SUBSIDIARY COMPANY

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Subsidiary Comapany

Foreign investors are willing to do business in India as the nation offers many opportunities due to its fast-growing market. Any foreigners except Pakistani and Bangladeshi citizens or legal entities established and operating outside of India are permitted to invest in the Indian market. A subsidiary company is any company owned by a foreign company and the Companies Act 2013 governs the process of registering a subsidiary company.
The Economic Liberalization of 1991 was a catalyst for foreign direct investment in India. A subsidiary company is also known as a sister company, and the company that controls a sister company is known as the parent or holding company. The parent company controls all or part of its subsidiary company.
Subsidiary company registration in India is under the full control of the Companies Act 2013. According to the Companies Act 2013, a subsidiary company is a foreign company or parent body that owns at least 50% of the entire share capital. A subsidiary company must comply with the laws of the country in which they are incorporated.

Benefits of Subsidiary Comapany

Separate Legal Identity
A subsidiary company enjoys the benefit of separate legal identity in the eyes of law.
Management Structure
Subsidiary companies have a management structure of their own, different from the parent company.
Limited Liability
Shareholders or the owners of a Company have limited liability towards the company.
FDI Allowed 100%
In case of subsidiary company, FDI is allowed 100% without any prior permission. However, it requires posts facto filing/intimation to the Reserve Bank of India.
Parent Company 100% Effective
Parent Company (based in any part of the world) can retain a 100% effective ownership of its Indian Counter-part.
Capability To Jump
The parent company can provide the monetary means and capability to jump start new companies and products.

Procedure of Subsidiary Comapany

1
Incorporation of Subsidiary Company

To start with incorporation of a subsidiary company, two directors apply for DSC (Digital Signature Certificate), and all the directors must apply for DIN (Director’s Identification Number).

2
Register yourself

The applicant is required to apply for the name of the company in Form INC-1. After obtaining name approval from ROC (Registrar Of Companies), an applicant is required to file –

  • Form INC-7 [Application for Incorporation of Company (Other than One Person Company)]
  • Form DIR-12 [Particulars of appointment of directors and key managerial staff]; and
  • Form INC-22 (Notice of the situation) along with the memorandum of association (MOA) and articles of association (AOA) of the company.

3
Payment of Online ROC

After the filing of the incorporation documents, payment of online ROC fees and stamp duty is done by the client. (This is based on the authorized capital of the company).

4
ROC Verifies

After the fees are paid, ROC verifies the filed documents. Form INC-22 and DIR-12 are approved via the Straight-Through-Process (STP) and the ROC verifies Form INC-7 in detail. The ROC may suggest some changes in the form or attachment.

5
Certificate of Incorporation

Once the changes have been affected and the ROC is satisfied, Certificate of Incorporation is sent to the client via email.

Documents Required For Subsidiary Comapany

  • Passport Size photograph
  • Address proof (Driving license, voter ID, passport, aadhar card).
  • Proof of Registered office in India (Electricity bill, leased deed or rent agreement)
  • PAN card (Not mandatory in case of foreign Director)
  • Passport (Mandatory for foreign director must be in english language and duly apostle)
  • If the proposed director is in a foreign country, then all the documents must be duly apostle by the home country & if the director is presently in India, then such apostle is not required
  • Bank passbook / credit card statement / telephone bill / electricity bill

Eligibility Criteria of Subsidiary Comapany

Two Directors
Minimum two directors are required for incorporation of the subsidiary company. At least one should be a resident of India.
No Minimum Capital is Required
No minimum capital is required to form a subsidiary company in India.
Two Shareholders
A subsidiary company must have minimum of two shareholders. Shareholders can be either individual or any entity or a combination of both.
50% Total Equity
The parent company must hold 50% of the total equity share capital.
Director Identification
Director Identification Number for all Directors.

FAQs

Q. Why can’t an e-MOA and an e-AOA be used by foreign companies to establish a subsidiary company in India?
An E-MOA and an AOA cannot be used by foreign companies because, in compliance with Rule 13(5) of the Company (Incorporation) Rules, 2014, MOA and AOA signed by a person residing outside India, which should be apostilled or notarized by the notary of the country of origin.
Q. Does the ID proof of foreign subscribers require to be apostilled and notarized from the country of origin by a public notary?
ID proof of the approved foreign company representative / foreign company nominee requires to be apostilled in the country of origin if that person is not an Indian citizen.
Q. How many digital signatures are required for the incorporation of a subsidiary company?
Just one digital signature will be sufficient. Since the DSC is affixed only on the "INC-32" type of SPICE, there is no need to attach the DSC to the MOA / AOA subscriber sheet, as a physical MOA / AOA is used for business incorporation.
Q. Under which circumstances are documents from international subscribers not allowed to be apostilled?
Under Rule 13(5), if foreign subscribers arrive on a "Business Visa" to India, then the documents are not necessary to be apostilled.

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