A business entity incorporated in India but owned and managed by a foreign organization or individual is known as an Indian subsidiary.
It is a firm registered in India but whose ownership and management are controlled by a foreign entity or person.
The Indian company is referred to as a subsidiary, and the foreign business is referred to as the parent company or holding company.
The foreign parent company must adhere to all Indian legal and regulatory requirements before establishing an Indian subsidiary.
The subsidiary must be registered with the Registrar of Companies (ROC); the appropriate licenses and permits must be obtained, and all tax and other legal requirements must be met.
The subsidiary is required to have its own board of directors, management team, and operational structure, separate from the parent company.
Creating an Indian subsidiary for a foreign company has a number of advantages.
Access to the Indian market, which has one of the world's fastest-growing economies, is a significant advantage.
India has a sizable and expanding consumer base and a sizable quantity of international investment.
Foreign businesses can enter this market and grow their operations by establishing an Indian subsidiary.
The availability of skilled and bright labour is another benefit of establishing an Indian subsidiary.
India boasts a sizable pool of educated and skilled workers in many professions, including engineering, technology, and finance.
This gives international businesses access to a talented and diversified labour population, which may be a great asset for their business operations.
Also, Indian Subsidiary Registration may offer tax incentives and benefits to overseas businesses.
Foreign businesses that invest in India are given a number of tax breaks and advantages, which can lower the subsidiary's overall tax obligation.
For international businesses wishing to increase their business activities in India, establishing an Indian subsidiary can be a profitable opportunity.
They may access a sizable and expanding market, a competent labour supply, and tax breaks and incentives provided by the Indian government.
To maintain the efficient functioning of their Indian subsidiary, international corporations must adhere to all legal and regulatory standards set forth by the Indian government. Let's now discuss the registration process of the Indian subsidiary.
Requirements For Indian Subsidiary Registration
A number of processes are involved in registering an Indian subsidiary, such as getting required consent, preparing and filing documents, and adhering to legal regulations.
An instruction manual for registering an Indian subsidiary is provided below:
1. A digital signature certificate (DSC)
DSC for the subsidiary firm's directors and other authorized signers must be obtained as the first step in the registration process. A secure digital key, a DSC, is used to sign documents electronically.
A Digital Signature Certificate (DSC) is necessary for filing electronic papers with the Ministry of Corporate Affairs in the context of Indian subsidiary registration (MCA). The directors of the subsidiary are required to obtain a DSC from a Certifying Authority (CA) approved by the MCA as part of the registration process.
The directors must file an application to the CA and provide identification and address evidence in order to receive a DSC. The CA validates the data before issuing the certificate on a smart card or USB token. Afterwards, the Memorandum of Agreement (MOA), the Articles of Association (AOA), and the request for approval of the company name are all signed electronically using the DSC.
2. Director identification number (DIN)
DIN for each of the proposed directors of the subsidiary. All directors of Indian corporations must have the DIN, a special identifying number.
A Director Identification Number (DIN) is a special identifying number given to each director of the company for the purposes of registering Indian subsidiaries. All people who want to be appointed as directors of the subsidiary must meet this condition.
The director must submit an application to the Ministry of Corporate Affairs (MCA) with identification and address evidence to receive a DIN. With the MCA portal, the application can be submitted online. The MCA grants the director a special DIN after processing the application.
3. Reserve a Business Name
The following action is to reserve a distinctive name for the subsidiary. The name must adhere to the Companies Act of 2013 and cannot be the same as or confusingly similar to the name of an existing company. You can submit a request for the name reservation via the website of the Ministry of Corporate Affairs (MCA).
One of the first steps in the process of Indian Subsidiary Registration in India is reserving a business name. In order to prevent other parties from using the proposed subsidiary's distinctive name entails reserving it with the Ministry of Corporate Affairs (MCA).
The applicant must submit an online application via the MCA site in order to reserve a Company Name.
A minimum of one preferred name and a maximum of six alternate names for the proposed subsidiary must be included in the application.
The names must follow the MCA's rules and cannot be the same as or similar to the names of any trademarks or companies that already exist.
Creating the Articles of Association(AOA) and the Memorandum of Association(MOA)
The subsidiary's articles of association (AoA) and memorandum of association (MoA) must be written next. These documents lay forth the company's goals, authority, and regulations.
Payment of registration fees
The registration fees must now be paid to the ROC. The charges are based on the subsidiary's permitted capital.
Paying the registration fees is a necessary step in forming a subsidiary in India.
The charge is determined using the subsidiary's authorized capital, and it can be paid online or offline by creating a Challan and delivering it to specific bank locations.
Upon payment of the fee, a receipt is generated, and this receipt should be included with the other paperwork needed for subsidiary registration.
Fill in the MoA and AoA
MOA and AOA are followed by filing them with the Registrar of Companies, which is the final stage in the incorporation process (ROC).
The documents consist of the incorporation application, the MoA, the AoA, and other necessary paperwork.
Both the MoA and the AoA should be written in compliance with the 2013 Companies Act's stipulations as well as the guidelines established by the Ministry of Corporate Affairs (MCA).
The MoA and AoA should be printed on non-judicial stamp paper and signed by the signatories in front of a witness.
As part of the subsidiary registration procedure, the MoA and AoA must be completed and submitted to the Registrar of Companies (RoC).
The subsidiary is then able to launch its activities in India after the RoC confirms the paperwork and grants a certificate of incorporation.
Get a permanent account number (PAN) and a tax deduction account number (TAN)
Once the subsidiary has been registered, obtaining a PAN and TAN from the Income Tax Department is the next step.
The subsidiary firm must apply to the Income Tax Department to get a PAN and a TAN.
The application can be made online at the Income Tax Department's website or in person at the nearest tax office.
The application must be accompanied by relevant documents, such as proof of identification, citizenship, and the subsidiary company's registration certificate.
After receiving the application, the Income Tax Department will review the information and issue the PAN and TAN numbers to the subsidiary firm.
It should be noted that a PAN and TAN are required for a subsidiary firm to conduct business in India and comply with tax rules.
Following registration, the subsidiary must adhere to a number of legal requirements, including filing yearly returns, keeping statutory registers, holding board meetings, and holding annual general meetings.
Legal compliance, as it relates to the registration of Indian subsidiaries, entails abiding by a number of laws and rules, including the Companies Act, the Foreign Exchange Management Act (FEMA), the Income Tax Act, the Goods and Services Tax (GST), and other relevant laws.
For an Indian subsidiary, some of the major compliance needs include the following:
- Obtaining all essential permits and licenses from the government, including the Securities and Exchange Board of India (SEBI) and other regulatory organizations.
- Complying with the deadlines for submitting statutory documents to the Registrar of Companies (RoC). These documents include annual returns, Financial Statements, and other legally required filings.
- Maintaining the relevant records and conducting board meetings and annual general meetings (AGMs) in accordance with the Companies Act's requirements.
In conclusion, setting up a subsidiary in India is a difficult procedure that needs careful planning and adherence to a number of legal requirements.
A unique company name must be reserved, the memorandum of association and articles of association must be written, incorporation documents must be filed with the Registrar of Companies, registration fees must be paid, PAN and TAN must be obtained, and there are legal requirements that must be followed.
It is significant to remember that, depending on the company structure's complexity and the required documents' availability, the registration procedure may take several weeks to complete.
To ensure a quick and easy registration process, it is imperative to start the process well in advance and hire a professional adviser.
After registering the subsidiary, it can start operating there and benefit from India's substantial market potential.
The foreign parent business may own the subsidiary outright, or it may have local shareholders as well. It is allowed to carry out a range of commercial activities as long as they comply with local laws and regulations.
Generally, multinational businesses intending to grow their commercial operations in India may find it profitable to incorporate an Indian subsidiary.
To ensure a quick and easy registration procedure, meticulous planning, adherence to legal standards, and engagement of professional services are necessary. Especia provides all these services.
Why Especia For Indian Subsidiary Registration
Especia provides comprehensive financial outsourcing services in its role as a firm, including valuation, secretarial, transaction counselling, routine tax and compliance, and virtual CFO.
Tax and corporate rules are evolving swiftly to enhance governance and increase transparency in how businesses operate.
Especia assists business owners and entrepreneurs by allowing them to concentrate on their core competencies while delegating to Especia the management of all financial department operations.