If foreign company wants to expand its business then start it with incorporating a subsidiary in India.

Although foreign owned subsidiary has to follow more rules and regulations (applicable laws in India) as compared to Indian owned companies. Before proceeding further get a look into the basic terminology as per Indian Law.

1) FOREIGN COMPANY MEANING

Section 2(42) of the Companies Act, 2013 defines a foreign company

“Foreign company” means any company or body corporate incorporated outside India which has a place of business in India whether by itself or through an agent, physically or through electronic mode; and conducts any business activity in India in any other manner.

2) SUBSIDIARY COMPANY MEANING

 Section 2(87) of the Companies Act, 2013 defines a subsidiary company

“Subsidiary company” means a company in which the holding company controls the composition of the Board of directors or controls more than one-half of the share capital either at its own or together with one or more subsidiaries.

PROCESS FOR INCORPORATING A SUBSIDIARY OF A FOREIGN COMPANY

The Ministry of Corporate Affairs (MCA) introduced SPICe+ FORM (Simplified Performa for Incorporating Company electronically plus) and notified the same on 18th February 2020

The SPICe+ form consists of:-

♦ Part A- Reservation of name for new companies.

♦ Part B- All the other services which are required for incorporation of the company.

Process:-

1) Obtain Digital Signature Certificate (DSC)

For obtaining DSC we required:

  • Identity proof

For Indian National

PAN Card/ Passport/ Driving license (Self attested)

For Foreign Nationals

Attested copy of the Passport/VISA / Resident Permit

  • Address Proof

For Indian National

Copy of Aadhar Card/Voter ID Card/Driving license or any other utility bill which is not older than 3 months

For Foreign Nationals

Attested copy of the Passport/VISA/ Resident Permit

  • Passport Size photograph
  • For Indian National, self-attested is sufficient but for foreign national it should be attested by the embassy of the foreign or it should be apostatized by Native Country

2) Obtain Director Identification Number – We can take it in the form also

3) Name Availability

According to Section 4(2) and (3) of the Companies Act, 2013 and read with rule 8 of the Companies Incorporation Rules, the original name of the holding company may be used with the addition of word India or name of any Indian state or city.

If the proposed name includes the name of a foreign country then the same shall be allowed after the proof of business relations such as Memorandum of Understanding. If the foreign company has a trademark for the same then it can use the Trademark for the same.

4) E-filing for incorporation of a Company

Once the name is approved, an online application is required to be filed through SPICE+ PART B along with the requisite documents as under:

    • Memorandum of Association which is duly apostilled or notarized in a foreign nation;
    • Articles of Association which is duly apostilled or notarized in a foreign nation;
    • Declaration by the first Director(s) and Subscriber(s) which duly apostilled or notarized in a foreign nation;
    • Digital Signature with only one subscriber;
    • NOC from the owner of the company;
    • DIR-2 declaration from directors along with proof of Identity;
    • Proof of office address;
    • Copy of utility bills which should not be older than two months;
    • A resolution passed by the promoter company;
    • Copy of body resolution of incorporation of foreign body and resolution of passed by the foreign company;
    • Proof of identity and residential address of subscribers;
    • Proof of identity and residential address of nominees

In Part B of the spice form we can apply for the following:

    • Incorporation
    • DIN(Director’s Identification Number) allotment
    • Mandatory issue of PAN
    • Mandatory issue of TAN
    • Mandatory issue of EPFO registration
    • Mandatory issue of ESIC registration
    • Mandatory Opening of Bank Account for the Company and
    • Allotment of GSTIN (if so applied for)

5) CERTIFICATE OF INCORPORATION

Once the company incorporated we will get the certificate of incorporation  which contains the Name, CIN, PAN, TAN No. and date of incorporation of the company.

POST INCORPORATION COMPLIANCE WITH THE RBI:

1) The company must report details of the FDI inflow to the Foreign Exchange Department, Reserve Bank of India in Form FCGPR which is to be filed with RBI within 30 days of allotment. FIRC and KYC are to be attached with the FCGPR

2) Annual return on Foreign Liabilities and Assets is required to be submitted reporting all the investments received during the year.

The due date of filing this form is 15th July and in case the company does not have their accounts audited before 15 July, the company is to file the FLA return according to the unaudited accounts and have their accounts audited thereafter.

After the audit, if there are any changes regarding the details filed, the company has to file another form with the updated details before the last day of September of the same year.

COMPLIANCE AS PER SECTION 380 AND 381 OF THE COMPANIES ACT, 2013

S.NO FORMS REMARKS
1 FORM FC-1 The form FC-1 has to be filed within thirty days of the incorporation of the subsidiary company in India.

The form must be accompanied by the required files, certifications etc. from other regulatory bodies in India such as the RBI.

2 Form FC-3 The form must contain the details of the areas where the business is going to conduct operations as well as the financial records of the company.
3. FORM FC-4 Foreign company must prepare and file the annual return of the company in Form FC-4 within a period of sixty days from the final day of its financial year.
4. Financial Statements All foreign companies registered in India are required to organize financial statement of its Indian business operations in agreement with Schedule III of the Companies Act, 2013. The financials shall consists of

  • Statement of related party transaction
  • Statement of repatriation of profits
  • Statement of transfer of funds (including dividends if any)

The documents shall be delivered to the Registrar within a period of six months of the close of the financial year of the foreign company to which the documents relate

5. Audit of accounts All accounts of the foreign subsidiary company must be audited by a Practicing Chartered Accountant
6. Authentication and translation of documents All the documents that are submitted by the company to the ROC must be validated by a practicing lawyer in India.

These documents also need to be translated into English before its validation and submission.

This is all about how to incorporate a subsidiary of the foreign company in India and the compliance they have to do.

Author Bio

Qualification: CS
Company: N/A
Location: New Delhi, Delhi, India
Member Since: 07 Sep 2022 | Total Posts: 1

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