All major corporations entering the Indian market must abide by the government’s rules and regulations. This is true whether the companies are owned by Indian or foreign entities or citizens. The one and only real difference is that foreign-owned subsidiary companies must adhere to more rules and regulations than Indian-owned companies.
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Definition of a Foreign Subsidiary Company
A foreign subsidiary company is any company in which a company incorporated in another foreign country owns 50% or more of its equity shares. In this case, the foreign company is referred to as the holding company or the parent company.
A company must be incorporated in India in order to be considered a foreign subsidiary company in India. It makes no difference where the parent company is incorporated.
Compliance is premised on several aspects of the business. All compliances must be met according to the type of company that is incorporated, the industry of operations, the annual turnover, and the number of employees. Section 2(42) of the Companies Act, 2013, defines a foreign company as one that must follow guidelines and laws established by multiple statutes and orders, such as:
- Income Tax Act of 1961 – Companies Act of 2013.
- 2017 GST – SEBI rules and regulations
- FEMA (Foreign Exchange Management Act) of 1999 – RBI compliances, and so on.
Steps for Incorporation of Foreign Subsidiary Company in India
- Name Reservation with the Ministry of Corporate Affairs: At least two names must be finalised in order to apply for incorporation. The name of the company must be in accordance with Rule 8 of the Company Incorporation Rules, 2014. If a foreign company incorporates a subsidiary company in India, the original name of the holding company may be used with the addition of the word India or the name of any Indian state or city, if available.
The following documents must be attached to the Name Application:- The main objectives of the company must be stated in the Memorandum of Association of the Company, which must be submitted with the SPICE Main application to the MCA.
- The Body Corporate’s Apostille Board resolution to apply for Name Reservation with MCA.
- Apostilled copy of the foreign body corporate’s COI that has been translated into English.
The application number will be generated once the name has been approved, and it will be valid for the first twenty days. The incorporation application must then be submitted in Spice Part B form. It can be extended by 40 or 60 days by paying additional fees in accordance with Rule 9A of the 2014 Incorporation Rules.
- Obtaining a Digital Signature Certificate for Subscribers and Directors: Obtaining DSC for subscribers and directors is a requirement for any incorporation. We can obtain the DSC of the resident Director in India first before proceeding with the foreign subsidiary in India because the Spice Part B form and AGILE form only require one Director DSC apart from the practising professional required in Spice Part B.
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Documents needed in addition to the Incorporation Application (Spice Part B)
- Apostilled/notarized copy of board resolution specifying the authorization to subscribe to the proposed company’s memorandum of association/the number of shares proposed to be subscribed by the body corporate/the name, address, and designation of the person authorised to subscribe to the Memorandum.
- Apostilled/notarized copy of a foreign body corporate’s COI. (This would have already been obtained if name reservation had been used.)
- Authorized and paid-up capital, as well as share allocation, is detailed.
- India is the registered office address. A letter of authorization from the primary owner as well as a utility bill is required. If it is not available, it must be filed within 30 days of the date of incorporation.
- Resident Director/Individual Subscriber Information: Name, Father/name, Mother’s educational qualifications, E-mail ID, and Phone Number, as well as a soft copy of a passport-sized photo A notarised/apostilled copy of your passport, as well as proof of your residential address, such as a bank statement, an electricity bill, or a telephone bill that has been translated into English.
- Apostilled/notarized physical copies of MOA/AOA
- Apostilled/notarized INC-9 declaration of subscribers/directors
- PAN Undertaking from Subscribers/Directors/Authorized Representative in the event that the PAN is not apostilled and notarized.
- Director’s apostilled/notarized DIR-2 The resident director does not need an apostille or to be notarized.
- Signature of the Resident Director who will be authorised signatory in the AGILE Form
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Fill out the online form with the required information
- Foreign Subsidary can proceed with the online application with MCA once we receive the above documents. This is a web-based form that can be saved and accessed online. Spice Part B and AGILE are the two forms.
- Fill out all of the required information in the web-based form and attach the necessary signed documents obtained in Step 3.
- PAN and TAN information should be entered into the form, and the Area code can be found in the help kit.
- After completing the Spice Part B form, the AGILE form will appear. GST Registration– If the company wishes to apply for GST, they should select yes and attach supporting documentation.
- After completing the above two online forms, foreign subsidiaries can download the forms in pdf format and upload them as linked forms after attaching the DSC and paying the applicable fees.
- Incorporation Certificate: After the CRC verifies the form and determines that it is correct and justified, the department will issue a Certificate of Incorporation together with PAN and TAN information.
Compliance Following Incorporation
- Form INC-22 for the confirmation of registered office must be filed within 30 days of the date of incorporation if not applied at the same time.
- Appointment of ADT-1 as the first auditor within 30 days of incorporation.
- Receipt of share subscription funds from the foreign subscriber, as well as collection of FIRC and KYC copies from the AD Bank.
- Filing of form INC-20A for declaration of business start-up.
- Subscribers are given a share certificate that has been duly stamped.
- Filing of the FC-GPR web-based form with the RBI for foreign investment reporting.
Conclusion
India is one of the world’s fastest growing economies, with a plethora of business opportunities, making it a popular destination for investment from NRIs, Foreign Nationals, and Foreign Companies. Foreign investment in India can be done in a variety of ways. Incorporation of Wholly Owned Subsidiary Company in India is one of the most successful and sought-after methods. As a result, such businesses must follow the mandatory incorporation procedure.
