Open a Subsidiary in India

Updated on Monday 14th January 2019

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Foreign legal entities may set up subsidiaries in India and the legislation in this country provides for two types of subsidiaries, depending on the capital owned by the foreign company. Thus, when starting a company in India which is represented by a foreign legal entity, the investors may choose to incorporate a wholly-owned subsidiary or a subsidiary company. Our team of specialists in company formation in India can assist with the legal requirements related to the registration of a subsidiary. 
 

What are the types of subsidiaries in India? 
 

According to the Companies Act 2013, a subsidiary is defined as a company in which a foreign legal entity owns at least 50% of the total share capital. The definition also states that the foreign company has legal rights on the structure of the board of directors of the subsidiary
 
As mentioned above, there are two main options when registering a company in India as a subsidiary. Investors may establish a wholly-owned subsidiary, which designates the fact that the parent company owns 100% of the subsidiary’s shares. This option is available only for the business sectors which allow 100% foreign direct investments and our team of agents in company registration in India may provide further assistance on this matter. The other option refers to the subsidiary company, in which the parent company controls at least 50% of the subsidiary’s capital
 

What are the registration requirements for Indian subsidiaries?  
 

Under the Indian legislation, the subsidiary is treated as a separate แอพ Fishing Masterlegal entity. The Indian subsidiary falls under the regulations of the Income Tax Act and benefits from the same provisions applicable to companies registered in India. It is also important to know that India has recently become one of the main business destinations of foreign companies, which generally choose to establish a business through a subsidiary; the other option would be to operate through a branch office
 
The subsidiary is generally registered as a แอพ Fishing Masterprivate limited company and it is necessary to appoint two directors. The procedure on how to form a company in India in this case stipulates that the company’s directors should apply for a Director’s Identification Number. Following specific incorporation steps, such as obtaining the approval for the company’s trading name (issued by the Registrar of Companies), the subsidiary will receive a Certificate of Incorporation. The company’s representatives will need to provide certain documents, which can be detailed by our consultants
 

What are the main steps for registering a wholly-owned Indian subsidiary?
 

One of the main aspects for opening a company in India as a subsidiary refers to the company’s trading name. In the case of a subsidiary, the foreign company’s name has to be included in the local trading name, alongside the word “India” or the name of the Indian city in which the business will set its operations. Other important matters are the following: 
 
  • apply for the Digital Signature Certificate for all the directors of the company;
  • apply for a Digital Identification Number for all the appointed directors of the Indian subsidiary;
  • apply for a suitable company name by providing 3-4 options to be chosen by the Registrar of Companies;
  • appoint minimum two directors and minimum two shareholders and comply with the requirements stated by the Reserve Bank of India
In order to incorporate an Indian subsidiary, the legal entity must be registered with the Registrar of Companies (ROC), by completing a set of forms requested by the institution. This procedure has to be conducted once the ROC has accepted the company’s trading name. 

Thus, the investors will need to submit the following: the Form INC-7 – Application for Incorporation of Company (Other than One Person Company), the Form DIR – 12 – Particulars of Appointment of Directors and Key Managerial Staff and the Form INC – 22 – Notice of the Situation. While filling these documents, the company’s representatives will also have to provide the company’s statutory documents (the articles of association and memorandum). 
 

What business forms can Indian subsidiaries take? 


When opening a company in India as a subsidiary, it is necessary to select one of the legal entities that are available for this structure. Investors should know that the subsidiary represents a separate entity from the parent company, in which case it must follow the rules and regulations prescribed by the Indian law
 
The subsidiary can take the form of a private limited company or of a public limited company, which are incorporated as stipulated by the Companies Act 2013. Our team of specialists in company formation in India can provide an in-depth presentation on the main characteristics of each one of the two business forms and can assist in the registration with the local institutions. 

Under the new Companies Act, a subsidiary in India can also be registered as a limited liability company, but it is important to know that, in practice, the most common way to start a subsidiary is by opening a wholly-owned private limited subsidiary. This option is generally selected by large multinational companies expanding their operations in this country, which is one of the top preferences of foreign businessmen for a wide range of business activities, telecommunications included.  
 
 

Are there any requirements for foreign businessmen investing in India? 


Although foreign businessmen can easily invest in this country, those who are interested in how to form a company in India should consider several aspects prior to starting their business here. This is due to the fact that in certain situations foreign investors (and foreign shareholders) must obtain approval for their investment projects from the local institutions. 

Depending on the investment sector that is of interest for foreign businessmen, a prior approval may be needed from the Foreign Investment Promotion Board or from the Reserve Bank of India. Our team of consultants, specialized in any matter concerning the procedure of company formation in India, can offer a detailed presentation on the business sectors that need governmental approval.  

The Reserve Bank of India (RBI) needs to provide its approval for the registration of the subsidiary when appointing foreign directors. This is a direct consequence of the fact that the participation at the company’s capital is considered foreign direct investment (FDI) and it is necessary for any newly formed business to obtain the approval from the institution. 

Thus, the subsidiary is legally required to submit the Advance Reporting Form with the RBI when receiving funds from the parent company abroad. The procedure must be completed in a period of 30 days since the funds were transferred to the local subsidiary. Another step refers to the issuance of shares, a procedure that should be completed in a period of 180 days since the subsidiary received its funds. 
 

What are the advantages of opening an Indian subsidiary? 
 

As a foreign entity investing in India, there are several ways of starting a business here, and some of the most common options refer to registering a subsidiary or a branch office. Each business form provides a set of advantages, but in the case of the Indian subsidiary the following will apply: 
 
independent legal structure  the subsidiary is an independent structure from its parent company and it is regulated under the Indian commercial legislation
transfer of shares   the shares owned by a shareholder can be easily transferred to another party, by signing a share transfer form and a share certificate
acquire property in India   as the subsidiary is an independent structure, it is allowed to purchase properties here
incorporation with foreign direct investments  as mentioned earlier, FDI is widely accepted for Indian subsidiaries and this applies to most of the economic activities that are available in this country
 
Foreign businessmen are invited to contact our team of consultants for in-depth assistance on the compulsory registration steps applicable to an Indian subsidiaryOur specialists can also assist with advice on the documents that have to be submitted with the local authorities and may offer assistance on the most suitable type of subsidiary to be registered here. 
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