INDIAN SUBSIDIARY COMPANY REGISTRATION

REQUIREMENT TO REGISTER AN INDIAN SUBSIDIARY COMPANY

To register as an Indian subsidiary company following criteria should be followed:

• Minimum numbers of two directors are required for incorporating a company

• One of the directors must be an Indian resident

• There is no minimum capital limit required to incorporate an Indian Subsidiary Company in India.

• Indian Subsidiary Company is required to have a minimum of two shareholders.

• The shareholders can either be an individual or the entity or a combination of both.

• The parent company is required to hold 50% of the total equity share capital.

• Director Identification Number (DIN) of all Directors.

PROCEDURE FOR REGISTERING AN INDIAN SUBSIDIARY COMPANY

To register a Private Limited Company in India, the following documents required to be submitted:

1. Minimum of two numbers of directors (one needs to be an Indian director who is also an Indian resident).

2. A minimum of two numbers of shareholders is required for a private limited company. The holding company in a foreign country must pass a Board resolution for the Incorporation of the Company in India and the subscription of shares of the proposed company.

3. The Foreign Company can hold upto 99.99% of the total shares of the Indian Company, while 0.01% of the company's issued shares can be controlled by an Indian entity in trust with the foreign company.

4. First obtain the DSC and the Director Identification Number (DIN) of all the directors.

5. Make an application to ministry of corporate affair for name approval. The names applied should be unique and does not go against any provisions relating to intellectual property rights.

6. After the name approval is obtained, it is necessary to draft the Memorandum of Association and file it within 60 days to complete the incorporation process.

7. Once the Registrar of Companies will verify the application and documents it will issue the Incorporation Certificate to the company if no objection was raised.

8. Once the company is incorporated, it is necessary to open the Bank accounts of the company and obtain the required licenses. At the same time, it is necessary to make filings with the RBI to indicate India's foreign investment through the automatic route.

WHY INCORPORATE AN INDIAN SUBSIDIARY COMPANY?

Limited Liability:
The liability of the Directors and the members of the Indian Subsidiary Company are limited to their shares. If the company is suffering from any loss and is facing any financial distress then the personal assets of the shareholders or the members or the directors will not be at risk.

Perpetual succession:
The life of the business is not affected by the status of its members or shareholders and even after the death of the shareholder the Indian Subsidiary company will continue to exist.

Brand value:
The brand value of the company will increased as the employees will feel secure in joining the Private Limited Company, the vendors will feel secure in offering credit and the investors will be relieved while investing. The new startups can become a multibillion company in years due to the high brand value of the company.

Expansion:
Here the scope of expansion is higher as it is easy to raise the capital from a venture capitalist, the financial institution, investors, and the advantages of limited liability.

Foreign direct investment:
100% Foreign Direct Investment is allowed in several business activities and industries through automated route without any prior approval. FDI in a Limited Liability Partnership requires government approval.

FOREIGN DIRECT INVESTMENT

Foreign Direct Investment in a Private Limited Company is allowed for the foreign entities that are subject to the FDI guidelines. FDI in India comes under two categories automatic route and the approval route. Currently, 100% FDI is permitted in most of the sectors, that is exempting the capped and the restricted sectors.

If automatic approval is not permitted then it is necessary to get the prior consent of the foreign investment promotion board of the Indian government. Further, the citizens or the entities from Bangladesh and Pakistan can invest only under the approval route. FDI can be through equity instruments Indian companies can issue equity shares, preference shares, and convertible debentures but this is subject to the norms and the guidelines.

The equity shares of a Private Limited company can be issued under the FDI and must be at a fair value. If the NRI is incorporating a company or a subscription to the association's memorandum during the company the shares can be issued at fair value.

Here is the list of the industries that require approval from the government for investments by the foreign company or the foreign national:

• Petroleum sector (Except the Private sector oil refining), Natural gas, LNF pipelines.

• Investing in companies in Infrastructure.

• Defense and the strategic industries

• Atomic minerals

• Print media

• Broadcasting

• Postal services

• Courier services

• The establishment and the operation of the satellite

• Development of the integrated township

• Tea sector

• Asset reconstruction companies.

MANAGEMENT AND THE SHAREHOLDING STRUCTURE OF THE INDIAN SUBSIDIARY COMPANY

A Private Limited Company is required to have a minimum of two shareholders and two directors. The shareholder can be any person or even a corporate entity. Foreign nationals can be the directors of the Private Limited Company but it should be noted that at least one director should be having Indian residency.

There is no minimum requirement for the Indian Director to be a shareholder in the company. Many of the foreign companies prefer to incorporate a company in India with three directors of which two are foreign nationals and one is an Indian Director.

The 100%shares of the Indian company can be held by a combination of foreign companies or nationals. One corporate entity or the person cannot have all the shares of the Indian subsidiary company.

COMPLIANCES FOR THE INDIAN SUBSIDIARY COMPANY

There are certain compliances which the Indian subsidiary companies are required to fulfill:

• Companies Act, 2013 - A company formed in India have to stick with compliance under the Companies Act, 2013.

• Foreign Exchange Management Act, 1999 - It is necessary to follow with India's foreign exchange laws when a foreign company has are planning to establish in India.

• RBI Compliance - The Indian Subsidiary of a foreign company also has to stick with the respective RBI compliances.

• Income Tax - All the companies operating in India have to file Income Tax returns. It is necessary for the Indian subsidiary company to comply with the individual tax rates.

• Annual returns of ROC - The companies established in India must file the yearly compliances with the Registrar of Companies through Ministry of Corporate affairs.

• SEBI- If the Indian subsidiary company lists its securities in a stock exchange, then they must have to fulfill the compliances as per the laws under the Securities Exchange Board of India.