Indian Subsidiary Registration in India

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.

How a Subsidiary is a Separate Indian Company

In India, a subsidiary company is considered a separate legal entity from its parent company, even if the parent holds a majority stake. This means the subsidiary has its own identity, can sign contracts, own property, and be taken to court independently.

• Separate Legal Identity: A subsidiary is a distinct legal entity under Indian law, separate from its parent company. This means it can own property, enter into contracts, and be sued in its name.
• Limited Liability: The parent company is only responsible for the amount it invested in the subsidiary. If the subsidiary has debts or losses, the parent company's assets are usually safe.
• Control and Decision-Making: The parent company can control the subsidiary by owning shares or appointing directors. This allows it to make or influence important business decisions.
• Following Indian Laws: Subsidiaries in India must follow all Indian rules, including those for taxes, employee laws, and company registration.
• Types of Subsidiaries: In India, a subsidiary can be a private limited company (better for smaller businesses) or a public limited company (which follows SEBI  rules).
• Wholly Owned Subsidiary: If the parent company owns 100% of the shares, it’s called a wholly owned subsidiary. In this case, the parent has complete control.
• Reasons for Formation: Many foreign companies create subsidiaries in India to grow their business, hire local talent, and benefit from the country’s growing economy.

Types of Subsidiary Companies

A subsidiary can be of different types based on how much control and ownership the parent company has. Below are some common types:

• Wholly-owned subsidiary: This type of subsidiary is completely owned and managed by the parent company, which holds 100% of the shares. The parent company can make all the decisions without needing approval from others, ensuring its goals are fully followed.
• Partially-owned subsidiary: In this case, the parent company owns more than 50% but less than 100% of the shares. This gives it strong control, but other smaller shareholders may still have a say in important decisions.
• Operational subsidiary: This type of subsidiary handles specific tasks or parts of the business. It works on day-to-day operations to help the company run more smoothly and use its resources better.
• Strategic subsidiary: These subsidiaries are created to grow into new markets or try out new business ideas. They help the company expand and often play an important role in its overall growth.
• Foreign subsidiary: This subsidiary is set up in another country. It follows the rules and laws of that country, helping the business reach new customers while adjusting to a different business environment.
• Joint venture subsidiary: This is owned by two or more companies together. They share resources, skills, and profits. It’s a partnership to reach shared business goals and reduce risks when entering new markets.

Wholly-Owned vs. Shared Ownership

Here’s a comparison between a Wholly-Owned Subsidiary and a Shared Ownership Subsidiary (Partially-Owned):

When a foreign company plans to set up a subsidiary in India, it must choose the appropriate business structure. The most common structures are:

Setting up a subsidiary in India gives foreign companies many advantages, especially in terms of business growth, legal protection, and operational ease.

• Market Access and Growth: Entering India allows access to a vast, fast-growing market, driving higher sales and regional expansion through localized offerings.
• Financial Benefits: Enjoy tax incentives, lower operational costs, and access to a cost-effective, skilled workforce for smooth scaling.
• Limited Liability: The parent company's liability is limited to its investment, safeguarding its global assets.
• Operational Flexibility: Subsidiaries can make decisions locally and adapt quickly to market needs, improving efficiency.
• Separate Legal Identity: As an independent legal entity, the subsidiary protects the parent company while ensuring compliance with Indian laws.
• Business Diversification: Spreads business risk and enhances global presence by tapping into new sectors and customer bases.
• Strategic Partnerships: Facilitates collaboration with Indian firms, leveraging local expertise and networks.
• Brand Trust and Visibility: A local presence builds credibility with Indian customers and boosts brand reputation.
• Focused Operations: Enables dedicated teams to concentrate on specific products, services, or markets for better performance.

To register a subsidiary in India, you need at least two shareholders, two directors (one must be a resident of India), and a registered office in the country.

There is no fixed minimum capital needed to set up the subsidiary.

• Shareholders: At least two shareholders are needed. These can be individuals, foreign companies, or a mix of both.
• Directors: You must appoint a minimum of two directors. At least one of them must live in India.
• Registered Office: A valid physical address in India is needed as the registered office. If the space is rented, a No Objection Certificate (NOC) from the property owner is required.
• No Minimum Capital: There is no specific minimum capital required to start a subsidiary company in India.
• Equity Share Capital: In some cases, the foreign parent company must hold at least 50% of the equity share capital in the Indian subsidiary.

To register a subsidiary company in India, you need to collect documents related to the company, its directors, and its registered office.

1. Company-Related Documents

• i) Memorandum of Association (MOA) and Articles of Association (AOA): These are key documents that explain the company’s goals, shareholding details, and internal rules and regulations.
• ii) Proof of Registered Office: You need to show that your business has a physical office in India. This can be:
  • A rental agreement is required if the space is leased
  • Ownership documents are required if the company owns the property
  • Recent utility bills (electricity, water, phone) as supporting address proof

• iii) No Objection Certificate (NOC): If the office is rented, the landlord must provide a letter (NOC) permitting to use of the space as the company’s registered office.
• iv) Certificate of Incorporation (if applicable): If the parent company is a foreign entity, you need to submit its Certificate of Incorporation to prove its legal existence.
• v) Board Resolution of the Parent Company: The parent company must officially approve the formation of the Indian subsidiary through a board resolution.
• vi) Capital Structure: Details of how much share capital the company is authorized to issue and how much has already been paid up.

2. Director and Shareholder Related Documents

• i) Digital Signature Certificate (DSC) and Director Identification Number (DIN): These are mandatory for directors to file forms online and for official identification.
• ii) Identity and Address Proof:
  • For Indian directors and shareholders: PAN card, Aadhaar card, passport, or voter ID
  • For foreign nationals: Passport and proof of address, verified by the Indian embassy or notarized/apostilled
• iii) Photographs of Directors and Shareholders: Passport-size photos are needed for identification purposes.
• iv) Declaration by Directors and Shareholders: Each director and shareholder must sign a declaration confirming their consent and eligibility to take part in the company.

Setting up a foreign subsidiary in India involves a few important steps and legal formalities.

Here's a simple step-by-step guide to help you through the process:

1. Decide the Type of Company

First, decide what type of company you want to register as your Indian subsidiary. Most foreign businesses choose a Private Limited Company structure.

2. Get Digital Signature Certificates (DSC)

Since the registration process is done online, you’ll need a Digital Signature Certificate (DSC) for all proposed directors. This allows them to sign official documents electronically.

3. Apply for Director Identification Number (DIN)

Each director must have a Director Identification Number (DIN). You can apply for this online through the Ministry of Corporate Affairs (MCA) portal.

4. Choose and Get Company Name Approved

Pick a unique name for your subsidiary and apply for name approval through the MCA portal. Make sure the name follows the official naming rules.

5. Prepare Memorandum and Articles of Association (MoA & AoA)

These are legal documents that define the purpose of the company and how it will run. Draft the MoA and AoA according to the Companies Act, 2013.

6. File Incorporation Documents

Once the name is approved, submit the MoA, AoA, and other required forms using the SPICe+ form on the MCA portal. These documents go to the Registrar of Companies (ROC).

7. Pay the Registration Fees

You will need to pay a registration fee to the ROC. The amount depends on the company’s authorized share capital.

8. Get the Certificate of Incorporation (COI)

If all documents are correct, the ROC will issue a Certificate of Incorporation (COI). This officially means your Indian subsidiary is now registered.

9. Apply for PAN and TAN

After getting the COI, apply for a Permanent Account Number (PAN) and a Tax Deduction and Collection Account Number (TAN) from the Income Tax Department.

10. Open a Bank Account

Open a bank account in the name of the Indian subsidiary to start managing business finances.

11. Follow Other Legal Requirements

Make sure you also follow other necessary rules and registrations based on your business type and sector.

12. Get a GST Number

If your business involves selling goods or services, you’ll need to register for Goods and Services Tax (GST). This is required for tax compliance.

13. Start Business Operations

Once the company is officially registered and all required steps are complete, your foreign subsidiary can begin doing business in India.

The AGILE PRO form is an important part of the SPICe+ (Simplified Proforma for Incorporating Company Electronically Plus) process, which is used to register companies in India, including foreign subsidiaries.

The form's name, AGILE PRO, is an acronym for Application for Goods and Services Identification Number, Employees State Insurance Corporation registration, Professional tax registration, Opening of bank account, and Shops & Establishment registration.

It is submitted along with SPICe+ Part B during the company incorporation process on the Ministry of Corporate Affairs (MCA) portal.

What the AGILE PRO Form Covers

Once your subsidiary company is registered in India, there are several legal and regulatory steps you must follow to stay compliant with Indian laws.

These are known as post-incorporation compliances. Completing them on time is crucial to avoid penalties and ensure smooth operations.

1. Opening a Bank Account: After incorporation, the company must open a current bank account in its name to carry out financial transactions and receive capital investment.
2. Capital Investment from the Parent Company: The initial share capital must be deposited into the subsidiary's bank account by the foreign parent company as per the capital mentioned in the incorporation documents.
3. Issue of Share Certificates: The company must issue share certificates to the shareholders (including the foreign parent) within 60 days from the date of incorporation.
4. Filing of Form FC-GPR with RBI: When a foreign parent company invests in the Indian subsidiary, the company must file Form FC-GPR with the Reserve Bank of India (RBI) through the FIRMS portal within 30 days of receiving the funds.
5. GST Registration (If Applicable): If the company’s turnover is expected to exceed the threshold limit or it is involved in taxable goods or services, it must register for Goods and Services Tax (GST).
6. Professional Tax Registration (State-Specific): Some states in India require registration for Professional Tax, which is deducted from employees' salaries.
7. Shops and Establishment Registration: Depending on the state, the company may need to register under the Shops and Establishments Act within 30 days of starting business.
8. Accounting and Bookkeeping: The company must maintain proper books of accounts, either in physical or electronic form, as per Indian accounting standards.
9. Auditor Appointment (Form ADT-1): Within 30 days of incorporation, the company must appoint a statutory auditor and file Form ADT-1 with the ROC.
10. First Board Meeting: The first meeting of the Board of Directors should be held within 30 days of incorporation to discuss key company matters and comply with governance norms.
11. Income Tax PAN and TAN: These are generally issued during incorporation, but if not, the company must apply for a Permanent Account Number (PAN) and a Tax Deduction and Collection Account Number (TAN).
12. Annual Compliances: After incorporation, the company must fulfill yearly compliances such as:

• • Filing Annual Return (Form MGT-7)
  • Filing Financial Statements (Form AOC-4)
  • Holding an Annual General Meeting (AGM)

13. Filing of Form INC-20A (Declaration of Commencement of Business): The company must file this form within 180 days from incorporation, confirming that the share capital has been received.

The cost to register a subsidiary company in India can vary based on several factors such as the authorized share capital, professional fees, number of directors/shareholders, and state-specific charges.

1. Government Fees

2. Professional Fees (Legal/Consultancy)

3. Additional Registrations (If Applicable)

4. Post-Incorporation Costs