Establishing a subsidiary in India is a strategic move for foreign companies looking to enter the Indian market. An Indian subsidiary is a separate legal entity from its parent company, offering a range of benefits including risk mitigation and a stronger local presence. The process is governed by the Companies Act, 2013, and is primarily handled through the Ministry of Corporate Affairs (MCA).

 

Why Choose an Indian Subsidiary? 

Foreign companies choose to set up a subsidiary in India for several compelling reasons:

• Limited Liability: The subsidiary is a separate legal entity, meaning the parent company's liability is limited to its investment in the subsidiary. This protects the parent company's assets from any debts or legal issues the subsidiary might incur.

• Full Control: A wholly-owned subsidiary gives the parent company 100% control over its Indian operations, including decision-making, branding, and strategic alignment.

• Market Penetration: A local entity can better understand and adapt to the nuances of the Indian market, culture, and consumer behavior. This helps in building a strong brand presence and increasing credibility.

• IP Protection: Operating through a subsidiary provides a robust legal framework to protect the parent company's intellectual property (IP) from misuse or theft.

• Access to Talent and Capital: India offers a large and skilled talent pool. The subsidiary structure also allows for easier access to new capital and resources within India.

 

The Complete Registration Process 

Registering a subsidiary in India is a step-by-step digital process. Here's a breakdown:

 

Step 1: Obtain Digital Signature Certificate (DSC) and Director Identification Number (DIN)

• Digital Signature Certificate (DSC): Since all company incorporation forms are filed electronically, the proposed directors must obtain a DSC. It's the digital equivalent of a physical signature.

• Director Identification Number (DIN): Every individual who wishes to be a director of a company in India must have a unique DIN. You can apply for a DIN through the Ministry of Corporate Affairs (MCA) portal.

 

Step 2: Name Approval

• You must propose a unique name for the subsidiary that is not identical to any existing company or trademark.

• The name can be the same as the parent company with "India" added (e.g., "Google India Private Limited").

• You apply for name reservation through the RUN (Reserve Unique Name) service on the MCA portal.

 

Step 3: Draft and Prepare Incorporation Documents

• Memorandum of Association (MoA): This document defines the company's objectives and scope of activities.

• Articles of Association (AoA): This outlines the company's internal rules and regulations for management and operation.

• Other Documents: This includes a resolution from the parent company's board, identity and address proofs of all directors and shareholders, and proof of the registered office in India (e.g., a lease agreement or utility bill).

 

Step 4: File for Incorporation

• All the prepared documents, along with the application for incorporation (SPICe+ form), are filed electronically with the Registrar of Companies (RoC) through the MCA portal.

• This single integrated form also applies for PAN (Permanent Account Number), TAN (Tax Deduction and Collection Account Number), EPFO (Employee Provident Fund Organization), and ESIC (Employee State Insurance Corporation) registration.

 

Step 5: Obtain Certificate of Incorporation (CoI)

• Once the RoC scrutinizes and approves the application, it issues a Certificate of Incorporation (CoI), which officially establishes the company's legal existence and provides a unique Corporate Identification Number (CIN).

 

Step 6: Post-Incorporation Compliances

• Bank Account: Open a corporate bank account in the name of the new subsidiary.

• GST Registration: Register for Goods and Services Tax (GST) if your business turnover exceeds the specified threshold.

• FEMA/RBI Compliance: Report foreign investment to the Reserve Bank of India (RBI) through the Foreign Exchange Management Act (FEMA) guidelines.

• Other Registrations: Depending on the business activity, you may need other licenses and registrations, such as an Import Export Code (IEC).

 

Key Requirements & Considerations 

• Directors: A minimum of two directors is required for a Private Limited Company. At least one of them must be a resident Indian.

• Shareholders: A minimum of two shareholders is required. The parent company can be one of the shareholders, and a wholly-owned subsidiary can have the parent company holding 100% of the shares.

• Minimum Capital: There is no minimum capital requirement to incorporate a private limited company in India. However, the capital should be realistic for the company's business activities.

• Timeline: The entire process typically takes a few weeks, but can vary depending on document preparation and government approval times.