Foreign investors are willing to start their business in India as the nation is providing tonnes of opportunities because of the fast-growing market. Any foreign national except the citizens of Pakistan and Bangladesh or an entity that is formed and is operating outside India can invest in the Indian market. Indian Subsidiary is any company that is owned by a foreign company, the Companies Act, 2013 governs the registration process of the Indian Subsidiary.
The Economic liberalization of 1991 was a catalyst for the foreign direct investment in India. A subsidiary company is also called the sister company and the company which has a hold over the sister company is called the parent or holding company. The parent company holds control over the subsidiary company completely or partially.
The registration of the Indian subsidiary company is completely controlled by the Companies Act, 2013. As per the Companies Act 2013, a subsidiary company is a foreign corporation or a parent body that has a minimum of 50% of the entire share capital. The subsidiary must adhere to the laws of the nation in which they are planning to establish the entity.
IndiaFilings can help with Indian Subsidiary registration while providing nominee directors and registered office service in India.
An applicant who is a foreign national has to submit the following documents:
The Indian Director has to submit the following documents:
The representative of the foreign company has to submit the following documents:
When we receive a request at IndiaFilings our business consultant reaches to you, understands the business needs, and suggests you the best suitable type of entity for your business.
A dedicated relationship manager is allocated to the business, the relationship manager will collect all the necessary documents. These documents will be simultaneously uploaded on the government portals.
To incorporate a Private Limited Company in India, the following documents need to be submitted.
IndiaFilings will help the applicant obtain the DSC and the Director Identification Number (DIN) from the Ministry of Corporate Affairs.
After the name approval is obtained, it is necessary to draft the Memorandum of Association and file it within 60 days to complete the incorporation process.
A minimum of two shareholders is required for a private limited company. Hence, the holding company in a foreign country must pass a Board resolution for the Incorporation of the Company in India and the subscription of shares of the proposed company.
The Foreign Company can hold around 99.99% of the total shares of the Indian Company, while 0.01% of the company's issued shares can be controlled by an Indian in trust with the foreign company.
Once the company is incorporated, it is necessary to open the Bank accounts and obtain the required licenses. Simultaneously, it is necessary to make filings with the RBI to indicate India's foreign investment through the automatic route.
Limited Liability: The liability of the Directors and the members of the Indian Subsidiary Company is just like the Private Limited Company is limited to their shares. This means if the company is suffering from any loss and is facing any financial distress then because of any business activity, then the personal assets of the shareholders or the members of the directors will not be at risk.
Perpetual succession: The life of the business is not affected by the status of the shareholders and even after the death of the shareholder the Indian Subsidiary company will continue to exist.
Brand value: The brand value of the company is increased as the employees will feel secure in joining the Private Limited Company, the vendors will feel secure in offering credit and the investors will be relieved while investing. The new-age startups can become a multibillion company in years due to the high brand value of the company.
Expansion: Here the scope of expansion is higher as it is easy to raise the capital from a venture capitalist, the financial institution, angel investors, and the advantages of limited liability.
Foreign direct investment: 100% Foreign Direct Investment is allowed in several business activities and industries through automated route without any prior approval. But FDI is not allowed in proprietorships or partnerships. FDI in a Limited Liability Partnership also requires government approval.
Foreign Direct Investment in a Private Limited Company is allowed for the foreign entities that are subject to the FDI guidelines. FDI in India falls under two categories automatic route and the approval route. Currently, 100% FDI is permitted in most of the sectors, that is exempting the capped and the restricted sectors.
If automatic approval is not permitted then it is necessary to obtain the prior consent of the Foreign investment promotion board of the Indian government. Further, the citizens or the entities from Bangladesh and Pakistan can invest only under the approval route. FDI can be through equity instruments Indian companies can issue equity shares, preference shares, and convertible debentures but this is subject to the norms and the guidelines.
The equity shares of a Private Limited company can be issued under the FDI and must be at a fair value. If the NRI is incorporating a company or a subscription to the association's memorandum during the company the shares can be issued at fair value.
Here is the list of the industries that require approval from the government for investments by the foreign company or the foreign national.
A Private Limited Company is required to have a minimum of two shareholders and two directors. The shareholder can be any person or even a corporate entity. Foreign nationals can be the directors of the Private Limited Company But it should be noted that at least the director should be having Indian residency.
There is no minimum requirement for the Indian Director to be a shareholder in the company. Most of the foreign companies prefer to incorporate a company in India with three directors of which two are foreign nationals and one is an Indian Director.
The 100%shares of the Indian company can be held by a combination of foreign companies or nationals. One corporate entity or the person cannot have all the shares of the Indian subsidiary company.
There are certain compliances which the Indian subsidiary companies are required to adhere to mandatorily.
Companies Act, 2013 - A company formed in India would have to comply with compliance under the Companies Act, 2013.
Foreign Exchange Management Act,1999 - It is necessary to comply with India's respective foreign exchange laws when a foreign company has is planning to establish in India.
RBI Compliance - The Indian Subsidiary of a foreign company also has to comply with the respective RBI compliances.
Income Tax - All the companies currently operating in India have to file Income Tax returns. It is necessary for the Indian subsidiary company has to comply with the individual tax rates.
Annual returns of ROC and MCA - The companies established in India must file the yearly compliances with the Registrar of Companies and the Ministry of Corporate affairs.
SEBI- If the Indian subsidiary company lists its securities in a stock exchange, then the compliance must be followed as per the laws under the Securities Exchange Board of India.
Entities that enter into an International transaction are required to obtain a report from a Chartered Accountant. Failing to furnish a report from the CA can lead to a penalty of Rs. 1 lakh.
Suppose the entity fails to maintain the documents or fails to report or even furnishing incorrect information can attract a penalty of 2 % of the value of each transaction where the non-compliance exists.
The tax authorities may in any proceeding require any person who has entered into the international transactions to furnish any related information or document.
The document must be furnished within 30 days from the date of receipt of a notice.
Failure to furnish can attract a penalty equal to 2 % of the value of the transaction specified for each failure.
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Open a new or link your existing ICICI bank current account with LEDGERS for seamless bank account reconciliation, account balance check and sending of payments through NEFT / RTGS / IMPS.
Open a new or link your existing DBS bank business account with LEDGERS for seamless bank account reconciliation, account balance check and sending of payments through NEFT / RTGS / IMPS.
Opening a current account for an India Subsidiary is easier when compared to opening of current account for a sole proprietorship firm as a company is a registered legal entity – recognized by law. Therefore, once a company is incorporated, a bank account can be opened in the name of a company with the incorporation certificate of the company and identity/address proof of the Directors.
To incorporate a private limited company, a minimum of two people are required. A private limited company must have a minimum of two Directors and can have upto a maximum of fifteen Directors. A minimum of two shareholders and a maximum of upto 200 shareholders are allowed in a private limited company.
The Director needs to be over 18 years of age and must be a natural person. There are no limitations in terms of citizenship or residency. Therefore, even foreign nationals can be Directors in a Indian Private Limited Company.
You can start a Private Limited Company with any amount of capital. However, fee must be paid to the Government for issuing a minimum of shares worth Rs.1 lakh [Authorized Capital Fee] during the incorporation of the Company. There is no requirement to show proof of capital invested during the incorporation process.
An address in India where the registered office of the Company will be situated is required. The premises can be a commercial / industrial / residential where communication from the MCA will be received.
No, you will not have to be present at our office or appear at any office for the incorporation of a Private Limited Company. All the documents can be scanned and sent through email to our office. Some documents will also have to be couriered to our office.
Identity proof and address proof is mandatory for all the proposed Directors of the Company. PAN Card is mandatory for Indian Nationals. In addition, the landlord of the registered office premises must provide a No Objection Certificate for having the registered office in his/her premises and must submit his/her identity proof and address proof.
IndiaFilings.com can incorporate a Private Limited Company for in 7-15 days. The time taken for incorporation will depend on submission of relevant documents by the client and speed of Government Approvals. To ensure speedy incorporation, please choose a unique name for your Company and ensure you have all the required documents prior to starting the incorporation process.
To incorporate a Company quickly, make sure the proposed name of the Private Limited Company is very unique. Names that are similar to an existing private limited company / limited liability partnership / trademark can be rejected and additional time will be required for resubmission of names.
Once a Company is incorporated, it will be active and in-existence as long as the annual compliances are met with regularly. In case, annual compliances are not complied with, the Company will become a Dormant Company and maybe struck off from the register after a period of time. A struck-off Company can be revived for a period of upto 20 years.
A Digital Signature establishes the identity of the sender or signee electronically while filing documents through the Internet. The Ministry of Corporate Affairs (MCA) mandates that the Directors sign some of the application documents using their Digital Signature. Hence, a Digital Signature is required for all Directors of a proposed Company.
Director Identification Number is a unique identification number assigned to all existing and proposed Directors of a Company. It is mandatory for all present or proposed Directors to have a Director Identification Number. Director Identification Number never expires and a person can have only one Director Identification Number.
Authorized capital of a Company is the amount of shares a company can issue to it shareholders. Companies have to pay the Government an authorized capital fee to issue shares in a Company. Companies have to pay authorized capital fee for a minimum of Rs.1 lakh.
A private limited company must hold a Board Meeting atleast once in every 3 months. In addition to the Board Meetings, an Annual General Meeting must be conducted by the Private Limited Company, atleast once every year.
Yes, a NRI or Foreign National can be a Director in a Private Limited Company after obtaining Director Identification Number. However, atleast one Director on the Board of Directors must be a Resident India.
Yes, NRIs / Foreign Nationals / Foreign Companies can hold shares of a Private Limited Company subject to Foreign Direct Investment (FDI) Guidelines.
100% Foreign Direct Investment is allowed in India in many of the industries under the Automatic Route. Under the Automatic Route, only a post-investment filing is necessary with the RBI indicating the nature of investment made. There are a few industries that require prior approval from the RBI, in such cases, approval must first be obtained from RBI prior to investment.
Last updated: Sep 20, 2021