Subsidiary of Foreign Company
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Overview:
Wholly owned subsidiary is a company in which a foreign entity makes 100% FDI in India through automatic route. This is considered as the easiest and the preferred route by the foreign entities for establishment of their business in India.
A wholly owned subsidiary company can be formed as a Private Limited Or Public Limited Company. A wholly owned company has more flexibility to conduct business in India as compared to liaison office or branch office. In these companies funding can be done via equity, debt and internal accruals. Indian transfer pricing regulations apply on such companies. They are governed by the Companies Act, 2013. They are treated as Domestic Company and are eligible for all exemptions, deductions benefits as applicable to any other Indian company.
Foreign Subsidiary Company in India:
a) India’s booming economy and abundance of capital make it a favored investment destination for NRIs, foreign nationals and foreign companies.
b) Any company which is incorporated or registered as a company outside India can operate within the country, as a part of their foreign company, is called a subsidiary company.
c) This Subsidiary Company can be registered as a public limited or private limited company.
d) A private limited company is a business that is closely owned and enjoys the rights as provided by the Companies Act, 2013.
e) A Public Limited Company is a corporation with an interest in the public and it is expected to comply with several laws and regulations set out in the Companies Act, 2013.
Benefit of Foreign Subsidiary:
a) No prior approval of RBI is required for incorporation, if the subsidiary company is related to the sectors like automobiles, agriculture, electronic equipment, etc.
b) Subsidiary companies can avail of several tax-benefits like incentives, exemptions prescribed by the government of India depending upon the sector they operate.
c) Foreign subsidiary companies generate a lot of job opportunities thereby increasing the economic growth and national income of the country.
FAQ:
1) Can Foreign Company(MNC)incorporates a company in India and 100% of ownership?
Ans. Yes, Foreign company can incorporate with 100% ownership & it called as Indian Subsidiary company of Foreign Parent Company. Indian company Law allows you to retain 100% ownership by subscribing shares of Indian company subject to FDI guidelines.
2) Is there any requirement for appointment of resident Indian Director in subsidiary company?
Ans. Yes, as per the provisions of the Indian Companies Act, 2013, every company to be incorporated in India must have at least one Indian resident individual as a director.
3) Is it mandatory to allot any shares to Indian resident Director?
Ans. It is not necessary that a Indian Resident director should also be a shareholder in an Indian Company. =
4) What is an apostille?
Ans. An Apostille is a specialized certificate, issued by the Secretary of State. The Apostille is affixed with your original document to verify it is legitimacy and authenticity so that is accepted in one of the other countries who are members of the Hague Apostille Convention.
Since 2005, India is a member of the Hague Convention of October 5, 1961 that abolished the requirement of legalization of foreign public documents. Moreover, an apostille certificate can be used to authenticate public documents like passport copy, driver’s license copy, business documents, judgments, extract of a register or a notarial attestation.
5) which documents are required to start a business/company in India?
Ans. Following are the documents required from a foreigner to start a company in India:
a) In case of Proof of identity:
In case of foreign nationals, passport is a mandatory requirement for proof of identity.
b) In case of Proof of residence:
Address proofs like bank statement, mobile bill, electricity bill, telephone bill and should be in the name of applicant only.
In case of foreign applicant, address proof should not be older than 2 months from the date of filing of the e-Form.
The attached supporting documents should be attested/ apostille by the Consulate of the Indian Embassy, Foreign public notary.
6) Can a non-resident(NRI) be a Director of an Indian Company?
Ans. Yes, a non-resident can become a director in Indian Company if he possess the required documents and one resident director is already on the board.
7) Can foreigners start a company in India?
Ans. Yes, Foreigner can start the company. This is what is referred to as Foreign Direct Investment and India has several policies in place to encourage this kind of investments
