Indian Subsidiary Registration

About Indian Subsidiary Registration

Registration of Indian Subsidiary Company

At A2Z FINEDGE, we provide exceptional taxation compliance and filing services to help businesses establish their subsidiaries in India. Our expert team of Chartered Accountants (CAs), Company Secretaries (CSs), MBAs, lawyers, and advocates ensures a hassle-free registration process. This comprehensive guide explains everything about subsidiary registration, its benefits, and compliance requirements.

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What is a Subsidiary?

A subsidiary is a company that is controlled by another company, referred to as the parent or holding company. The parent company owns more than 50% of the subsidiary’s shares, granting it decision-making authority over the subsidiary’s operations. Subsidiaries are often created to expand business operations, enter new markets, or manage specific business areas.

In India, subsidiaries are established under the Companies Act, 2013, and are classified as either private or public limited companies. They operate as separate legal entities, with their own assets, liabilities, and management structures, although the parent company retains significant influence.

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Types of Subsidiaries in India

1. Wholly Owned Subsidiary:
• The parent company holds 100% of the subsidiary’s shares.
• Commonly used by multinational companies to fully control their Indian operations.
2. Joint Venture Subsidiary:
• Ownership is shared between the parent company and another entity, often a local business partner.
• Ideal for leveraging local expertise and resources.
3. Associate Company:
• The parent company owns a significant share but less than 50%.
• Provides strategic involvement without full control.
4. Step-Down Subsidiary:
• A subsidiary owned by another subsidiary of the parent company.
• Used for further segmentation of business activities or regional management.

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Advantages of Indian Subsidiary Registration

1. Market Access:
• India’s large and diverse market provides significant growth opportunities for businesses.
2. Limited Liability:
• Shareholders’ liability is limited to their shareholding, protecting personal assets.
3. Separate Legal Entity:
• Operates independently of the parent company, allowing flexibility in operations and decision-making.
4. Tax Benefits:
• Subsidiaries can access favorable tax treaties and exemptions, reducing operational costs.
5. Global Recognition:
• Establishing a subsidiary enhances the parent company’s global footprint and credibility.
6. Operational Flexibility:
• Indian subsidiaries can structure operations and resources to align with local market demands.
7. Ease of Repatriation:
• Profits can be repatriated to the parent company, subject to compliance with tax and FEMA regulations.

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Regulatory Framework

Indian subsidiaries are governed by the following laws and regulations:

1. Companies Act, 2013:
• Provides comprehensive guidelines for incorporation, management, and compliance.
2. Foreign Exchange Management Act (FEMA), 1999:
• Regulates foreign direct investment (FDI) in Indian subsidiaries.
3. Income Tax Act, 1961:
• Governs taxation, transfer pricing, and tax benefits for subsidiaries.
4. Goods and Services Tax (GST) Act, 2017:
• Applicable for subsidiaries involved in the supply of goods or services.
5. Sectoral Regulations:
• Specific industries, such as banking, insurance, and telecommunications, have additional regulatory requirements.

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Requirements and Key Facts

1. Directors:
• A minimum of two directors is required, one of whom must be an Indian resident.
• Directors must have valid Director Identification Numbers (DIN).
2. Shareholders:
• At least two shareholders are required, with the parent company being one of them.
3. Registered Office:
• A physical address in India must be provided as the official registered office.
4. Authorized Capital:
• There is no minimum capital requirement; however, appropriate capital must be allocated based on business needs.
5. Company Name:
• The name must be unique and comply with the naming guidelines prescribed by the Ministry of Corporate Affairs (MCA).

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Detailed Document Requirements for Registration

1. Parent Company Documents:
• Certificate of Incorporation: Proof of the parent company’s legal existence.
• Memorandum of Association (MoA): Defines the objectives of the parent company.
• Articles of Association (AoA): Outlines the governance and operational structure of the parent company.
• Board Resolution: Authorizing the establishment of the subsidiary and appointing representatives.
• Proof of Address: Recent utility bill or lease agreement of the parent company’s registered office.
2. Indian Subsidiary Documents:
• Proposed Name Approval: Evidence of name reservation through the RUN service.
• Drafted MoA and AoA: Tailored to align with Indian legal and business requirements.
3. Director and Shareholder Documents:
• Identity Proof:
• Passport (mandatory for foreign directors and shareholders).
• PAN Card (for Indian residents).
• Address Proof:
• Aadhaar Card, Driver’s License, or recent Utility Bill (not older than two months).
• Passport-Sized Photographs: Recent and clear.
• Digital Signature Certificate (DSC): Required for e-filing with the MCA.
4. Registered Office Documents:
• Address Proof:
• Rent Agreement (if the office is rented).
• Property Ownership Document (if self-owned).
• Utility Bill: Electricity or water bill as proof of address (not older than two months).
• No Objection Certificate (NOC): From the property owner if the office is rented.
5. Additional Requirements:
• Banker’s Certificate: Certifying the availability of funds for investment.
• FEMA Compliance Documents: Necessary for foreign investments.

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Step-by-Step Process for Subsidiary Registration

1. Name Approval:
• Submit the proposed name for approval through the RUN (Reserve Unique Name) service on the MCA portal.
• Ensure the name complies with naming guidelines and is not already in use.
2. Drafting MoA and AoA:
• Prepare the Memorandum of Association and Articles of Association, specifying the objectives and operational guidelines.
3. Digital Signatures and DIN:
• Obtain Digital Signature Certificates (DSC) for directors.
• Apply for Director Identification Numbers (DIN) for all directors.
4. Filing SPICe+ Form:
• Submit the SPICe+ form along with all required documents for incorporation, PAN, and TAN applications.
5. Verification and Certificate of Incorporation:
• The Registrar of Companies (RoC) reviews the application and issues a Certificate of Incorporation upon approval.
6. Post-Incorporation Compliance:
• Open a bank account.
• Obtain GST registration if applicable.
• Ensure compliance with other regulatory requirements.

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Compliance Requirements

1. Annual Filings:
• File annual financial statements and returns with the RoC.
2. Tax Compliance:
• File income tax returns and adhere to TDS regulations.
3. Board Meetings:
• Conduct regular board meetings and maintain proper minutes.
4. Statutory Audits:
• Annual audit of financial records by a qualified auditor.
5. Transfer Pricing Compliance:
• Ensure adherence to transfer pricing norms for related-party transactions.

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Frequently Asked Questions (FAQs)

1. What is the minimum shareholding for a parent company in a subsidiary?
• The parent company must hold more than 50% of the subsidiary’s shares.
2. Can a foreign company be a director in an Indian subsidiary?
• No, only individuals can be directors, but a foreign individual can serve as a director.
3. What is the time frame for subsidiary registration?
• The process typically takes 10-20 working days, depending on document verification.
4. Are there restrictions on foreign ownership?
• No, foreign ownership is allowed under automatic or approval routes, depending on the sector.
5. What is the validity of a Certificate of Incorporation?
• It is valid indefinitely, provided compliance requirements are met.
6. Can a subsidiary repatriate profits to the parent company?
• Yes, profits can be repatriated, subject to tax and FEMA regulations.
7. What sectors require government approval for foreign investment?
• Sectors such as defense, telecommunications, and media require prior government approval.
8. What is the role of an Indian resident director?
• An Indian resident director ensures compliance with local regulations and represents the company domestically.

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Why Choose A2Z FINEDGE?

• Expert Team: Our professionals have extensive experience in subsidiary registration.
• End-to-End Support: From documentation to compliance, we handle it all.
• Transparent Pricing: No hidden charges, complete clarity throughout the process.
• Timely Execution: We ensure a smooth and timely registration process.
• Post-Registration Assistance: Continued support for compliance and regulatory requirements.

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Get Started with A2Z FINEDGE Today!

Take the first step toward securing your business’s future with A2Z FINEDGE’s Society Registration Services. Let us handle the complexities while you focus on growing your dream business.

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