Legal entities from other countries may establish subsidiaries in India, and the country's laws distinguish two categories of subsidiaries based on the amount of capital the foreign company owns. Consequently, investors may choose to form either a wholly-owned subsidiary company or a subsidiary company when starting a firm in India that is represented by a foreign entity.

Foreign corporations who want to set up shop in India might create satellite businesses that are either reliant or independent of their parent company. These are the branch office and subsidiary firm, respectively. The parent company has complete discretion over whether to establish a branch office under the total management of the foreign entity or a subsidiary that is an independent business form.

Company owners should first investigate the Indian market to acquire a clear idea of the most appropriate sort of legal entity to use in order to start one or more enterprises.

Types of Indian Subsidiaries

A subsidiary is a corporation in which a foreign legal entity controls at least 50% of the entire share capital, according to the Companies Act of 2013. According to the definition, the foreign corporation has legal authority over the subsidiary's board of directors.

When it comes to forming a subsidiary in India, there are two major possibilities. Investors can form a wholly-owned subsidiary, which means the parent business owns 100% of the shares of the subsidiary. This option is only available to businesses that accept 100 percent foreign direct investment. The other option is a subsidiary firm in which the parent company owns at least 50% of the capital stock of the subsidiary.

Features of Indian Subsidiaries 2021

An Indian subsidiary of a parent firm can be established, which will be independent of the parent company's operations in the country. It will be able to do a lot of the same things as its parent firm, but it will also be able to do things that are specific to the Indian market. From a profit standpoint, this is advantageous to both companies. The subsidiary can be established as a trading company or as a subordinate business of a holding company, with significant variations between the two.

Considerations for establishing a subsidiary in India in 2021 include the following:

  • It will be permitted to have its own distinct name, and hence will not be required to use the parent company's trading name.
  • the company will be required to obtain its own business permits and have its own set of legal documents
  • In terms of taxation, it will be subject to the corporate tax on its worldwide profits.
  • It is free to engage in any activity as long as the sector's requirements are met.

Licensing

Business licences and permissions are required by the company in India. These must be obtained from the appropriate authority in the industry or industries in which it will be used. The licencing method is one of the most time-consuming aspects of the company creation process in India, as each regulatory agency has its own set of requirements, rules, and approvals.

Advantages

  • A shareholder's shares can be easily transferred to another party by signing a share transfer form and a share certificate.
  • FDI is commonly permitted for Indian subsidiaries, and this holds true for the majority of the country's economic activity.
  • The subsidiary is a separate legal entity from the parent firm, governed by Indian commercial law.
  • Since this subsidiary is a separate entity, it is permitted to purchase real estate in this city.

The formation of an Indian subsidiary company in 2021 offers a number of benefits, including a simple incorporation process and flexibility in terms of the activities that can be pursued. More information about the registration requirements can be obtained from our experts.

Requirements for registering an Indian Subsidiary

India has become one of the most popular business locations for foreign corporations, which typically prefer to establish a foothold through a subsidiary. The subsidiary in India is treated as a separate legal entity under Indian law. The Indian subsidiary is governed by the Income Tax Act and is subject to the same rules that apply to firms established in India.

The subsidiary is set up as a private limited company, and two directors must be appointed. In this scenario, the procedure for forming a business in India specifies that the company's directors apply for a Director's Identification Number. The subsidiary will acquire a Certificate of Incorporation after completing particular incorporation stages, such as gaining approval for the trading name (given by the Registrar of Companies). If investors want to safeguard their brand, trademark registration might be a stage in the company formation process in India.

The foreign company's name, as well as the word "India" or the name of the Indian city where the business will operate, must be included in the local commercial name in the case of a subsidiary. Aside from that, there are a few more significant points to consider:

  • For each of the company's directors, request a Digital Signature Certificate.
  • Obtain a Digital Identification Number for each of the Indian subsidiary's designated directors.
  • Apply for an appropriate company name by presenting the Registrar of Companies with 3-4 possibilities from which to choose.
  • Appoint a minimum of two directors and two shareholders, and adhere to the Reserve Bank of India's regulations.

The Registrar of Companies (ROC) has asked investors to register an Indian subsidiary as a legal entity. The company will also have to pay taxes on its income and VAT when it is incorporated in India. The ROC has accepted the company's trading name, which means that it will be able to trade under the name 'Indian' It must complete a set of forms requested by the institution.

Required documents

  • If you're establishing a subsidiary in India in 2021, you'll need to prepare the parent company's Certificate of Registration and Articles of Association, as well as the articles of association for the new subsidiary. As for the parent company's statutory documents, they must be translated and lodged with the Trade Register in India as certified copies.
  • The subsidiary must also have its own bank account in India to deposit the share capital. When you register with Companies House, you must submit a bank statement.
  • The subsidiary must be registered in India. A lease or rental contract can be used for this purpose.
  • The subsidiary in India must obtain a tax identification number and register for VAT.
  • All paperwork must be filed with the Trade Register, and the Certificate of Registration will be granted based on those documents.
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