What a foreign subsidiary means?

As per section 2(87) of the Companies Act, 2013, a company which is controlled by another company is understood as a subsidiary company. And as per section 2(46) of the Act, a holding company is defined, i.e., an entity which controls more than 50% power in another company. Indian Subsidiary Company has been defined under the Companies Act, 2013. Hence, we can say that an Indian subsidiary company can be understood as a company which is owned 50% or more or say is controlled by a foreign company. The foreign company that owns more than 50% of the share capital of the Indian Company i.e. the paid up share capital. So the company can be wholly owned subsidiary or a subsidiary or a Joint Venture.
The Indian laws are applicable in case of Indian subsidiary. Indian subsidiary will enjoy status of an Indian Company and will have a separate virtue from its parent company.en it comes to the status of an Indian Subsidiary Company, then the principle of separate legal entity would also apply to the subsidiary company. Hence the status of the shareholders and directors of the subsidiary is different from that of the company. Under the Companies Act, 2013, an Indian subsidiary can be either registered as a private limited company or a public limited company.

Benefits of raising a foreign subsidiary

  • Easy to enter Indian market
  • Tax savvy – enjoys least corporation tax rate
  • Benefit of status of a regular Indian company
  • Easy transfer of profits through dividends
  • Separate virtue from parent company
  • Perpetual succession
  • Liability limited to FV of shares
  • Company can file a law suit
  • Company can purchase a property in India

Compliances applicable on Foreign subsidiaries

  • Compliances prescribed under Companies Act 2013
  • Filings and reportings under Income Tax Act
  • Foreign Exchange Management Act 1991
  • RBI Act
  • GST Act
  • SEBI – for listing shares with stock exchanges

Process of registration

  • Name reservation application and getting the name approved
  • Applying for DIN and DSC of the Directors
  • Preparation of required Board Resolution, MOA AOA of the proposed company
  • Applying for Company registration, PAN TAN , PF with MCA
  • Resolving queries raised by MCA if any
  • Getting the approval from MCA
  • Issuance of certificate of incorporation from MCA