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Overview of Indian Subsidiary Company Registration

As Indian economy has a fast growing market, the foreign investors are very much interested to start a business in India.  As per the FDI policy of India, any organization, which is performing its business outside India or in any foreign nation, except the citizens of Pakistan and Bangladesh can invest and has a controlling power over their Indian Subsidiary Company by having shares.

A subsidiary company, which otherwise is called as sister company, has a controlling power is known as the holding company or parent company.  The subsidiary company is controlled by the parent company in all the ways whether in whole or in part.

It is imperative that before starting the process of subsidiary company registration, we should make sure that the company must at least have one Indian Director, who needs to be a resident of India and there should be one Foreign Director for forming Indian Subsidiary Company.

The Companies Act 2013 implies that a subsidiary company is a company, in which a parent body or a foreign corporate body should hold a minimum of 50% of its entire share capital.  The parent company should have a hold and should keep an eye over a subsidiary company.  Above all, it is essential that the Subsidiary company should abide by the laws of the country where they are willing to start or already started.   So it is imperative that the Subsidiary Company should follow and oblige the laws of the Indian Government.

The very important thing one must note is that if a subsidiary company has a parent company in foreign country then it should be considered as a separate legal organization.  The subsidiary company should require functioning as per the rules and regulations of the country in which it was started.  They have to register in the Indian Subsidiary Company as a private limited company or as a public limited company.

A public limited company should function in such a way that the public holds cheerfulness for it and it is essential to accommodate the rules, regulations and guidelines as enforced by the Companies Act 2013.

As per the Companies Act 2013, the private limited company is not accessible to the general public and estimates the advantages over public company.

BENEFITS OF REGISTRATION OF INDIAN SUBSIDIARY COMPANY

Liability is limited

The attributes of limited liability protects the members, associates and directors of the company while in the time of financial stress or loss in the company.  If the subsidiary company suffers from financial stress or loss, the personal assets and properties of the members and directors are protected.  The members and directors enjoy a limited liability in the process of business.  In short, the directors and members are compulsorily limited to their company’s share. Even if the company suffers from financial problems, the members and directors enjoy the benefit of protection of their personal properties.

The subsidiary companies attract foreign direct investment

For the foreign direct investment, the LLP or a partnership firm or proprietorship has to get an approval in advance from the government.  For fast growth of the business, the government of India has sanctioned a 100% involvement of foreign direct investment. In other words, the foreign direct investment can get the 100%without any preceding approval.

Perpetual existence &succession

The existence of the company will not be affected even in the case of death, insolvency, and change in members or transfer of members or directors of the company. This means that whatever happens to the members or directors of the company, the business will continue to run as usual.

Expansion of the establishment

The progress and development of the Indian Subsidiary Company is quite easy as it promotes its capital from venture capitalist, financial institution and other investors and thereby the subsidiary company enjoys all the advantages of the private limited company.

Acquirement of property in India

As this company works as an independent model, it naturally has the opportunity to buy properties in India.

Borrowing of funds

All authorised financial institutions will lend loans to a formal subsidiary company registration in India.

Sued and sue

The subsidiary companies in India function as legal person, so will be sued or will sue.

The features of the Indian Subsidiary Companies

·         For the return or repatriation dividend, approval in advance is not needed.

·         The dividend distribution tax is nil as per the Union Budget 2020.

·         The Ministry Of Corporate Affairs has simplified the process of registration of the Indian Subsidiary Company by introducing SPICe+ form and it made up of two types.

The name reservation procedure is part A.

Part B begins as and when the name reservation procedure is completed, and it includes all the incorporation steps as given below:

Once the above mentioned steps are done, then commences the submission of the application begins as follows:

·         Application for DIN.

·         The process of issuance of TAN and Pan.

·         The subsidiary company has to open a current account in the authorised bank.

·         GSTIN allotment.

DSC is the most needed basic document for any type of company. The registration process of Indian Subsidiary Company will not be considered as complete if it does not have a DSC from concerned authority.

Capital

For the registration of the company, minimum capital is not required.

Directors

The Indian Subsidiary Company registration should comprises of two directors of which one must be an Indian citizen.

Shareholders

Minimum of two shareholders are required for the registration process to form the Indian Subsidiary Company.

Equity Shares

The parent company should keep about 50% of the equity share capital with them.

DIN or directors identification number

All the directors must necessarily have the DIN or Director Identification Number.

Indian Subsidiary Company’s annual compliances are:

·         Companies Act 2013 and its compliance.

·         Income Tax Act 1961 and its compliance.

·         Ministry Of Corporate Affairs’ guidelines.

·         Guidelines from FEMA.

·         Return of income tax.

·         Registrar of the Company (ROC) and its annual returns.

·         Filing with Reserve Bank of India.

·         Filing with SEBI.

If the application is dully filled and all the rules and regulations are followed as per the registration procedure, then Certificate of Insurance (COI) will be issued. The Indian Subsidiary Company is in no way different from any of the other registered Indian Companies and they all will function in a similar way.