What is a foreign subsidiary company?
Any corporation where a company formed in another foreign country owns 50% or more of its equity shares is said to have a foreign subsidiary. In this situation, the named foreign corporation is also referred to as the holding company or parent company.
A corporation must be formed in India in order to be considered a foreign subsidiary there. It does not matter where nation the parent business is formed in.
Compliance requirements depend on a variety of business factors. One must be aware of the regulations that must be followed depending on the sort of company that is established, the sector in which it operates the number of workers, and the yearly turnover. According to section 2(42) of the Companies Act of 2013, a foreign company is one that must abide by the laws and regulations of multiple jurisdictions, including:
- Companies Act, 2013 – Income Tax Act, 1961
- GST, 2017 – SEBI rules and regulations
- FEMA (Foreign Exchange Management Act), 1999 – RBI compliances etc.
A subsidiary company is a company whose 50% voting stocks or equity shares are held by another company, referred to as the parent company, or the holding company. If the parent company is incorporated in a foreign country, it is said to be a foreign subsidiary company. Any subsidiary company incorporated in any country has to register in India.
Procedure to Register a Foreign Subsidiary Company in India
With the influx of digitization, the process of registering a company in India has become online. Now you can get your company registered in India from the comfort of your home with the following steps:
Step 1: Log in to the MCA portal
- The MCA has launched the SPICe+ form to ease the incorporation procedure. "SPICe+" may be chosen by clicking on MCA services.
- Part-A (Name approval process) and Part-B are the two sections of the form (application to incorporate a company in India)
Step 2: Fill in the data in part-A to reserve your company name.
- Firstly, the user will have to run a detailed name search.
- The user has to fill in details like the subsidiary company’s class, type, sub-category, etc.,
- Adding the word "India" to the name of the parent company allows a foreign entity to register in India.
- The name picked should not be similar to an existing one, and must not be unwanted by the Indian legislation.
- If the parent company has a trademark that is registered, it may use that trademark in India for the foreign approval name approval.
Step 3: on successful name approval, the user has to fill in the details required for Part-B
- Before filling up the form you will have to keep the following handy:
- All details of each director, along with soft copies of passport size photos, and contact details. Notarized or apostilled copy of passport and residential proof translated in English.
- Digital Signature Certificate of a resident director
- Permanent Account Number (PAN) and Tax Account Number (TAN) of the directors
- Director Identification Number (DIN) of each director.
- Apostilled/ Notarized copy of the Board resolution authorizing the registration of such foreign entity in India.
- Proof of registered offices in India like utility bills, or NOC from the landowner
- Notarized/apostilled physical copy of Memorandum of Association (MoA) and Articles of Association (AOA)
- A resident director is someone who has resided in India for 182 days in the previous year. Any foreign subsidiary company in India has to authorize a resident director as a signatory whose specimen signature would be required for company incorporation.
Step 4: The AGILE form comes after completing the SPICe+ form.
The three important business registrations in India are covered under the AGILE form or INC-35.
- GST registration (GSTIN) (GSTIN)
- Employees’ State Insurance Corporation registration (ESIC), and
- Registration of Employees Provident Fund Organization (EPFO)
- It is required to fill out the AGILE form and submit it along with the SPICe+ form for the incorporation of a firm. However, the abovementioned registrations are optional during the incorporation.
- The department will provide the Certificate of Incorporation together with the PAN and TAN information following a successful review of the provided information and supporting documentation.
Post Incorporation process
- Step I: Receipt of Subscription Money from Foreign Subscriber.
- Step II: Filing of e-form 20A – Declaration of Commencement of Business.
- Step III: Collect FIRC Certificate from the Bank as per FDI Guidelines.
- Step IV: Issue Share Certificate to the subscribers
Businesses looking to set up a subsidiary in India need to be aware of the various compliance requirements. From registration to tax compliance to make sure the business complies with local labor laws. When setting up a foreign subsidiary in India, seeking professional guidance is wise. To get better insight and get your process underway, contact www.bbnc.in