Incorporation of Foreign Subsidiary in India

Foreign Subsidiary Company:

Foreign Subsidiary company is a company owned and controlled by another company and located in a country other than the parent company or holding company.  The owning company is called a parent company or Holding company of the subsidiary company.

Benefits of the Foreign Subsidiary Company

The composition of a subsidiary in a foreign country may have many benefits such as opening access to new markets and using efficient production methods to control costs, expanding brand recognition.  Move into a new location can increase profit and business expansion that would not be possible in the home country.

The stepwise process to incorporate a foreign subsidiary in India

1. Application for Name approval (Part-A)

First, it needs to decide the name of the proposed subsidiary company, it can be similar to foreign entity name by using the word “India” in its name, and this will help to take the Benefit of Its goodwill in foreign County.

After checking the name availability, the Incorporation Part A name approval application needs to submit with the Ministry of Corporate Affairs (MCA) department to take approval for the name of the foreign Subsidiary. The name availability check facility is available at the MCA website.

2. Documents need to be prepared for the Incorporation of foreign Subsidiary companies.

After getting the name approval letter from the Ministry of Corporate affairs following documents need to be prepared for company formation.

1.            The physical copy of the MOA (Memorandum of Association of Company) shall be prepared.

2.            The physical copy of the AOA (Article of Association of Company) shall be prepared.

3.            Form DIR-2 declarations from the first Directors of the proposed company.

4.            Declaration from the foreign directors and INC-9 Declaration from the foreign subscribers not having PAN or DIN (Director Identification Number).

5.            NOC from the owner of the premises of the registered address.

Note: All the documents related to the foreign entity, foreign-based authorized person, and foreign director shall be duly Apostille / notarized in the country of origin.

3.            The following documents and information should be required to incorporate a foreign subsidiary.

1.            Copy of duly notarized and apostilled Certificate of Incorporation (COI), MOA and AOA (By-Laws) of the Foreign Entity.

2.            Copy of duly notarized and apostilled board resolution to open a subsidiary company in India and to authorize someone to subscribe to the MOA (Memorandum of Association and AOA                          (Article of Association) of the proposed company on behalf of the foreign company.

3.            Copy of ID and address proof of authorized person with passport size Photograph. (Passport, driving license and latest Electricity Bill or Mobile Bill or Latest bank statement)

4.            ID and Address proof of proposed directors and Shareholders with passport size Photographs. One Indian Director shall be mandatory to incorporate a Subsidiary company in India)

5.            Email ID & mobile number and education qualification of proposed director/shareholders and Authorized person

6.            Latest utility bill as registered address proof of the proposed company and Rent agreement or lease deed if the property is on rent.

7.            Details of Authorized capital and paid-up capital of the company.

4.            Application for Company Incorporation (Part-B Incorporation of Company)

After getting the name approval letter from the Ministry of Corporate affairs and preparing all the above-required documents for company formation the applicant needs to log in the MCA website account and need to fill all the required Information in web-based Spice+ Part B form related to the formation of the foreign subsidiary company like Capital structure of the proposed company, registered address details, details of shareholder and directors of the company, PAN and TAN details of the proposed company and practicing professional details, etc. and also need to attach Following documents in Spice + Part B form.

(i)            Copy of board resolution for Authorization, COI, and By-laws of the foreign entity.

(ii)           MOA and AOA of the proposed company,

(iii)          Latest Utility bill as a registered address proof

(iv)          NOC from the owner of the premises

(v)           ID and Address proof of the Subscribers, Directors and Authorized person.

(vi)          INC-9 declaration if a person does not have PAN or DIN

(vii)         Form DIR-2 (Declaration form the first directors of the company.

5.            To Fill the details in AGILE PRO form:

After submission of Spice+  Part B form, one another AGILE PRO Web-based form needs to fill. In AGILE PRO form information related to GST, EPFO, ESIC, and BANK Account of the proposed company need to fill related to the proposed company and also need to attach following attachment in AGILE PRO Form:

(i)            Utility bill as registered address proof of the proposed company

(ii)           ID and Address proof of Authorized Person.

(iii)          Specimen signature of the Authorized Person.

The Ministry of Corporate Affairs gives an option to apply for GST in AGILE PRO form, if the applicant wants to take GST then he/she can apply for GST but if do not want to take GST, in that case, he/she can select the option “No” but it’s mandatory to apply for ESIC and EPFO for every person but the company does not require to file a return of ESIC and EPFO till the date applicability of provisions of same on such company.

6.            INC-9 Declaration

If the directors/ subscriber having PAN or DIN, in that case, INC-9 declaration shall be generated web-based and do not need to prepare separately, only need to affixation of DSC of Directors/ subscribers on the same. But in case directors/subscribers do not have PAN or DIN, It shall not be generated web-based, and the applicant needs to prepare it separately.

7.            Download PDF of all the web-based forms

The applicant needs to download all the web-based forms in PDF file from the link given at the MCA dashboard after complete the filing of all information in a web-based form. After downloading the all web-based form PDF, applicants need to affix the DSC of Authorized person and subscriber in the same.

8.            Submission of forms with the MCA

Whenever all forms ready with the applicant, upload all three documents as the linked form on the MCA website and make the payment of the same.

Web-based form i.e.

Spice+

Agile Pro

INC-9

9.            Certificate of Incorporation

Once all the forms submitted with the MCA department the Registrar will issue a certificate of incorporation only after checking the forms and satisfying himself about the compliance with relevant provisions of the Companies Act to register the Company.

Some mandatory post incorporation compliances for foreign subsidiary:-

Report to the RBI in form FCGPR:

A report in Form FCGPR (Foreign Currency – General Purchase Register) need to submit with the RBI: This form needs to be filed within 30 days from the date of allotment of shares to foreign entity.

Further, the shares must be allotted within 60 days from the date of receipt of funds or within 60 days from the date of the Incorporation of the company. (Whichever is earlier), so it’s mandatory for newly incorporated company that funds should be received within 60 days from the date of incorporation.

Payment of Stamp Duty:

The Company must be an issue the Share Certificate within 60 days from the allotment of shares or from the date of Incorporation.

Payment of Stamp Duty: The Company will have to pay the stamp duty on the shares allotted as per the State in which the Company is registered. The rate of stamp duties is varied state to state.

Commencement of business form INC-20A:

The applicant needs to submit the Commencement of business form INC-20A to MCA within 180 days from the Incorporation date of the company.