Why is forming an Indian subsidiary not as tough as you think?

[Ishita Ramani]

Introduction

India is a country that attracts a lot of private equity and foreign direct investment (FDI) due to its rapid expansion. India has the second-largest population in the world and a wealth of skilled IT workers, which makes it an appealing destination for investment from foreign businesses and individuals. This article will explain why establishing an Indian subsidiary is not as tough as you may believe. In this article, we will also include information on What is an Indian Subsidiary? It is discussed how important it is to have an Indian subsidiary and what paperwork needs to be done to get one.

What do you mean by Indian Subsidiary Company?

An Indian subsidiary is a business whose interests are controlled or owned by another organization. The connection between the holding company and subsidiary company can be determined by looking at the preference share capital and paid-up equity share capital of the subsidiary company. It could be wholly or partially owned by another firm. It is essential to remember that the business that owns the subsidiary is referred to as the “parent company” or “holding company.” On the other hand, a holding company and a parent company differ slightly.

What is the importance of establishing an Indian Subsidiary Company?

The following are the importance of forming an Indian Subsidiary:

• Since they are considered independent entities, Indian subsidiary businesses are allowed to buy real estate in India.
• India’s population is young and productive, which makes it easy to develop a sizable clientele.
• The main advantage of an Indian subsidiary of a foreign firm is the limited liability of the shareholders toward the company.
• A subsidiary company in India may be either a private or public corporation, depending on the applicant’s needs.

What are the requirements for eligibility to establish an Indian Department?

• A private company needs two directors at the very least.
• One of the company’s directors shall be an Indian citizen (the director who has resided in India for at least 182 days in the preceding calendar year).
• A minimum of two shareholders are required for a Private Limited Company.
• The directors who were nominated should possess a valid certificate for digital signatures.
• Foreign investors must own the majority of the company’s shares in order to keep control and management in their hands.
• The company’s headquarters need to be in India. It is necessary to follow multiple RBI and FEMA laws while making a corporate share subscription.

What is the necessary paperwork to open an Indian subsidiary?

• A picture of every director and shareholder
• Every Indian shareholder and director has a PAN card.
• An electricity bill or other utility bill serves as proof of the registered office’s address and the directors’ all-important apostille ID.

The specific documents needed to establish an Indian subsidiary are listed below:

• An organization needs to have an Indian registered office.
• The utility bill must be provided to the ROC as proof of address.
• The electricity bill or bank statement must be more than two months old.
• A NOC from the landlord is required in order to use the space as a registered office for a business.

What are the benefits of Subsidiary Company Registration?

The following are the benefits of Subsidiary Company Registration:

1. Duration of Existence

A private limited company’s ability to continue operating even after a shareholder passes away generally remains unaffected by the status of its investors.

2. Brand Value Growth

An organization’s strong corporate structure, customers’ trust and confidence in a brand when buying its goods or services, employees’ confidence in joining a private limited company, vendors’ confidence in granting credit, investors’ confidence in making investments, and the company’s rising brand value. Due to their great brand recognition, many new businesses that start with no revenue soon reach billion-dollar valuations in a matter of years.

3. Foreign Direct Investment (FDI)

FDI is entirely allowed in a number of commercial ventures and industries without the need for prior approval. However, FDI is not allowed in sole proprietorships or partnerships, and LLPs need prior government approval.

4. Range of Growth

The Private Limited Company offers greater transparency in the business and is more easily accessed by angel investors, financial institutions, venture capitalists, and limited liability investors.

5. Limited Liability

The directors and members of a Private Limited Company are only liable for the value of their shares. This means that the personal assets of the owners, individuals, or directors will not be in danger of being seized by banks, creditors, or the government, even in the event that the company suffers a loss or financial difficulties as a result of its major commercial activity.

“Foreign company subsidiary in India” is a comprehensive guide that provides insights into the advantages, prerequisites, and regulatory compliances associated with establishing a subsidiary company in India by a foreign parent company. It offers valuable information on how to register, operate, and expand your business in the burgeoning Indian market. This guide is an essential resource for foreign companies looking to tap into the vast potential of the Indian economy.

Final Thoughts

India is a popular destination for foreign investment due to its growing opportunities. Foreign investment in India is rising as a result in all areas. Ever since Economic Liberalization occurred in 1991, the increase in foreign direct investment into India has resulted in a boom in the Indian economy.

When the Foreign Exchange Management Act (FEMA) was implemented in 1999, the government repealed the Foreign Exchange Regulation Act. It became easier to invest in India with the support of FEMA. The Reserve Bank of India (RBI) provides regulations regarding the establishment and registration of Indian Subsidiary Companies.