How to set up Foreign Subsidiary in India?

Setting up a foreign subsidiary in India can be a chance to attract a large consumer market, skilled workforce, ecosystem, government initiative, etc. For foreign companies looking for long term stability in India, foreign subsidiaries is one of the most preferred methods to set up in India. In this blog, we will discuss how one can set up their foreign subsidiary in India step by step including documents and timeframe. 

What is Foreign Subsidiary? 

When an Operational Company starts another company under its brand name at different locations to expand its business is considered as a Parent Company, while the newly established company is known as its Subsidiary. Registering a Subsidiary company in a Foreign country is known as Foreign Subsidiary Registration. The registration process for each foreign subsidiary company varies depending on the country where it's going to be registered. Let’s understand the requirements in detail to start a Foreign Subsidiary Company in India.

Why Set up Foreign Subsidiaries in India?  

There are multiple reasons due to which foreign companies set up their subsidiaries in India. These reasons or benefits of registering foreign subsidiary in India are as follows: 

1. Access to Indian Market: Setting up foreign subsidiaries in India opens the door to one of the fastest growing markets in the world. 
2. Skilled Manpower: India is one of the countries with skilled manpower and at a cost effective rate as well. 
3. Offer FDI: Registering foreign subsidiaries in India allows foreign direct investment making it easy to raise funds. 
4. Independent Legal Status: Foreign Subsidiary offers independent legal identity of the subsidiary company. This ensures limited liability protection, meaning the foreign parent company’s risk is restricted to its investment in the subsidiary.

Procedure to Incorporate Foreign Subsidiary in India

The procedure to incorporate a foreign subsidiary in India includes the approval from the Registrar of Companies. The entire procedure can be completed online with submitting certain documents. Following are the steps to set up a foreign subsidiary in India: 

Step 01: Obtain Required Documents: To set up a foreign subsidiary in India, arrange all the documents required in the incorporation procedure including MoA (Memorandum of Association), AoA (Article of Association), DIN & DSC, Address proof, certificate of incorporation of parent company, and many more. 

Step 02: Choose a Name: Select the name of your foreign subsidiary and make sure the name is unique and not similar with existing companies. Check the name availability on the MCA portal once the name is selected.

Step 03: Obtain DIN & DSC: Once the name is reserved with the Ministry of Affairs, obtain the director identification number (DIN) and digital signature certificate (DSC) of the proposed directors.

Step 04: File Incorporation Documents: File incorporation documents such as MoA, AoA, etc on the MCA portal. Along with these documents, incorporation form i.e, SPICe+ Part B Form will be filed. Also pay the prescribed government fee and submit the application. 

Step 05: Issuance of Certificate: Once the file is submitted, the ROC (Registrar of Companies) will verify all the documents and issue a certificate of incorporation upon the successful verification. 

Step 06: Bank Account Opening: After getting the certificate of incorporation, foreign subsidiaries need to open a bank account in their own name. Later, this bank account will be used for all the financial transactions within the business. 

Step 07: Other Compliances: Once the Bank Account is opened, subsidiaries must go with other mandatory or required licenses and registration. These registrations include GST Registration, Employee Provident Fund (EPF) Registration, 

Documents Required to Setup a Foreign Subsidiary in India 

There are multiple documents required for Foreign Subsidiary Registration in India from different sources, including the Indian Director/Shareholder, Parent Company, Indian Registered Office Address, and Authorized Representative. The following is the detailed list of documents prepared for you to minimize your documentation workload: 

Timeline to Setup Foreign Subsidiary in India 

Usually the procedure to set up a foreign subsidiary in India takes around 10-15 working days. Here is the detailed breakdown of time to set up foreign subsidiary in India: 

Note: It is important to note this is the estimated timeline; the incorporation procedure can take more or less time depending on the MCA approval and documents availability. 

Conclusion 

Setting up a foreign subsidiary in India is one of the strategic moves in order to enter a large global market along with long-term growth and stability. While the process of setting up a foreign subsidiary looks simple, it includes multiple regulatory, legal, tax compliances. This complete procedure to set up a foreign subsidiary takes almost two working weeks. To ensure a smooth procedure, proper planning and expert assistance is recommended.