A subsidiary company is an entity registered under the Companies Act, 2013, where a foreign company owns more than 50% of the equity shares. The subsidiary operates as an independent legal entity but remains under the control of the parent company. It is one of the most popular ways for foreign companies to establish a foothold in the lucrative Indian market.
Limited Liability
Shareholders’ liability is limited to their investment in the company.
Access to Indian Markets
Enables direct entry into India’s growing consumer and business markets.
Ease of Doing Business
Simplified registration process under the automatic FDI route in most sectors.
Tax Benefits
Eligible for certain tax exemptions and benefits based on business activities and industry.
Separate Legal Entity
Operates independently, limiting the parent company’s exposure to risk.
Local Hiring
Easier to hire local talent to drive operations.
Brand Presence
Builds stronger local brand recognition by establishing a direct presence.
Obtain Digital Signature Certificate (DSC):
– All directors must secure a DSC for electronic document submissions.
Apply for Director Identification Number (DIN):
– Each director must have a DIN, which is obtained online via MCA.
Reserve a Name with MCA:
– File ‘SPICe+ Part A’ to check and reserve a unique name for the subsidiary.
Prepare Incorporation Documents:
– Memorandum of Association (MOA) and Articles of Association (AOA).
– Proof of registered office (lease agreement or ownership proof).
– Parent company documents, notarized and apostilled.
File SPICe+ Form (Part B):
– Submit incorporation details, including directors, shareholders, and registered office.
– Attach relevant documents to this form.
Issue of Certificate of Incorporation:
– MCA issues the Certificate of Incorporation along with the Corporate Identification Number (CIN).
PAN, TAN, and Bank Account:
– Obtain a PAN and TAN, and open a local bank account for the subsidiary.
Post-Incorporation Compliance:
– Conduct the first board meeting within 30 days.
– File necessary declarations and maintain statutory records.
Additional Documents Required for Setting Up a Subsidiary Company in India:
When registering a subsidiary company in India, additional documentation is required to ensure compliance with the Companies Act, 2013, and RBI’s Foreign Exchange Management Act (FEMA) guidelines. These documents are in addition to those required for a regular Private Limited Company registration.
1-Documents from the Foreign Parent Company:
A) Certificate of Incorporation of the Parent Company
– A notarized and apostilled copy of the parent company’s Certificate of Incorporation.
– If the document is in a foreign language, it must be translated into English by a certified translator.
B) Board Resolution for Subsidiary Incorporation
– A resolution passed by the parent company’s board authorizing the setup of a subsidiary in India.
– The resolution must appoint authorized representatives for signing and filing incorporation documents.
C) Charter Documents (MOA & AOA of Parent Company)
– The Memorandum of Association (MOA) and Articles of Association (AOA) of the parent company must be submitted.
– These should be notarized and apostilled.
D) Letter of Authorization
– A letter authorizing a person in India to handle incorporation and compliance-related matters on behalf of the parent company.
2-Documents for Foreign Directors
A) Passport of Foreign Directors
– A notarized and apostilled copy of the foreign directors’ passports.
– If the passport is in a language other than English, it must be translated and notarized.
B) Proof of Address of Foreign Directors
– Recent utility bills, bank statements, or driver’s licenses (not older than 2 months).
– These must also be notarized and apostilled.
C) Digital Signature Certificate (DSC)
– A DSC issued by an Indian Certifying Authority is required for at least one foreign director to sign incorporation forms.
D) Director Identification Number (DIN)
– DIN application for all directors if they do not already possess one.
3-Proof of Shareholding and Investment
A) Share Subscription Agreement
– Details the parent company’s commitment to subscribe to the subsidiary’s equity shares.
B) Foreign Inward Remittance Certificate (FIRC)
– Proof of remittance from the parent company for capital contribution.
– Issued by the bank when funds are received in India.
C) Declaration of Beneficial Ownership
– Declaration under Section 89 of the Companies Act, 2013, identifying the ultimate beneficial owner (parent company) of the subsidiary.
4-RBI and FEMA-Related Documents
A) Form FC-GPR (Foreign Currency – General Permission Route)
– Filed with the RBI within 30 days of allotment of shares to the parent company.
B) Form FDI-Reporting
– Compliance form to report foreign direct investment under FEMA.
C) Proof of Sectoral Compliance
– If the business operates in a restricted sector, approvals from relevant ministries or departments are required.
5-Additional Indian Requirements
A) Resident Director Details
– Proof of identity (PAN or Aadhaar) and address proof (utility bills) of at least one Indian resident director, as mandated by Section 149(3) of the Companies Act, 2013.
B) Registered Office Proof
– Rent agreement and utility bill for the proposed registered office in India.
C) No-Objection Certificate (NOC)
– From the property owner, if the registered office is rented.
Additional Documents Required for Setting Up a Subsidiary Company in India:
Document | Required for Subsidiary | Required for Regular Pvt Ltd Company No |
Certificate of Incorporation (Parent Company) | Yes (Notarized and Apostilled) | No |
Charter Documents (MOA & AOA of Parent) | Yes (Notarized and Apostilled) | No |
Board Resolution from Parent Company | Yes | No |
Foreign Directors' Passport | Yes (Notarized and Apostilled) | No |
Foreign Inward Remittance Certificate (FIRC) | Yes | No |
Form FC-GPR | Yes (Filed with RBI) | No |
Beneficial Ownership Declaration | Yes | No |
Resident Director Details | Yes | Yes |
Registered Office Proof | Yes | Yes |
Share Subscription Agreement | Yes | No |
Who Should Opt for Subsidiary Registration?
– Foreign Companies expanding operations in India.
– Businesses looking to establish a long-term presence in India with full operational control.
– Companies entering FDI-compliant sectors under automatic approval routes.
– Entities requiring local hiring capabilities and market branding.
Comparison: Subsidiary, Company by Foreigner, Branch Office, Liaison Office
Feature | Subsidiary | Company by Foreigner | Branch Office | Liaison Office |
Ownership | Owned by a foreign parent company | Owned by a foreign individual/entity | Owned by a foreign parent company | Owned by a foreign parent company |
Legal Entity | Separate legal entity | Separate legal entity | Not a separate legal entity | Not a separate legal entity |
Control | Parent company retains control | ndependent | Full control by parent company | No operational control |
Activities Allowed | Operational activities, local trading | Any activities allowed to an Indian company | Restricted activities like exporting/importing, consulting | Liaisoning, market research, networking |
FDI Approval | Automatic route (most sectors) | FDI norms for company registration | RBI approval required | RBI approval required |
Taxation | Taxed as an Indian company | Taxed as an Indian company | Taxed as a foreign entity | Not taxable (no income generation) |
Compliance | High (annual filings, audits, etc.) | High | Medium | Low |
Banking | Independent bank account | Independent bank account | Operates through parent company account | Operates through parent company account |
Best For | Long-term presence, local operations | New business setups by individuals | Short-term specific projects | Initial market entry |
Frequently Asked Questions (FAQs)
What is the minimum shareholding required for a foreign company in a subsidiary?
A foreign company must hold more than 50% of the shares to qualify as a subsidiary.
Can a foreign subsidiary hire local employees in India?
Yes, subsidiaries can hire local employees and conduct business operations like any other Indian company.
Are there any restrictions on FDI for subsidiaries?
FDI restrictions depend on the sector. Most sectors allow 100% FDI under the automatic route, while others may require government approval.
What is the minimum capital requirement for setting up a subsidiary in India?
There is no minimum capital requirement under the Companies Act, 2013, unless specified by the sector.
How long does it take to register a subsidiary in India?
The process typically takes 15–30 days, provided all documents are in order.
Is a local director mandatory for a subsidiary?
Yes, at least one director must be a resident of India (staying in India for at least 182 days in the previous financial year).
Can a subsidiary repatriate profits to the parent company?
Yes, profits can be repatriated after paying applicable taxes, including corporate tax and withholding tax on dividends.
What are the tax rates applicable to a subsidiary?
The corporate tax rate is generally 25%, but it may vary based on turnover and sector.
Can a foreign company convert its liaison office or branch office into a subsidiary?
No, a liaison or branch office cannot be directly converted into a subsidiary. A new subsidiary must be incorporated.
What post-registration compliance is required for subsidiaries?
Subsidiaries must file annual returns, conduct statutory audits, and comply with FEMA and RBI regulations for foreign investments.