Indian Subsidiary

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A subsidiary company is a company whose control lies with another company. Subsidiaries let the holding firm expand out to other locations, business sectors, and nations by acting as supplementary branches to the main body. The company in which the holding company holds 100% share capital is termed a wholly-owned subsidiary.

What is the Indian Subsidiary? 
An Indian subsidiary company is also known as a subsidiary or a sister company; and the company which practices control over it, is known as the parent company, or holding company. It can be controlled by the parent company partially or wholly. 
What is an investment in an Indian Subsidiary company?
Investment and acquisition of equity shares in this firm are separated into two categories: automatic route and Government permission route. For investment in equity shares of an Indian company, no prior regulatory approval is required through the automatic route; only post facto filing/intimation from RBI within 30 days of receipt of investment money in India and filing of prescribed documents and particulars of allotment of shares within 30 days of allotment of shares to foreign investors is required.
In most activities/sectors in India, FDI of up to 100 percent is permitted through the automatic method. Investment in activities/industries where the automated route is not accessible can be undertaken through the Government Approved FDI approach, which requires the consent of the government. OnFiling can be your legal and professional partner in India to help you form your New Company / Subsidiary fast and affordably.
What are the features of an Indian Subsidiary Company?
  • For all other aspects, including income tax, it is classified as an Indian corporation.
  • An Indian Subsidiary company is having a perpetual succession until it is legally dissolved.
  • Compared to a foreign company, it is taxed at a lesser rate, whereas a foreign firm is taxed at 40%.
  • The Indian subsidiary company is subject to Indian transfer pricing regulations.
  • Indian subsidiaries can make valid and effective contracts with any of its members.
What are the advantages of an Indian Subsidiary company?
  • Limited Liability: 
Directors and members of a private limited business are only liable for the value of their shares.
  • Continuity of Existence
The life of the business is unaffected by the status of the shareholders, and the company continues to exist even after the death of the shareholder.
  • Value of a Brand
Employees will feel safe joining a private limited firm, increasing the brand value of the company.
Scope of Expansion
The potential of expansion is greater since it is easier to acquire funds from financial institutions and investors because of the transparency.
What are the disadvantages of an Indian Subsidiary company?
  • Sometimes the issue of limited freedom in management comes into picture.
  • Decision making can become time consuming
  • Legal paperwork involved with creating a subsidiary can be lengthy and expensive.
What is the registration process of the Indian Subsidiary?
  • Apply for digital signature and reservation of name
Here we apply for a digital signature for each director and a shareholder. You have to sign notarize and apostille the DSC form and courier it to the onfiling Team along with passport and address proof copies. The name is reserved by filing a RUN application. It takes 3-4 days to get the name reserved.
  • To Prepare articles and charter of the company
The AOA and MOA are the charter documents of the company which contain all the rules of the shareholder and the directors of the company. It is a specified format available in Companies Act, 2013.
  • Filing the incorporation form along with MOA and AOA
In this step we will file your incorporation form. Once this is approved you will get the certificate of incorporation, PAN and TAN.
  •  Opening of bank account
To open a bank account one of the directors needs to be physically present here. Other directors can sign the application form and courier the same to the banks.
  • Deposit of share application money and issue of shares
Once the bank account is opened the foreign shareholders should transfer the share capital amount in the bank account of the Indian company within 30 days of incorporation. Once the share application money is deposited the company will issue the share certificates to the foreign shareholders.
  • Filing of FCGPRA with RBI
Once the money is received the company will then inform the RBI about this receipt within 30 days.

Required Documents

Acceptable DocumentDocument TypeAdditional Details
Foreign National: Proof of Address- Any utility bill not older than 6 months duly attested foreign notary and apostilled.,
Indian Director: Proof of address- Copy of Passport..
Foreign National: Proof of Identity- Copy of passport duly attested foreign notary and apostilled..
Indian Director: Copy of PAN card..
Foreign Company: Board resolution for investment in Indian company. It should also mention the details of representative director in Indian company- Duly attested by foreign notary and apostilled..
Foreign National: 2 Photographs..
Foreign Company: Registration Certificate of a company- Duly attested by foreign notary and apostilled..

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It is not mandatory to give shares to a Indian resident. Foreigners are allowed to hold 100% shares in the Indian company. But it is important to note that there should be minimum 3 shareholders. Therefore in subsidiary company 99.99% shares can be held by the foreign company and the remaining 0.01% can be help by any other foreign individual or a foreign company.
The process to open an account in India is a bit tedious. For opening company I India minimum 20-25 days is required. All the notarized and appostiled documents of foreign nationals are required to be submitted to the bank.
For registration of company in India, the office address is mandatory. It can be commercial, residential or a virtual office. For documentation, the proof of utility bill of the provided address and the rental agreement is required.
Once the company is incorporated the following steps and registrations are required 1. Opening a bank account and depositing the share capital amount. 2. Issuing the share certificates 3. Appointing a Auditors within 30 days of registration 4. GST registration 5. Shop and Establishment Act and Professional Tax 6. Having important agreements like employment agreement, vendor agreement in place.
Minimum 2 directors are required and atleast one should be Indian resident. Minimum 2 shareholders are required. An individual, company, foreign company, NRI or foreign national can hold shares in the company.
The subsidiary company can transfer the fees in form of royalty, fees or dividend after paying taxes in India.
1. Tax Filing • GST filing every month • TDS filing every quarter • Annual income tax return filing 2. Audit • Statutory Audit annually • Tax Audit annually • GTs Audit annually 3. Secretarial compliances • 4 board meeting every year • Annual general meeting of shareholders • AOC 4 and MGT 7 filing annually

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