Online Indian Subsidiary Registration

Indian Subsidiary Registration Guide

Introduction

A sister company, also known as a subsidiary, is under the control of a parent company or holding company. The parent company possesses the authority to govern the subsidiary, whether partially or wholly. In India, the procedure for Indian Subsidiary Registration follows the guidelines of the Companies Act of 2013. As per this act, a subsidiary is characterized by a foreign corporate body or parent entity holding at least 50% of the total share capital. Essentially, the parent company wields substantial influence and control over the subsidiary.

Types of Subsidiaries in India

India recognizes two primary types of subsidiaries:

Wholly Owned Subsidiary: The parent company holds complete ownership, owning 100% of the subsidiary’s shares. Can only be formed in sectors permitting 100% Foreign Direct Investment (FDI).
Joint Venture Subsidiary Company: Operated jointly by two or more companies, sharing ownership and control. Used for collaborative projects and market endeavors.
LLP for Subsidiary Company: Formed as a Partnership, providing liability protection to partners. Partners are not personally liable for the subsidiary’s debts or obligations.

Before initiating the establishment of a subsidiary in India, obtaining approval from the Reserve Bank of India is a crucial prerequisite to ensure adherence to foreign investment regulations.

Advantages of Indian Subsidiary Registration

Indian Subsidiary Registration offers numerous compelling advantages:

Entry into the Indian Market: Access to India’s competitive business landscape and investment opportunities.
Foreign Direct Investment (FDI) in India: Attracts foreign investors through share subscriptions or acquisitions.
Perpetual Succession: Ensures the company’s existence remains unaffected by changes in management or ownership.
Limited Liability: Protects shareholders and directors' personal assets from company debts.
Scope of Diversification: Allows foreign businesses to expand operations and contribute to India’s economic growth.
Separate Legal Identity: Recognized as a distinct legal entity, capable of engaging in legal agreements and actions.
Property Ownership and Rental: Subsidiary companies can purchase or rent properties in India for business activities.

Regulatory Authorities for Indian Subsidiary Registration

The following regulatory authorities play key roles in the Indian subsidiary registration process:

Ministry of Corporate Affairs (MCA): Formulates and enforces rules and regulations for company registration and compliance.
Registrar of Companies (ROC): Manages procedural intricacies involved in company incorporation.
Reserve Bank of India (RBI): Regulates foreign currency exchange aspects and ensures compliance with financial regulations.

Requirements and Key Facts about Company Registration in India

The registration process for a company in India is governed by the Companies Act of 2013. Key elements include:

Company Name: Must be unique and distinct from existing business names or trademarks.
Shareholders: Can be 100% owned by the parent company or a combination of two foreign nationals.
Share Capital: No minimum capital requirement.
Directors: Minimum of two directors, with at least one being an Indian resident.
Registered Address: Must have a registered address officially recorded in government records.
Annual General Meeting (AGM): At least one AGM and two board meetings annually.
Company Secretary: Mandatory filing of three secretarial returns annually.
Professional and Government Fees: Incurrence of fees during the registration process.
Profit Tax Rate: Approximately 25.36% post-incorporation.
GST (Goods and Services Tax): Monthly and annual GST returns are mandatory for domestic sales.

Procedure for Indian Subsidiary Registration

Establishing an Indian subsidiary company involves the following steps:

Determine the Type of Company: Decide on the specific type of subsidiary company to establish.
Obtain Digital Signature Certificate (DSC): Required for electronically signing necessary documents.
Apply for Director Identification Number (DIN): Submit DIN application online for the proposed directors.
Name Approval: Choose a distinctive name and apply for its approval through MCA’s online portal.
Draft Memorandum of Association (MoA) and Articles of Association (AoA): Prepare legal documents outlining the company’s objectives, rules, and regulations.
File Incorporation Documents: Submit MoA, AoA, and other required forms to the ROC through MCA’s online portal.
Payment of Registration Fees: Pay applicable registration fees based on the subsidiary’s authorized capital.
Obtain a Certificate of Incorporation (COI): Issued by ROC confirming the subsidiary’s registration.
Apply for PAN and Tax Registration: Obtain Permanent Account Number and Tax Deduction and Collection Account Number.
Open Bank Account: Open a bank account in the subsidiary company’s name.
Compliance with Other Regulations: Ensure compliance with relevant regulations, including obtaining a GST number.
Initiating Business Operations: Begin business operations once all steps are completed.

Compliance Requirements for Indian Subsidiary Registration

Ensuring the establishment of a legally sound and valid Indian subsidiary company necessitates strict adherence to specific regulatory requirements, including:

Foreign Exchange Management Act (FEMA): Compliance with laws governing foreign exchange.
Companies Act, 2013: Adherence to provisions for corporate entities.
Reserve Bank of India (RBI) Compliances: Compliance with foreign exchange management regulations.
Income Tax Act, 1961: Annual filing of income tax returns with a current corporate tax rate of 25%.
Annual Returns: Submission of annual returns to MCA and ROC.
SEBI (Listing Obligations and Disclosure Regulations): Compliance with SEBI regulations if the subsidiary lists its securities on a stock exchange.

Taxation of Indian Subsidiary Companies

Indian subsidiary companies are governed by distinct taxation policies, characterized by the following key features:

Income Tax Applicability: Taxes on all income generated within or outside India.
Tax Rates for Foreign Subsidiaries: 50% for royalties from the government or Indian entities, 40% for other income.
Surcharge Rates: 2% for income between Rs. 1 Crore and Rs. 10 Crores, 5% for income over Rs. 10 Crores.
Health and Education Cess: 4% added to the total tax amount.
Concessional Tax Rates: Favorable tax rates for specific sectors like oil exploration, air transportation, and shipping.

How Registerkaro Can Assist with Indian Subsidiary Registration

Registerkaro simplifies the registration process, guiding you through key steps such as:

Choosing a distinctive name.
Acquiring Director Identification Numbers (DIN) and Digital Signature Certificates (DSC).
Assisting with PAN and TAN applications.
Establishing a company bank account.