Indian Subsidiary Company Registration a Complete Guide | Legalman

 Registering an Indian subsidiary company is an essential process for foreign companies aiming to establish a presence in India. Here is a detailed overview of the procedure:

What is an Indian Subsidiary?

An Indian subsidiary company registration where a foreign entity owns more than 50% of the share capital. It allows foreign businesses to operate within India with a local presence. Indian subsidiaries are treated as domestic companies for taxation purposes, and their earnings are subject to Indian taxes and regulations.

Key Features:

1.      Ownership Structure: A foreign company can hold a majority stake (over 50%) in an Indian subsidiary, with the rest held by Indian or other foreign entities. The parent company has control over business decisions and operations.

2.      Limited Liability: Shareholders' liability is limited to their investment in the company, offering protection against personal liability for debts.

3.      Separate Legal Entity: The subsidiary operates as an independent legal entity, meaning its liabilities and obligations do not directly affect the parent company.




Advantages of Setting Up an Indian Subsidiary:

1.      Access to the Indian Market: A subsidiary allows foreign companies to expand into one of the fastest-growing economies in the world.

2.      Limited Liability Protection: The foreign parent company enjoys protection against any legal liabilities arising from the subsidiary's operations.

3.      Ease of Operation: It provides a permanent establishment in India, simplifying operations like contracting, hiring, and local compliance.

4.      Tax Benefits: As Indian subsidiary company registration are taxed as domestic entities, they can take advantage of various tax benefits and schemes available to Indian companies.

Legal Requirements:

1.      Directors: A minimum of two directors are required, with at least one being a resident of India. Foreign directors need to provide notarized and apostilled copies of identity documents, such as a passport.

2.      Shareholders: A minimum of two shareholders are necessary, and the foreign company must hold at least 50% of the shares. Indian subsidiaries are typically private limited companies.

3.      Registered Office: A subsidiary must have a registered office in India. This is the official address for communication with the government and legal authorities.

4.      Memorandum and Articles of Association (MoA and AoA): These documents define the scope of the subsidiary’s activities and govern its internal operations.

5.      Compliance with Indian Laws: The subsidiary must comply with various Indian regulations, including the Companies Act, 2013, Foreign Exchange Management Act (FEMA), and other industry-specific laws. Foreign Direct Investment (FDI) is allowed under automatic and approval routes, depending on the sector.

Steps for Registration:

1.      Obtain Director Identification Number (DIN) and Digital Signature Certificate (DSC): The directors need to obtain these essential credentials for signing documents and filings online.

2.      Name Approval: The proposed subsidiary must apply for a name reservation through the Ministry of Corporate Affairs (MCA) portal. The name must be unique and not conflict with existing companies.

3.      Incorporation Filing: After name approval, the company must file for incorporation by submitting the MoA, AoA, and other essential documents. These include details about the company’s directors, shareholders, and registered office.

4.      Issue of Certificate of Incorporation (COI): Once the incorporation documents are approved, the Registrar of Companies (RoC) issues a COI, marking the official creation of the subsidiary.

5.      Permanent Account Number (PAN) and Tax Account Number (TAN): After receiving the COI, the subsidiary must apply for PAN and TAN to comply with taxation rules.

Post-Incorporation Compliance:

Once registered, the Indian subsidiary company registration must adhere to various legal and regulatory compliances, including:

  • Filing annual financial statements with the MCA.
  • Conducting statutory audits.
  • Filing income tax returns and Goods and Services Tax (GST) filings.
  • Holding annual general meetings (AGMs).
  • Maintaining proper books of accounts as per Indian laws.

Taxation:

An Indian subsidiary is treated as a domestic company for tax purposes. The corporate tax rate for domestic companies in India is 25% (plus surcharges and cess, depending on income). Dividends paid to the foreign parent company may also be subject to taxes.

Conclusion:

Setting up an Indian subsidiary company registration is a strategic move for foreign businesses seeking entry into India. It provides a local presence with benefits such as limited liability and access to India's growing market. However, the registration process requires compliance with several legal requirements, making it advisable to seek professional assistance for smooth incorporation.

For detailed guidance, you can refer to the original guide on LegalMan.

 

Location: State Highway 8B Dholi Mandi Chomu, RJ SH 8B, Khadi Bagh, Chomu, Rajasthan 303702, India

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