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What is Subsidiary of a Foreign Company ?
Under Section 4(7) of the Companies Act 2013, In India a Subsidiary company is the one where parent company directly or indirectly holds 51% voting rights in that company.
Eligibility for Registering Subsidiary of a Foreign Company
- Must receive specific approval from the Reserve Bank of India’s (RBI) Foreign Exchange Department to operate a Branch office in the country
- Shall have at least two directors, of which one should be an Indian resident
- Shall have at least two shareholders, a shareholder can be either a foreign individual or a foreign company
- The parent company should hold 51% of the total equity capital
Key Features & Benefits of Subsidiary of a Foreign Company
Loss Management
In case of company incur losses, the assets of the parent company will be untouched. However, this rule does not always apply in all countries, depending on local laws
Effective Control
Parent company will always have significant influence over the principles, vision, and tactics that govern the subsidiary.
Minimum Investments
The investment needed to acquire a foreign subsidiary is less than that to set up a unit of the company in another country without the hassle of setting up a branch or a new firm abroad.
Global Expansion
Establishing a foreign subsidiary also enables a parent company to expand its target consumer and to introduce its products and services to a new group of prospects.
Process for Registering Subsidiary of a Foreign Company
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Documents Required for Registering Subsidiary Company of a Foreign Company
Following documents are required for registering Subsidiary Company:
- 2 Copies of Certificate of Incorporation / Registration (notarized and attested by Indian Embassy) (One copy each for RBI & ROC). If it is in a language other than English then Translation of the same notarized and attested by Indian Embassy is required.
- 2 Copies of Memorandum & Articles of Association (English Translation) notarized and attested by Indian Embassy
- Details of Last Three Years Import Into / Export From India (On letterhead, signed with a stamp, five copies)
- Latest 5 years Audited Balance Sheet (English translation) notarized/attested by Indian Embassy
- Details of Authorized representatives.
- Details of existing Indian Clients, if any
- Details of products/services to be rendered in India by the parent company. Also, provide some literature like brochures/catalogues of products and literature on the company, if any. Indian regulators (RBI) love this literature and it helps in getting the process completed speedily
- Regulatory and legal Forms/ documents.
- Details of Activities to be undertaken in India in case of the Branch office.
- Proof of Registered Address.