Incorporation of a Foreign Subsidiary in India: A subsidiary a company usually controlled by a parent company that has a voting stock of usually more than 50% in its subsidiary or the holding company. In a case where a parent company owns a foreign subsidiary, the subsidiary must follow the laws of the country where it is incorporated and operates. Therefore if incorporation of a foreign subsidiary in India, then it has to follow the laws applicable as per Indian policies.
India is one of the fastest growing economies globally with abundant business opportunities that make the country a major attraction for foreign investors. There are many ways by which foreign investment can be done in India, one majorly being by registration of a foreign company in India. As India is considered as a lucrative market for doing business, many foreign companies prefer establishing their businesses in India due to the favorable business environment.
Section 7 of Companies Act, 2013 and Companies (Incorporation) Rules, 2014 provides for the guidelines which have to be followed for the incorporation of a company. Rule 38 of Companies (Incorporation) Rules, 2014 mentions SPICe+ form and the procedure to be followed for the incorporation of a company. Since ease of doing business and related regulatory frameworks has significantly eased the process of incorporation of a foreign subsidiary in India. A foreign company can set up its subsidiary in India by following the below mentioned procedure.
Proof of Identity– PAN Card/ Passport/ Driving license or any other Government ID bearing the signature if the applicant is an Indian national. Attested copy of the Passport/VISA/ Resident Permit for foreign nationals.
Address Proof– Copy of Aadhar Card/Voter ID Card/Driving license or any other utility bill which is not older than 3 months if the applicant is an Indian national. Attested copy of the Passport/VISA/ Resident Permit for foreign nationals.
Attested Copy– Self Attested copy of the ID Card is sufficient if the applicant is an Indian national. If it is a foreign national then it should be attested by the embassy of the foreign or it should be apostatized by Native Country.
Passport Size photograph
Step 1: Obtaining Digital Signature Certificate (DSC)
Digital Signature Certificate is necessary for the person to be the Director of a company. DSC is a digital key which is issued by the Certifying Authority. The Ministry of corporate affairs has made it compulsory for filing of reports, applications using DSC only. DSC is obtained in two ways either through the traditional method or the biometric method. In the traditional method, the applicant has to courier all the relevant documents duly notarized along with the prescribed fee to the Certifying Authority. The certifying authority will provide DSC to the proposed applicant upon satisfaction of the provided documents. In the case of the Biometric method, the proposed application will personally reach the office of the Certifying Authority with all the relevant documents duly notarized along with organization form and shall submit the same to the company along with the prescribed fee.
Step 2: Approval of name
Next step in the incorporation of a company is the approval of the name by the Ministry of Corporate Affairs. Earlier approval of names was being filed on the R.U.N (Reserve Unique Name) form in the MCA website. Now the RUN form is used to change the name of an existing company only. Part A of the SPICe+ form can be applied for Reservation of name for a new company separately and it can be applied simultaneously also. The applicant who desires to incorporate a foreign firm is required to mention the following information in the SPICe+ form-
Type of company
Class of company
Category of company
Industrial activity of the Company
Description of Industrial activity
Pursuant 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. The applicant has to make sure that there is no trademark violation. The applicant has two options either to submit a name application and make a payment of INR 1000/- or can proceed with the incorporation of the company incorporation of Foreign Subsidiary. Part B of the SPICe+ form mentions incorporation of the company. On choosing to proceed after completion of Part A then only incorporation proceedings will start. SPICe+ form contains various columns that are necessary to be filled properly for the incorporation of the company.
Step 3: Registration of Company
The applicant has to fill necessary details and attach relevant documents of the company in an e-form and apply it through SPICE+ forms only. It includes various details such as the address of the registered office, the capital structure of the company.
Step 4: Allotment of Director Identification Number (DIN)
DIN is a unique 8 digit identification number allotted to an individual who desires to become a director of a company. The concerned person who intends to become the Director of a new company is required to apply and fill SPICe+ form. Only the person who has DIN can act as a director of the company.
Step 5: Issuing of PAN Card
Permanent Account Number (PAN) is a unique ten-digit number which is issued by the Department of Income Tax. It is mandatory to apply for a PAN Card at the time of incorporation of the Company.
Step 6: Issuance of TAN
Tax Deduction and Collection Account Number (TAN) is a unique ten-digit number which is issued by the Department of Income Tax.
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.
Section 38A of Companies (Incorporation) Rules, AGILE-PRO is mandatory to be filed for application of registration of Goods and Services (GSTIN), Employee State Insurance Corporation (ESIC) registration, Employees Provident Fund Organization (EPFO), Profession Tax Registration and Opening of Bank Account. It is mandatory to fill the AGILE-Pro form along with SPICe+ Form for the incorporation of a new company.
l Documents required for Agile-Pro
Proof of principal place of business.
Proof of appointment of authorized signatory for GSTIN.
Proof of identity of authorized signatory for opening a bank account.
Proof of address of authorized signatory for opening a bank account.
Specimen signature of authorized signatory of EPFO.
Issuing EPFO registration
Employees Provident Fund Registration (EPFO) is mandatory for each organization that has more than 20 employees. EPF is a benefit which is provided to the employee by the organization at the time of retirement. EPF is governed by the Employees Provident Funds & Miscellaneous Provisions Act, 1952. SPICe+ form has made it mandatory for EPFO registration along with the incorporation of the company.
Issuing ESIC registration
Employee State Insurance Corporation (ESIC) is an autonomous body under the Ministry of Labour and Employment. This scheme provides medical and monetary benefit to employees by the employer. ESI is governed by the Employees’ State Insurance Act,1948. SPICe+ form has made it mandatory for the applicant to register at ESIC at the time of incorporation itself.
Creating a Bank account for the Company
Companies are required to open bank account at the time of incorporation itself. Only ICICI and Punjab National Bank have been integrated with AGILE-Pro.
Fill Details in INC-9
It is a declaration given by the director. It is filed along with SPICe+ Form at the time of incorporation. An affidavit of the director is also filed along with INC-9.
Uploading Forms and Certificate of Incorporation
Every form is to be downloaded in PDF Format and DSC should be affixed. Once DSC is affixed then all the forms should be uploaded on the MCA website. Once the forms are uploaded it will be examined by MCA. After the necessary scrutiny, certificate of incorporation of a foreign subsidiary will be given. The certificate of Incorporation shall be issued by the Registrar in Form INC 11.