Foreign Subsidiary Company Setup in India: Essential Documents and Guidelines

Expanding your business into India can be a strategic move, offering access to one of the world’s largest and fastest-growing markets. One effective way to establish a presence is by setting up a foreign subsidiary company. This article provides a comprehensive guide to the essential documents and guidelines for registering a foreign subsidiary company in India.

What is a Foreign Subsidiary Company?

A Foreign Subsidiary Company Registration in India is a separate legal entity incorporated under the Indian Companies Act, 2013. It is owned and controlled by a foreign parent company, which holds a majority of the shares. Unlike branch offices or liaison offices, a subsidiary company has its own legal identity, can enter into contracts, own property, and is subject to Indian laws and regulations

Types of Foreign Subsidiary Companies in India

1. Wholly Owned Subsidiary (WOS): The foreign parent company owns of the shares, providing complete control over operations and decision-making.
2. Joint Venture Subsidiary: The foreign parent company collaborates with an Indian partner, sharing ownership and control.

Key Benefits of Setting Up a Foreign Subsidiary in India

• Limited Liability: Shareholders’ liability is limited to the extent of their shareholding.
• Full Control: Especially in the case of a WOS, the parent company retains complete control over operations.
• Access to the Indian Market: Establishing a subsidiary allows direct access to the Indian market, facilitating easier business operations and customer engagement.
• Tax Benefits: Subsidiaries may be eligible for various tax incentives and exemptions under Indian law.

Essential Documents Required for Foreign Subsidiary Company Registration

To successfully register a foreign subsidiary in India, the following documents are typically required:

1. Documents of the Foreign Parent Company

• Certificate of Incorporation: Proof of the parent company’s legal existence.
• Memorandum of Association (MOA) and Articles of Association (AOA): Governing documents outlining the company’s objectives and internal regulations.
• Board Resolution: A resolution passed by the parent company’s board of directors approving the establishment of the subsidiary in India.
• Power of Attorney: Authorizing a representative to act on behalf of the parent company in India.
• Proof of Registered Office Address: Evidence of the parent company’s registered office.

2. Documents of the Proposed Indian Subsidiary

• Proposed Company Name: A unique name for the subsidiary, subject to approval by the Ministry of Corporate Affairs (MCA).
• Registered Office Address in India: Proof of address, such as a rental agreement and utility bill.
• Directors’ Details: Information and consent of directors, including at least one resident director as per Indian regulations.
• Shareholding Pattern: Details of the shareholding structure, including the percentage of shares held by the foreign parent company.

3. Documents of Directors and Shareholders

• Photographs: Recent passport-sized photographs of directors and shareholders.
• Identification Proof: Passport copies of foreign directors; PAN card and Aadhaar card for Indian directors.
• Address Proof: Utility bills or bank statements not older than two months.
• Digital Signature Certificate (DSC): Required for signing electronic documents.
• Director Identification Number (DIN): Mandatory for all directors.

Step-by-Step Process for Incorporating a Foreign Subsidiary in India

1. Obtain Digital Signature Certificate (DSC): Required for signing electronic documents.
2. Apply for Director Identification Number (DIN): Necessary for all directors.
3. Name Approval: Submit an application to the MCA for approval of the proposed company name.
4. Draft MOA and AOA: Prepare the Memorandum and Articles of Association for the subsidiary.
5. File Incorporation Documents: Submit the necessary documents to the MCA for incorporation approval.
6. Obtain Certificate of Incorporation: Upon approval, the MCA issues a Certificate of Incorporation.
7. Register with the Reserve Bank of India (RBI): Necessary for compliance with foreign exchange regulations.
8. Obtain Permanent Account Number (PAN) and Tax Deduction and Collection Account Number (TAN): Required for tax purposes.
9. Open a Bank Account: In the name of the subsidiary company.

Compliance Requirements Post-Incorporation

After the incorporation of the foreign subsidiary, the following compliance requirements must be adhered to:

• Annual General Meeting (AGM): Conducted as per the provisions of the Companies Act.
• Financial Statements: Preparation and filing of annual financial statements.
• Tax Filings: Timely filing of income tax returns and GST returns.
• Form FC-1: To be filed within 30 days of incorporation, providing details of the foreign company.
• Form FC-3: Annual return to be filed with the Registrar of Companies (ROC).
• Form FC-4: To be filed within 60 days from the end of the financial year.

Common Challenges in Setting Up a Foreign Subsidiary in India

• Regulatory Complexity: Navigating through the various regulations and compliance requirements can be challenging.
• Documentation: Ensuring all documents are correctly prepared and submitted.
• Time Consumption: The registration process can be time-consuming, potentially delaying business operations.
• Cultural Differences: Understanding and adapting to the Indian business culture and practices.

Why Choose Groom Tax for Your Foreign Subsidiary Setup

Setting up a foreign subsidiary in India involves intricate legal and regulatory procedures. Groom Tax offers expert services to guide you through the entire process, ensuring compliance with all legal requirements. Our team of professionals provides:

• End-to-End Support: From documentation to post-incorporation compliance.
• Expert Advice: Tailored solutions to suit your business needs.
• Timely Execution: Ensuring a smooth and efficient setup process.

For more information on how Groom Tax can assist you in establishing your foreign subsidiary in India,

Essence of the Guide

Establishing a foreign subsidiary in India can be a rewarding venture, offering numerous benefits and opportunities. However, it requires careful planning, adherence to legal requirements, and timely execution. By understanding the essential documents and following the outlined guidelines, you can navigate the setup process effectively. Partnering with professionals like Groom Tax can further streamline the process, ensuring a successful business establishment in India.