Indian Subsidiary in Lucknow

Setting up an Indian Subsidiary in Lucknow can be a transformative step for expanding your business operations and accessing one of the world's largest and most dynamic markets. At IndiaFilings, we specialise in providing comprehensive and tailored services for incorporating an Indian Subsidiary. Our team of experts is here to guide you through the complexities of subsidiary registration, from understanding the legal requirements and navigating regulatory approvals to assisting with compliance and documentation. Partner with us for setting up a subsidiary and unlock India’s vast business potential to drive your company's growth and success in Lucknow.

Subsidiary Company

A subsidiary company is often referred to as a sister company, while the company that exercises control over it is known as the parent company or holding company. The parent company holds the authority to control the subsidiary company, either in part or entirely. The registration process for a subsidiary company is governed by the Companies Act of 2013. According to the Companies Act of 2013, a subsidiary company can be defined as a company in which a foreign corporate body or parent entity holds a minimum of 50% of the total share capital. In essence, the parent company exerts a significant influence and control over the subsidiary company.

Types of Subsidiaries in India

In India, there are two primary categories of subsidiaries: wholly-owned subsidiary and subsidiary company. Each has unique characteristics that can benefit foreign investors aiming to establish a business in Lucknow.

• Wholly-Owned Subsidiary: In a wholly-owned subsidiary, the parent company possesses 100% ownership of the subsidiary's shares. However, it's important to note that wholly-owned subsidiaries can only be established in sectors that permit 100% Foreign Direct Investment (FDI).
• Subsidiary Company: In this category of subsidiary, the parent company owns 50% of the subsidiary's shares.

Before proceeding with establishing a subsidiary, obtaining approval from the Reserve Bank of India is a crucial prerequisite. This regulatory step ensures compliance with the country's foreign investment regulations and safeguards the interests of all stakeholders involved.

Advantages of Setting up a Subsidiary in Lucknow

There are several compelling advantages associated with setting up a subsidiary in Lucknow. Establishing a subsidiary offers numerous strategic benefits for parent companies aiming to penetrate the Indian market.

• Entry into the Indian Market: India’s competitive environment offers a plethora of investment opportunities that attract foreign entrepreneurs to establish their subsidiaries in the country in Lucknow.
• Foreign Direct Investment (FDI): FDI involves investments by foreign companies in Indian private companies through share subscriptions or acquisitions. In 2020, the Indian government introduced a provision requiring prior approval for investments from countries sharing a border with India, making subsidiaries an attractive option for foreign investors.
• Perpetual Succession: The concept of perpetual succession ensures that a company's existence remains intact regardless of events like changes in management, transfers of membership, or insolvency. The company continues to operate seamlessly, providing stability and continuity.
• Limited Liability: Limited liability is a significant advantage that encourages individuals to opt for company formation over other business structures. This principle extends to subsidiary companies, protecting the personal assets of shareholders and directors. The company bears responsibility for its debts to third parties, shielding the personal assets of its stakeholders.
• Scope of Diversification: Establishing a subsidiary provides a strategic avenue for foreign businesses to expand their operations. This contributes to the growth and development of the Indian economy in Lucknow and introduces a wide range of goods and services, fostering healthy competition.
• Separate Legal Identity: According to the Companies Act, a company is recognized as a distinct legal entity separate from its shareholders and directors. This legal status empowers the company to engage in agreements with other competent entities as an artificial legal person. It also grants the company the ability to initiate legal actions and respond to allegations before the judicial system in its own name, without direct involvement from its members or directors.
• Property Ownership and Rental: A subsidiary company, being a legal entity, possesses the authority and right to purchase or rent properties in India for its business activities. To prevent potential conflicts among company members, it is advisable to acquire such properties in the name of the company itself, aligning with the principle of perpetual succession.

Regulatory Authorities for Subsidiaries in Lucknow

Several regulatory authorities oversee the process of establishing and operating a subsidiary in India. These authorities ensure legal compliance and facilitate smooth business operations in Lucknow.

• Ministry of Corporate Affairs (MCA): Responsible for setting and enforcing the rules and regulations governing company registration and compliance.
• Registrar of Companies (ROC): Offices handle the procedures related to company incorporation, ensuring companies follow legal requirements.
• Reserve Bank of India (RBI): Regulates foreign currency exchange aspects for subsidiaries, ensuring adherence to financial regulations.

Requirements and Key Facts about Company Registration in India

Here are the essential elements to consider for the incorporation of a subsidiary company:

• Company Name: Your new business requires a unique name that is distinct from existing businesses' names or trademarks.
• Shareholders: The parent company can hold 100% of the shares, or any combination of two foreign nationals can be shareholders. It is not mandatory to have an Indian resident as a shareholder.
• Share Capital: India does not impose a minimum capital requirement for company registration.
• Directors: A minimum of two directors is mandatory, with at least one director being an Indian resident. Nominee directorship services can be provided if required.
• Registered Address: Every company in India must have a registered address that is officially recorded in government records. Virtual office address services are available to meet this requirement.
• Annual General Meeting (AGM): According to the Companies Act, every Indian company must conduct at least one general meeting annually, in addition to two board meetings.
• Company Secretary: It is mandatory to file three secretarial returns each year, which are handled by a company secretary. IndiaFilings can assist with this requirement. A statutory auditor must also be appointed.

Taxation of Subsidiaries in India

Professional fees, including government fees for company registration, Following incorporation, companies are subject to a profit tax rate of approximately 25.36%. GST (Goods and Services Tax) is applicable to domestic sales, with monthly GST returns and one annual tax return required.

Annual Compliance

India has unique compliance requirements, including mandatory statutory audits even for smaller companies.

• Statutory Auditor: Subsidiaries must appoint a statutory auditor and submit annual filings.
• Compliance Importance: Navigating these requirements is crucial for establishing and operating a company in India under the Companies Act 2013.

How to Register a Subsidiary in Lucknow?

Incorporation of a subsidiary involves several key steps and compliance requirements. Here's a step-by-step guide on how to register a subsidiary:

• Determine the Type of Company: Decide on the type of company you want to establish.
• Obtain Digital Signature Certificate (DSC): Since the registration process is conducted online, you must obtain a DSC for the proposed directors of the company.
• Apply for a Director Identification Number (DIN): The directors of the subsidiary company must obtain a DIN from the Ministry of Corporate Affairs (MCA).
• Name Approval: Choose a unique name for your company and apply for its approval through the MCA's online portal.
• Draft MoA and AoA: MoA and AoA are legal documents that outline the company's objectives, rules, and regulations.
• File Incorporation Documents: Once your chosen name is approved, file the incorporation documents, including the MoA, AoA, and other required forms, with the Registrar of Companies (ROC).
• Payment of Registration Fees: Pay the necessary registration fees to the ROC based on the authorized capital.
• Obtain a Certificate of Incorporation (COI): If all the submitted documents and information are in order, the ROC will issue a COI.
• Apply for PAN and Tax Registration: After obtaining the CoI, apply for a PAN and a Tax Deduction and Collection Account Number.
• Open Bank Account: Finally, open a bank account in the name of the subsidiary.
• Obtain a GST Number: GST registration is required after completing the above steps, especially if the company engages in various business activities.
• Initiating Business Operations: Once the incorporation is completed, the company can commence its business operations.

Compliance Requirements for Subsidiaries in Lucknow

To establish a legal and valid subsidiary, compliance with specific regulations is mandatory:

• Foreign Exchange Management Act (FEMA): Foreign companies based in India must adhere to foreign exchange laws and regulations outlined in the Foreign Exchange Management Act, 1999.
• Companies Act, 2013: All subsidiary companies must comply with the provisions of the Companies Act, 2013.
• Reserve Bank of India (RBI) Compliances: RBI imposes several foreign exchange management compliances on subsidiary companies.
• Income Tax Act, 1961: Indian subsidiaries must file income tax returns every year. The corporate tax rate in India is currently 25%.
• Annual Returns: Companies are required to file annual returns with the MCA and the Registrar of Companies.
• SEBI (Listing Obligations and Disclosure Regulations): If the subsidiary lists its securities on a stock exchange, it must comply with SEBI regulations.

Taxation of Subsidiaries in India

• Income Taxes: Taxes are levied on all income earned within or outside India, including dividends from foreign subsidiaries.
• Tax Rates: Tax rates for foreign subsidiaries in India include 50% for royalty received for technical services from the government or any Indian entity and 40% for other income.
• Surcharge: A surcharge of 2% is applied if the company's income falls between Rs. 1 Crore and Rs. 10 Crores; for payments above Rs. 10 Crores, a 5% surcharge is levied.
• Health and Education Cess: A 4% health and education cess is added to the total tax amount.
• Concessional Tax Rates: Concessional tax rates apply to Indian subsidiaries in specific sectors, such as oil exploration, air transportation, and shipping businesses.

FDI in Private Limited Company in Lucknow

100% Foreign Direct Investment is allowed in most sectors. A few sectors, however, require prior approval from the Central Government for foreign investments. These sectors include private security agencies, civil aviation, mining, print media and broadcasting, satellite establishment and operation, pharmaceuticals, and trading of food products in Lucknow. Foreign entities can establish wholly-owned Indian subsidiaries with 100% ownership, subject to specific qualifications.

• For a Private Limited Company: No minimum capital requirement; Minimum of 2 directors (at least one must be a resident of India); Minimum of 2 shareholders.
• For a Public Company: Minimum of 3 directors; at least seven shareholders.

How IndiaFilings Can Assist with Subsidiaries

Still unsure how to register a subsidiary? IndiaFilings simplifies the registration process by offering comprehensive support at every crucial step. From selecting a unique name and obtaining essential Director Identification Numbers (DIN) and Digital Signature Certificates (DSC) to assisting with PAN and TAN applications and setting up a dedicated company bank account, we streamline the entire registration process. Our expert team ensures compliance with regulatory requirements, including the Foreign Exchange Management Act (FEMA), Companies Act, 2013, Reserve Bank of India (RBI) compliances, and the Income Tax Act, 1961. We facilitate filing annual returns, guide you through SEBI (Listing Obligations and Disclosure Regulations) compliance, and provide tax services to navigate India’s taxation policies. With IndiaFilings as your partner in Lucknow, you can initiate and grow your subsidiary business confidently and efficiently.

Partner with IndiaFilings to start your Indian Subsidiary application and maximize your business potential in Lucknow. Our dedicated team is here to support you every step of the way.