How to Incorporate a Subsidiary of a Foreign Company in India Incorporating a subsidiary of a foreign company in India is an entirely online, application-driven process. Like any other company, an Indian subsidiary is governed by the Companies Act, 2013. If you plan to establish a subsidiary in India, this guide covers everything you need to know, including the definition of a subsidiary, minimum requirements, step-by-step incorporation procedure, and the documents required. A foreign company’ subsidiary in India may be wholly or partially owned by the parent company and often operates under the same brand.
However, it maintains a separate legal identity for compliance and governance purposes. The parent company primarily provides funding support. The main goal of establishing a subsidiary in India is to expand business operations beyond the home country. Understanding the legal framework, funding obligations, and incorporation process is essential for a successful setup.
What is a Subsidiary Company? A subsidiary company is a legal entity established by a parent or holding company to expand operations under the same brand in a new location. Though it carries the parent company’ brand, a subsidiary functions as an independent legal entity. It can own assets, incur liabilities, acquire property, and is fully responsible for legal and tax compliance.
A separate management team is required for governance and administration. Subsidiaries can be categorized as: Wholly-owned subsidiary: The parent company owns 100% of the shares. Wholly-owned subsidiary: The parent company owns 100% of the shares. Partially-owned subsidiary: The parent company holds a majority stake (more than 50%).
The parent company typically provides funding to support operations. Understanding the type of subsidiary and ownership structure is critical for planning and decision-making when starting a foreign subsidiary in India. Minimum Requirements for Incorporation in India A foreign company can establish an Indian subsidiary as either aPrivate LimitedorPublic Limited Company, each subject to Indian laws. The minimum requirements vary depending on the company type.
Number of Shareholders: Private Limited: Minimum 2 shareholders, maximum 200. Private Limited: Minimum 2 shareholders, maximum 200. Public Limited: Minimum 7 shareholders, no upper limit. Ownership by Parent Company: Wholly-owned: Parent owns 100% of shares.
Wholly-owned: Parent owns 100% of shares. Partially-owned: Parent owns more than 50% of shares. Less than 50% ownership does not qualify as a subsidiary. Number of Directors: Private Limited: Minimum 2 directors, maximum 15.
Private Limited: Minimum 2 directors, maximum 15. Public Limited: Minimum 3 directors, maximum 15. Resident Director Requirement:At least one director must be an Indian resident for over 120 days in the previous financial year. Other directors can be Indian or foreign nationals.
Registered Office in India:A subsidiary must have a physical registered office in India. This address is crucial for legal communications and determines jurisdiction. Virtual offices or PO boxes are not permitted. Necessary approvals from authorities must be obtained before operations commence.
Capital Requirement:Indian law does not mandate a minimum capital, but the parent company must invest sufficient funds to ensure smooth functioning. Investment can be in the form of equity or debt, based on the agreement between the parent and subsidiary. Capital should comply with Reserve Bank of India (RBI) regulations on foreign investments, and all documentation must be submitted for regulatory compliance. Capital funds can be used for operational expenses, infrastructure, technology, marketing, staffing, and other business needs.
Process of Incorporation of Foreign Subsidiary in India Step 1: Gather DocumentsRequired documents typically include the Memorandum and Articles of Association, proof of registered office, director identification numbers (DINs), digital signature certificates, and a certificate of incorporation of the foreign parent company. The application is submitted online via the Ministry of Corporate Affairs (MCA) portal. Step 2: Draft Board Resolution & Power of AttorneyA Board Resolution must be passed to approve the establishment of the subsidiary. Additionally, a Power of Attorney authorizes a representative in India to file the incorporation application.
Step 3: Legalize Board ResolutionForeign documents must be legalized for Indian acceptance. This can be done via consulate attestation, apostille (for Hague Convention countries), or notary attestation (for Commonwealth countries). Step 4: Name Selection & ApprovalThe subsidiary can adopt the parent company’ name with the addition of “India” (.., XYZ India Pvt Ltd). If using a registered trademark, a No Objection Certificate (NOC) from the parent company is required.
Name approval is applied through the RUN form or Part A of the SPICe+ form. Step 5: Legalize Incorporation DocumentsDocuments like the Memorandum and Articles of Association and DIR-2 consent forms must be drafted as per Indian law and legalized similar to the Board Resolution before submission. Step 6: File Incorporation ApplicationSubmit Part of the SPICe+ form online with all required documents and the Digital Signature Certificate (DSC) of the authorized director. Pay the government fees and submit to the Registrar of Companies.
Step 7: Certificate of Incorporation & CINAfter verification, the Registrar issues the Certificate of Incorporation along with the Corporate Identification Number (CIN). Post-incorporation, the subsidiary must obtain PAN, GST, EPF registrations, open a bank account, and complete other formalities to commence operations.