companies Act, 2013. A public limited company is a company where the public is interested, and it is required to comply with many rules and regulations framed by the Companies Act, 2013. Generally, foreign Companies prefer the Formation of a wholly-owned subsidiary in India.

Foreign Company Registration in India – In the form of a Subsidiary company

What is a wholly-owned subsidiary?

A Wholly Owned Subsidiary Company can be defined as an entity whose entire share capital is held by another Indian or foreign company. 

For Subsidiary Company registration, the following requirements must be fulfilled. 
  1. There should be a minimum of 2 Directors and two shareholders in the Indian subsidiary.
  2. At least one of the directors shall be an Indian Resident and Indian Citizen.
  3. There should be a local Indian office address for the registered office address.
  4. Foreign parent company shall hold more than 50% shares in Indian subsidiary company.
  5. Directors& shareholders (subscribers) are required to apply for DSC (Digital Signature Certificate).
  6. The applicant is required to apply for the company’s name reservation with ROC/MCA.
  7. After obtaining name approval from ROC, an applicant is required to file a Form for Incorporation of Company along with Memorandum and Articles of Association of the Company.
  8. After filing the incorporation documents, ROC fees and Stamp duty must be paid online (This is based on the company’s authorized capital).
  9. After the payment of ROC fees and Stamp Duty, ROC verifies the filed documents.
  10. Once ROC is satisfied, a Certificate of Incorporation (COI)is sent through email.
  11. PAN & TAN of the company shall be issued simultaneously by the department by mentioning COI. ESI and P.F. registration is also granted simultaneously.

Other points to be kept in mind after registration of Indian subsidiary:
  1. Once Indian subsidiary is registered, the following further actions need to be taken: 
  1. Open a current account of an Indian subsidiary in Bank and bring share subscription money from all the shareholders.
  2. Intimate RBI regarding receipt of share subscription money, which will be considered as FDI
  3. Apply for GST registration and Import Export Code
  4. Hold first board meeting and make an appointment of auditors within 30 days of incorporation
  5. Apply for a certificate of commencement of business within 180 days of incorporation. 

Required documents/information for subsidiary company registration:

  1. Name of subscribers (holding co.)
  2. Name of Individual subscriber
  3. Name of nominee shareholder on behalf of foreign holding Company
  4. DIN of proposed directors (minimum 2), if already having.
  5. Mobile No., Email I.D., Place of Birth, Educational Qualification and occupation of Proposed Directors/subscribers/nominee shareholder.
  6. Proposed names (in order of preference) of the company.
  7. The Main object of the proposed company.
  8. Proposed authorized & paid-up capital of the company.
  9. % shareholding of subscribers
  10. the Face value of shares
  11. Self-attested copy of PAN Card of director/subscriber/nominee (for Indian nationals).
  12. Self-attested copy of I.D. Proof of proposed Directors (Voter ID/ Passport/ Driving License) of director/subscriber/nominee
  13. Self-attested copy of Residential Proof of Proposed Directors/promoters/nominee (Bank Statement/Electricity Bill/Telephone Bill/Mobile bill) (not older than two (2) Months) of director/subscriber/nominee
  14. Self-attested copy of aadhaar card of director/subscriber/nominee (for Indian nationals)
  15. Self-attested copy of passport is mandatorily required in case of foreign nationals.
  16. Details of Directors in other Companies:
  17. Name of the Company(s)
  18. Designation
  19. Shareholding percentage
  20. Nominal Value of Shares
  21. Other Interest, if any.
  22. Landline No of directors/promoters if having.
  23. Copy of electricity/telephone/gas/mobile Bill (not older than two (2) Months) of proposed registered office address,
  24. Latest passport size three coloured photographs of each proposed director/subscriber.
  25. DSC of subscribers.

What activities cannot be done by B.O.?

Bos cannot do the following activities in India: 
  1. Construction Development activities
  2. Manufacturing and Processing
  3. Retail Trading

Conditions required for setting up B.O.

  1. A foreign company must be having a profit-making track record during the immediately preceding five financial years in the home country.
  2. The net worth of a foreign company should not be less than USD 100,000 or its equivalent.
  3. If foreign banks want to open B.O. in India, DBOD, RBI, prior approval is required.

Legal status
Bos are an extended arm of the parent company. Therefore, legal status is a foreign company in India.

Approvals Required
For setting up BO/PO, Prior approval of the Reserve Bank of India and A.D. Banker is required. Also, after incorporation, ROC needs to be intimated. 

PROJECT OFFICE (P.O.) 

Activities allowed 
  1. A Project office (P.O.) is established for a particular purpose and a limited period until that project continues. Normally, when a foreign company secures a project from an Indian company, then to carry out such a project. It is similar to B.O. but for a specific project.
  2. APO cannot carry out any other activity other than incidental to or related to the project.
 Legal Status
P.O.s are the extended arm of the parent company. Therefore, legal status is a foreign company in India.

Approvals Required
  1. For setting up P.O., Prior approval of Reserve Bank of India and A.D. Banker is required. Also, after incorporation, ROC needs to be intimated.
  1. However, if the following conditions are fulfilled, no prior approval of RBI is required to establish P.O. in India.
Condition1– Foreign entity has secured a project from an Indian company; AND
Condition 2– An appropriate authority has cleared the project; AND
Condition 3– The project is funded directly by inward remittance from abroad; OR

The project is funded by a bilateral or multilateral International Financing Agency; OR 

A company or entity in India awarding the contract has been granted a Term Loan by a Public Financial Institution or a bank in India for the project. 

If the above criteria are not met, the foreign entity has to approach the RBI for approval.

In case P.O. need to be set up by foreign Non-Government Organizations/ Non-Profit Organizations/ Foreign Government Bodies/ Departments, then such approval will fall under the government approval route, and such P.O.s are required to apply to the Reserve Bank for prior permission to establish an office in India,

Thus, the above shows that there are many options available for foreign company registration in India. Depending upon the actual need of the foreign enterprise, an entry strategy can be designed and planned.






Created & Posted by (Ramesh Kumar Gupta)

Senior Accounts Manager at TAXAJ

 

TAXAJ is a consortium of CA, CS, Advocates & Professionals from specific fields to provide you a One Stop Solution for all your Business, Financial, Taxation & Legal Matters under One Roof. Some of them are: Launch Your Start-Up Company/Business, Trademark & Brand Registration, Digital Marketing, E-Stamp Paper Online, Closure of Business, Legal Services, Payroll Services, etc. For any further queries related to this or anything else visit TAXAJ

 

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