Procedure to Incorporate a foreign subsidiary in India

Overview

India has a sizable and expanding economy, which presents a wealth of opportunities for companies of all sizes. Indian business expansion may be a wise choice for a foreign company. Registration of a subsidiary company is one way to gain presence in India.

Owned by a parent company, a subsidiary company is a distinct legal entity. While it has its management, the parent company still has control over it. Without having to create a new company from scratch, this enables the parent company to have a presence in India.

A subsidiary of a foreign company can be set up in India more easily than other types of company registration because it offers more benefits in terms of the tax regime, post-incorporation compliances, and other formalities.

Benefits to foreign subsidiaries in India

• Large and growing market: India is one of the fastest-growing economies in the world, and its population of over 1.3 billion people presents a significant market for foreign companies to set up their own subsidiaries in India.
• Favorable business environment: The Indian government has taken several steps to improve the ease of doing business in the country, including simplifying regulations, streamlining procedures, and offering tax incentives.
• Access to skilled workforce: India is home to a large pool of highly skilled and educated professionals, including engineers, IT specialists, and business executives.
• Lower costs: Operating costs in India, including labor and real estate, are generally lower than in many other developed countries, making it an attractive location for cost-effective manufacturing and other business operations.
• Government support: The Indian government has established several policies and initiatives to promote foreign investment and support the growth of foreign companies in the country.
• Strategic location: India’s location provides easy access to other markets in the region, such as Southeast Asia, the Middle East, and Africa.

Information/ Documents required for incorporating a foreign subsidiary in India.

• Name of subscriber;
• Individual subscriber’s name;
• Name of the foreign company’s designated shareholder (parent company);
• Director DIN (at least 2);
• Proposed Directors/subscribers/nominee shareholders’ mobile number/email ID/place of birth/educational qualification and occupation;
• The goal of the planned business
• Proposed paid-up capital Percentage of subscribers’ shareholdings;
• The PAN Card of the director/subscriber/nominee (for Indian nationals) must be self-attested;
• Self-certified copy of the suggested director’s identification proof (voter identification / passport / driving license);
• Residential Proof (bank statement / electricity bill / telephone bill / mobile bill) (not older than two (2) months);
• Name of nominee / subscriber / director;
• A self-attested copy of the director’s / s;ubscriber’s / nominee’s aadhar card (for Indian nationals)
• In the case of international nationals, a self-attested copy of their passport is required.
• Information on other companies’ directors;:
• The Company’s Name (s);
• Percentage of shares held nominal value of shares;
• Copy of the proposed registered office address’s phone/mobile bill/electricity bill (not older than two months);
• 3 current passport-size photographs of each potential director/subscriber; and
• Subscribers’ DSC.

Other Essential Documents

• Approval of the name (name valid for twenty days only).
• Spice e-Form (INC-32) attachments such as a notarized affidavit of non-acceptance of a deposit
• A declaration signed by an attorney, a Chartered Accountant, a Cost Accountant, or a Company Secretary must be duly attested.
• Each subscriber and director shall sign an Affidavit on the fully attested. 
• As mentioned in the Memorandum of Association (“MOU”), a self-certified copy of the prospective directors’ and subscribers’ PAN cards.
• Self-certified document of proposed directors’ and subscribers’ address proof as mentioned in the MOA.
• As required by the MOA, a self-certified copy of the prospective directors’ and subscribers’ identity evidence.
• A copy of the lease/rent contract.
• Non-objection Certificate from the landlord or from the tenant if the tenant has the right to sub lease mentioned in the contract.

Process of incorporating a foreign subsidiary in India

1. Obtaining DSC and DIN:

The first step towards subsidiary registration is applying for the Digital Signature (“DSC”) and Director’s Identification Number (“DIN”). The primary documents required for obtaining the DIN and DSC are as under:

• In the case of Indian National (Self-attested):

1. a) PAN Card (mandatory),
2. b) Address Proof (electricity bill or telephone bill, bank statement or passbook).
3. c) Photo ID Proof (passport, driving license, or aadhar card).

• In the case of Foreign National:

1. a) Passport (mandatory)
2. b) Address Proof (electricity bill or telephone bill, bank statement or passbook).
3. c) Photo ID Proof (any government license or document containing the name in full, photo, and date of birth.)

Note: All the above documents for foreign citizens and non-residents should be notarized and apostilled by the competent authority.

2. Address proof of registered office of proposed Company:

• Electricity bill, not older than two months
• Obtain a No objection certificate (NOC) from the owner of the property.
• Rent agreement.

3. Name Approval:

An essential step in the entire incorporation process is choosing a distinctive and appropriate name for the proposed company. The name should not be the same as any already existing entities or be prohibited by law, and it should fit with the company’s mission.

4. Incorporation Application:

The proposed directors and shareholders of the company must digitally file the company’s memorandum, articles of association, and other properly executed documents as the last step in registering the foreign subsidiary.

In general, Indian nationals are required to self-attest the incorporation documents. However, the procedure is as follows in the case of foreign nationals:

If the documents are signed outside of India, they must either be apostilled by the appropriate authority or notarized by a public notary in the resident country.

If the subscriber is a foreign entity

The representative of the foreign entity should then sign the incorporation documents. In the home country of the subscriber company, an authorization letter that accurately states the name of the authorized person and the number of shares subscribed should be notarized or apostilled.

Apostilled copy of Resolution of Foreign Company

Once the Incorporation application is approved, the Registrar would issue a Certificate with a Corporate Identification Number (CIN) and PAN and TAN of the Company.

Essential compliances

The following are the more important compliances that have to be met by the foreign subsidiary company as per Sections 380 and 381 of the Companies Act, 2013:

• Form FC-1 under Section 380: The FC-1 form is crucial because it must be submitted within 30 days of the subsidiary company’s incorporation in India. The form must be submitted along with the necessary documents, certifications, etc. from other Indian regulatory bodies like the Reserve Bank of India.
• Form FC-3 under Section 380: Depending on where the company was incorporated in India, this form must be submitted to the relevant Registrar of Companies (“ROC”). The form must include information about the locations where the company will conduct operations as well as the company’s financial records.

• Section 381 Form FC-4: This form relates to the company’s yearly returns. It must be submitted within sixty days of the conclusion of the prior fiscal year.
• Financial statements: For its operations and business in India, the company must submit financial statements. This needs to be turned in within six months of the fiscal year’s end. They must include the following: statements on the transfer of funds, statements of repatriated earnings, statements on related party transactions, such as sales, transfers of property, purchases, etc.
• Accounts audit: A practicing chartered accountant must audit all of the foreign subsidiary company’s accounts. The company must arrange and make these accounts readily available for the audit.

• Document authentication and translation: Every document that the company submits to the ROC must be certified by an Indian lawyer in good standing. Additionally, these documents must be translated into English before being approved and submitted.

How we can help?

Our team can play a crucial role in assisting with the process of incorporating a foreign subsidiary in India. Here are some ways our team can help:

Legal advice: Our team can provide legal advice on the various laws, regulations, and compliance requirements involved in setting up a foreign subsidiary in India.

Entity selection: Our team can help determine the most appropriate legal entity structure for the foreign subsidiary, such as a private limited company, branch office, liaison office, or wholly-owned subsidiary. Our team can assess factors like ownership requirements, liability considerations, and tax implications to guide the client in making an informed decision.

Documentation and filing: Incorporating a foreign subsidiary requires preparing and filing various legal documents with the relevant authorities. Our team can assist in drafting and reviewing these documents, including the memorandum and articles of association, incorporation forms, director appointment letters, and other necessary filings.

Regulatory compliance: Our team would guide the client through the compliance process and assist in obtaining the required permissions from authorities such as the Registrar of Companies, Reserve Bank of India, and other regulatory bodies.

Ongoing legal support: Once the subsidiary is incorporated, our team can continue to provide ongoing legal support. This may include assistance with employment contracts, commercial agreements, compliance with labor laws, dispute resolution, etc.