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?
Directors and members of a private limited business are only liable for the value of their shares.
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.
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.
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.