Foreign Subsidiary Incorporation
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Foreign Subsidiary Incorporation Overview
India is a dominant market that most companies prefer to tap into. Global businesses endeavor to expand their operations in Indian markets, particularly because of the large customer base. Maintaining operations in India from foreign territory can prove to be difficult. Thus, foreign companies often establish a physical presence in India.
The most preferred option for these companies is to incorporate a subsidiary in India. However, there are many procedural aspects involved in incorporating a foreign subsidiary in India. What are these procedural aspects and requirements? Read on to learn everything about foreign subsidiary incorporation in India.
What is a Foreign Subsidiary?
A foreign company subsidiary is a company in which more than 50% of the share capital is held by a company incorporated outside India. In many cases, the foreign company forms a Wholly Owned Subsidiary (WOS) in India to conduct its operations. A WOS is where the entire share capital is held by the foreign company.
The following documents are required for incorporating a foreign subsidiary company in India:
Foreign Company:
- Copy of the resolution passed by the foreign company (Notarised/Apostilled)
- ID proof of the authorized representative of the foreign company, duly notarized/apostilled if the representative is not a resident in India
- Certificate of Registration
- Charter documents, i.e., MOA and AOA (Notarised/Apostilled)
- Details of the nominee shareholder of the foreign company (in case of a wholly-owned subsidiary)
- Any other document as required
Directors:
- Identity Proofs
- Address Proofs
- Digital Signatures
- Director Identification Number
- Form DIR-2 for consent to act as director (if a non-resident director, it shall be notarized/apostilled)
- INC-9, i.e., the declaration of the subscriber or the first director
- Any other document as required
The process of incorporating a subsidiary of a foreign company in India is similar to incorporating a regular company in India. The procedure is as follows:
Filing the SPICe+ Form:
- The SPICe+ form is used for foreign subsidiary incorporation. Part-A of the SPICe+ form can be used for the reservation of the name, in which case it is reserved for 20 days. If the company does not want to go for name reservation, it can continue with Part-B of the form.
- According to Rule 8A of the Companies (Incorporation) Rules, 2014, a foreign company incorporating a subsidiary in India can use its original name with the addition of ‘India’ or the name of any Indian state or city if available. This helps the subsidiary company benefit from the goodwill of the foreign holding company. The following documents are required if the name of the foreign holding company is used:
- NOC from the foreign company to use the same name.
- Apostilled copy of the charter of the foreign company.
- Apostilled copy of the resolution of the foreign company.
Submitting Information:
- Provide the following information in Part-A of the form:
- Type of Company (OPC, Section-8 company, Producer Company, etc.)
- Class of Company (Private limited or Public limited)
- Category of the Company (Limited by shares, limited by guarantee, unlimited company)
- Sub-category of the Company (Non-government, Union government, State government, subsidiary of a company incorporated outside India)
- Description of the main division
- Particulars of the proposed or approved name
- Save the information and submit it. After clicking the submit tab, you will have two options: ‘Submit for Name Reservation’ or ‘Proceed for Incorporation’. If you go for name reservation, you will have to pay a nominal fee of Rs. 1000.
- Provide the following information in Part-A of the form:
Proceeding with Part-B:
- After name reservation, proceed with Part-B of the SPICe+ form. The following documents are required:
- Notarised/Apostilled copy of the resolution passed by the foreign company mentioning the name of the authorized representative, number of shares subscribed.
- Notarised/Apostilled ID proof of the authorized representative if they are a non-resident.
- Notarised/Apostilled copy of the charter document of the foreign company.
- Name of at least one director who is resident in India.
- Name of the nominees (applicable in case of wholly-owned subsidiaries).
- Main division of industrial activity.
- Notarised/Apostilled copy of Memorandum of Association (physical copies as e-MOA can’t be prepared).
- Notarised/Apostilled copy of Articles of Association (physical copies as e-MOA can’t be prepared).
- Registered Office address proof (rent agreement, lease agreement, etc.).
- Copy of the utility bills.
- Director Identification Numbers of all the directors.
- Digital Signature Certificates.
- DIR-2 declaration for consent to act as director from both the resident and non-resident directors.
- INC-9 furnishing declaration to act as a subscriber or first director.
- After name reservation, proceed with Part-B of the SPICe+ form. The following documents are required:
Submission and Review:
- Fill in the required details and upload relevant attachments in the Form SPICe+, including the linked forms AGILE-PRO-S and Form INC-9. Once submitted using the relevant DSC, the ROC will review the details and grant the Certificate of Incorporation accordingly.
Post Incorporation Procedure
After incorporating the foreign subsidiary, the following compliances must be adhered to:
- The foreign subsidiary company in India shall receive the subscription money from the foreign holding subscriber company.
- The subsidiary company shall file e-Form INC-20A regarding the declaration of the commencement of business.
- Collection of Foreign Inward Remittance Certificate (FIRC) from the bank.
- The subsidiary company shall issue the share certificates to the subscribers.
- The foreign subsidiary company shall file the FC-GPR return with the RBI regarding the issue of share capital against investment by the foreign company in the foreign company subsidiary in India.
- Once the place of business is established, Form FC-1 shall be filed within 30 days along with the prescribed documents.
FAQs
The resident director is not required to hold shares in the foreign company. The law only states that there must be at least one resident director.
In the case of incorporation of a private limited company, a minimum of 2 shareholders is required. Therefore, if a foreign company incorporates a wholly-owned subsidiary in India, they need to appoint a nominee shareholder who will hold one share to meet the minimum number of shareholders criteria.
The SPICe+ form serves multiple purposes within a single form, including:
- Name Reservation
- Company Incorporation
- Allotment of DIN
- Issue of PAN
- Issue of TAN
- EPFO registration
- ESIC registration
- Professional Tax registration
- Opening of a bank account
- Allotment of a GST number
AGILE-Pro-S is linked with the SPICe+ form and contains applications for obtaining the following registrations:
- EPFO registration
- ESIC registration
- GST registration
- Professional Tax registration
- Shop and Establishment registration
- Opening of a bank account
The SPICe+ form can be submitted three times.
