How To Open A Subsidiary Company In India

As per recent report of KPMG, India has emerged as one of the fastest growing investment destination for foreign companies. Now more and more foreign companies are opening companies in India and make direct investment in them. One question which comes in mind of any foreign company is as How to open a subsidiary company in India

In this article, we have tried to touch base the Procedure for incorporation of foreign subsidiary in India

We are providing the Procedure and Documentation relating to how to incorporate a wholly owned subsidiary in India.

To start with, in order to register Indian subsidiary company, at least 1 director shall be Indian citizen and Indian Resident. Also, it is advisable to have at least 2 Indian directors. This will facilitate holding of board meetings etc. Also, since foreign company would be shareholder, therefore, it has to appoint one person as authorized signatory who would subscribe shares of Indian company on behalf of foreign company because foreign company being non individual cannot hold shares of its own.

There are 3 stages involved in company registration in India with foreign Directors:

  1. First Stage- Registration procedure
  2. Second Stage- Post registration procedure
  3. Third Stage- RBI compliance

First Stage- Procedure for incorporation of foreign subsidiary in India

Steps involved are as under:

First step is to apply for Digital Signature Certificate (DSC) of all Directors in India

Second step is to apply for Director Identification No. (DIN) of all Directors in India

Third step is to apply for company name approval of proposed Company

Here, applicant shall give 3-4 proposed names of the company out of which one name at the discretion of ROC will get approved. Also, name should reflect the main objects of the company.

Fourth Step is to apply for Final Incorporation

Here, MOA, AOA are drafted and statutory Forms are filed with MCA and also PAN and TAN of company are applied.

Thereafter, Certificate of Incorporation is obtained. This completes the Procedure for incorporation of foreign subsidiary in India

 

Second Stage- Post Registration requirement

Steps involved in post- incorporation stages are as under:

  1. Opening of current account in Bank
  2. Applying for auditor addition on MCA website within 30 days of incorporation of company

 

Third Stage – RBI compliance for FDI received in India

Since one or more Directors are foreign citizen, any contribution to capital would be considered as FDI and accordingly, RBI compliance needs to be done by newly registered company in India. It involves following steps:

  1. Remittance of subscription amount in India bank a/c (within 45 days of incorporation) through wire transfer from foreign country bank account to Indian bank account. Obtaining FIRC & KYC docs from the Bank
  2. Reporting receipt of share application money with RBI within 30 days of receipt of funds (Advance Reporting form along with KYC & FIRC)
  3. Allotment of shares immediately and
  4. Reporting in Form FC-GPR within 30 days of date of allotment (& of course post receipt of share application money) and follow up from bank from time to time.
  5. Issue of share certificates.

Besides above, once subsidiary company is registered in India and Bank account is opened, it may commence business. RBI compliance can be done simultaneously or parallel with business. Further, before commencement of business, subsidiary company shall take other mandatory registrations like

  1. GST registration
  2. IEC registration if engaged in Import or export business
  3. Shop and Establishment Registration
  4. ESI, PF registration in case no. of employees exceed 10 or 20 as the case may be.

Hope the above article gives some insights on How to open a subsidiary company in India

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Author: Anil Agrawal
EZYBIZ India Consulting LLP, New Delhi. The firm is business and tax consultancy firm providing consultancy in Taxation, Regulatory, Transfer pricing, Valuation, Corporate funding and Business set up matters. He may be reached at 9899217778 or anil@ezybizindia.in.

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