There are various options that a foreign company has to enter the Indian market and avail the economic benefits that India has to offer. The foreign entity may setup a corporate or non-corporate entity.
A foreign entity can set up anIndian corporate entity in India as a wholly owned subsidiary, as a Limited Liability Partnership or through joint venture with an Indian partner. The foreign entity may choose to operate as a foreign company in India through a Branch office, Liasion Office or a Project Office in India as well.
Indian Entity options
Wholly owned subsidiary: Foreign companies can set up wholly owned subsidiary companies in India in form of private companies subject to FDI guidelines. A wholly owned or a subsidiary company has the maximum flexibility to conduct business in India when compared with a liaison or branch office and has following salient features:
- Funding can be done via equity, debt (foreign as well as local) and internal accruals
- Indian transfer pricing regulations apply
- Repatriation of dividends is allowed without approvals
Limited Liability Company:An LLP is governed by the Limited Liability Partnership Act, 2008 and came into force in India on 1 April 2009. FDI is permitted in an LLP with the prior approval of the GOI in sectors where 100% FDI is allowed under the automatic route and there are no FDI-linked performance conditions. LLPs with FDI are not allowed to operate in agricultural or plantation activity, print media or real estate business. FIIs/FVCIs are not permitted to invest in LLPs. LLPs with FDI are not eligible to make any downstream investments.
Joint Venture with Indian or foreign partner: Foreign companies can also set up joint venture with Indian or foreign companies in India. There are no separate laws for joint ventures in India and laws governing domestics companies apply equally to joint ventures.
Foreign company options
Liaison office: A liaison or a representative office can be opened in India subject to approval by Reserve Bank of India. Such an office can undertake liaison activities on its company’s behalf. A liaison office can also undertake:
- Representing parent/group companies in India
- Promoting import/export in India
- Promoting technical/financial collaborations on parent company/group’s behalf
- Coordinating communications between parent/group companies and Indian companies
Branch Office: Foreign companies can conduct their business in India through its branch office which can be opened after obtaining a specific approval from Reserve Bank of India. A branch office can undertake following activities:
- Import & export of goods
- Rendering professional or consultancy services
- Carrying out research work in area which its parent company is engaged
- Promoting technical/financial collaborations on behalf of parent company/ overseas group company
- Representing parent/group companies in India and acting as buying/selling agent in India
- Providing IT services and developing software in India
- Providing technical support for products supplied by parent company/group
Project office: If a foreign company is engaged by an Indian company to execute a project in India, it may set up a project office without obtaining approval from Reserve Bank of India subject to prescribed reporting compliances. As applicable in case of a branch office, a project office is treated as an extension of foreign company and is taxed at the rate applicable to foreign companies.
Find out more about the suitable options for you to start business in India by speaking to one of our advisors at AJSH & Co LLP. We can also advise you with regards to transfer pricing policies in India.
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Subsidiary company is any company whose interests are held and controlled or held by another company. Paid up equity share capital and preference share capital of the subsidiary company can be used to determine the holding company, subsidiary company relationship between two companies.
What is a Subsidiary Company?
There’s often a lot of confusion regarding the position of the subsidiary company and what it does. A subsidiary company is a company that is either owned or owned in part by another company. The company that owns the subsidiary is known as a parent company or a holding company. It should be noted that a holding company does slightly differ from a parent company, though.
What is WOS (Wholly Owned Subsidiary)
When one company is 100% owned by another company, it is called Wholly Owned Subsidiary of the company who had made 100% investment in it.
How To Set Up a Subsidiary
To setup one of these companies, you only need a sole director. The requirement for a company secretary was waived some years ago. The only restriction is that the sole director cannot then act as the company secretary. When you register as a sole director, you will enter both your residential address and a service address. Only the service address will appear in the public records.
The key here is that in the various documentation you submit regarding shareholders you will have both an individual director and another company as a shareholder. You are prohibited from having an entire company owned by another company.
Once you submit the documents, you will have a decision within 24 hours from Companies House.
Opening up a subsidiary isn’t a decision that you should take lightly. It isn’t always necessary and it may be better to simply open a different company from scratch. You have to make this decision by yourself. And it may be better to employ a professional agent to help with the opening of your subsidiary.
Know more about how to register company in India
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Establishment of subsidiary companies or the wholly-owned subsidiaries, is certainly a very elegant and preferred means for extending one’s businesses to foreign countries of choice. Therefore, the majority of multinational corporations opt for setting up their subsidiary companies in the targeted countries, for the ultimate purpose of capturing market in the destination countries. In ours this webpage, we are offering rich, exclusive, and very profitable information about the subsidiary company formation, particularly in India.
Basic Requirments For Register Subsidiary
1. Indian Resident Director – Local director can be appointed without any equity participation in the subsidiary company and
2. Principal Place of Business in India – A rented or Leased Premises will be sufficient for this purpose.
Steps In Registration Of Subsidiary
1. Obtain Digital Signature for each Director of the proposed Subsidiary Company.
2. Apply for Directors Identification Number (DIN) of each proposed director of the Company.
3. Application for approval of Name of the Company.
4. Drafting of the Article and Memorandum of Association for the proposed Subsidiary Company and preparation of other documents for Incorporation of the Company.
5. Registration of Company.
Post Incorporation Complianes
1. Obtaining Permanent Account Number (PAN);
2. Opening of Bank Account for Subsidiary Company;
3. Obtaining various registrations including VAT, Service Tax, TIN, Excise etc depending on the requirements of the business of the Company;
4. Advance Foreign Remittance Reporting (AFRR) – To be submitted to Reserve Bank of India (RBI) within one month of receipt of FDI Remittance in India;
5. Allotment of Shares to the Holding Company within 180 of receipt of FDI;
6. Submission of FC-GPR Form with RBI within 30 Days of Allotment of Shares;
Documents & Information Required For Registration Of Subsidiary
1. Requirements for DIN Application of the Foreign Directors
a) Verification letter in Form DIR-4. Duly attested by the Consulate of the India Embassy in the Home Country of the Director or Apostils* (Worksheet for procurement of DIR-4 is attached).
b) Verification of Signatures of Subscribers in Form INC 10 : 1 Photo should be pasted in the box provided in the form. Duly attested by the Consulate of the India Embassy in the Home Country of the Director or Apostille*.
2. Details of at-least two Directors / Promoters of the company for obtaining DIN (Director’s Identifications Number)
– Complete Name
– Address (including City, State, Pin Code, Country)
– Father’s Name
– Date of Birth (mandatory)
– Passport Photograph of every proposed Director.
– Educational Qualification
– Place of Birth
– Two Copy of Pan Card as a proof of identity (mandatory requirement for Indian national).
– Two Copy of Aadhar Card/Voter Id/Driving Licence/Passport (One of these Mandatory for Indian Nationals)
– Two Copy of Passport as a proof of identity (mandatory requirement for Foreign national)
– Copy of Electricity Bill / Telephone Bill / Mobile Bill / Bank Statement as a Proof of Address.
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