Post Incorporation Compliances for Wholly Owned Subsidiary

Foreign Company have to follow certain rules and guidelines as laid down by The Companies Act, 2013, RBI guidelines etc.

The Companies that are incorporated outside India are known as Foreign Companies. This article is intended for those companies or startups that have registered their companies outside India and want to know Procedure for incorporation of foreign subsidiary in India as part of a foreign company.

A company can be registered as private limited or public limited. A private limited company is a closely held company and enjoys the privileges given by the Companies Act, 2013. A public limited company is a company where public is interested and it is required to comply with lot of rules and regulations framed by the Companies Act, 2013. Generally foreign Companies prefers Formation of wholly owned subsidiary in India.

A foreign company planning to set up business operations in India may:

  • Incorporate a company under the Companies Act, 2013, as a Joint Venture or as foreign company registration in India by way of Indian subsidiary.
  • Set up a Liaison Office / Representative Office or a Project Office or a Branch Office of the foreign company which can undertake activities permitted under the Foreign Exchange Management (Establishment in India of Branch Office or Other Place of Business) Regulations, 2000. (Discussed In another Article)

Foreign Subsidiary Company in India

What is Foreign Company?

As Per Section 2 (42) of Companies Act, 2013

Foreign company is a company or body corporate incorporated outside India which

  • has a place of business in India whether by itself or through an agent, physically or through electronic mode; and
  • conduct any business activity in India in any other manner

What is wholly owned subsidiary?

A Wholly Owned Subsidiary Company can be defined as an entity whose entire share capital is held by the foreign company.

For opening an Indian subsidiary, the following requirements must be fulfilled.

  • Directors& shareholders (subscribers) are required to apply for DSC (Digital Signature Certificate).
  • The applicant is required to apply for the name of the company in Form RUN (Reserve Unique Name).
  • After obtaining name approval from ROC, an applicant is required to file form spice (Application for Incorporation of Company along with Memorandum and Articles of Association of the Company.
  • After filing of the incorporation documents, ROC fees and Stamp duty is required to be paid online (This is based on the authorized capital of the company).
  • After the payment of ROC fees and Stamp Duty, ROC verifies the filed documents. ROC may suggest some changes in the form or attachment. We will have to make changes accordingly.
  • Once ROC is satisfied, Certificate of Incorporation (COI) is sent through email.
  • PAN & TAN of the company shall be issued simultaneously by the department by mentioning on COI

Required documents/information

  1. Name of subscribers (holding co.)
  2. Name of Individual subscriber
  3. Name of nominee shareholder on behalf of foreign holding Company
  4. DIN of proposed directors (minimum 2), if already having.
  5. Mobile No., E-mail I.D, Place of Birth, Educational Qualification and occupation of Proposed Directors/subscribers/nominee shareholder.
  6. Proposed names (in order of preference) of the company.
  7. Main object of the proposed company.
  8. Proposed authorized & paid-up capital of the company.
  9. % shareholding of subscribers
  10. Face value of shares
  11. Self attested copy of PAN Card of director/subscriber/nominee (for Indian nationals).
  12. Self attested copy of ID Proof of proposed Directors (Voter ID/ Passport/ Driving License) of director/subscriber/nominee
  13. Self attested copy of Residential Proof of Proposed Directors/promoters/nominee (Bank Statement/Electricity Bill/Telephone Bill/Mobile bill) (not older than two (2) Months) of director/subscriber/nominee
  14. Self attested copy of aadhaar card of director/subscriber/nominee (for Indian nationals)
  15. Self attested copy of passport is mandatorily required in case of foreign nationals.
  16. Details of Directors in other Companies:
  • Name of the Company(s)
  • Designation
  • Shareholding percentage
  • Nominal Value of Shares
  • Other Interest, if any.
  1. Land line No of directors/promoters, if having.
  2. Copy of electricity / telephone/gas/mobile Bill (not older than two (2) Months) of proposed registered office address,
  3. Latest passport size 3 colored photograph of each proposed director/subscriber.
  4. DSC of subscribers.

 

Following forms shall be required to be filed for Incorporation of subsidiary company:

  1. e-Form RUN-For approval of name (name shall be available only for 20 days).
  2. e-Form Spice (INC-32)

              Attachments:

  • Affidavit regarding non-acceptance of deposit duly notorised.
  • Declaration by an advocate, a Chartered Accountant, Cost accountant or Company Secretary in practice shall be in Form No. 8 duly notorised.
  • Declaration by first director in form DIR-2
  • Interest in other entities, if any
  • Affidavit shall be submitted by each of the subscribers to the memorandum and each of the first directors named in the articles in Form No.9 duly notarized.
  • Special POA to authorize professional
  • Self attested copy PAN card of proposed directors & subscribers to MOA
  • Self attested copy address proof of proposed directors &subscribers to MOA
  • Self attested copy identity proofs of proposed directors & subscribers to MOA
  • Copy of rent agreement/lease deed
  • NOC from landlord
  • Copy of electricity / telephone/gas/mobile Bill (not older than two (2) Months) of proposed registered office address
  • MOA, AOA & COI of foreign holding Company, attested by director of that company duly translated in English, if not in English language & Certified by Indian Consulate
  • COI of the foreign holding company attested by director of that company duly translated in English, if not in English language & Certified by Indian Consulate.

 

Post Incorporation Compliances:

Step-1: Opening of Bank Account

Bank account of company is required to get open to receive the subscription money from subscribers including Foreign holding Company.

Step-2: Filing of ARF (Advance Reporting Form) with RBI

The reporting regarding receipt of subscription money has to be done within 30 days from date of receipt of fund in ARF to RBI.

Step-3: Allotment of shares

Allotment of shares to be done within 2 months from date of incorporation of subsidiary company to the subscribers.

Step-4: Filing of Form FC-GPR with RBI

Form FCGPR is required to be filed with RBI within 30 days from date of allotment of shares to subscribers/foreign holding company.

 

Note:

  1. There must be at least one Indian resident director in company
  2. All the documents of the foreign party will be received after getting notarized/appostiled/consolorised as per the norms of the respective foreign company.
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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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