How to Register a Foreign Subsidiary in India?

India has emerged as one of the fastest-growing economies in the world, attracting businesses from across the globe. With a robust consumer base, competitive workforce and pro-investment policies, India offers immense potential for foreign companies to expand operations. One of the most popular ways for global businesses to establish their presence here is by registering a foreign subsidiary company.

If you are planning to set up a foreign subsidiary in India, this guide will walk you through the meaning, eligibility, process, documents required, compliance and benefits in simple terms.

What is a Foreign Subsidiary in India?

A foreign subsidiary is a company incorporated in India where more than 50% of the share capital is held by a foreign parent company (incorporated outside India). The parent company controls the subsidiary either fully (wholly-owned subsidiary with 100% ownership, where sectoral FDI limits allow) or partially (majority shareholding).

The foreign subsidiary is treated as an Indian company under the Companies Act, 2013, but it enjoys the advantages of having global backing and resources from its parent.

Why Set Up a Foreign Subsidiary in India?

1. Access to Indian Market – India offers a vast market with a growing middle class and the increasing purchasing power.
2. Favourable Policies – Liberalized FDI norms in many sectors make it easier and simpler for foreign companies to invest.
3. Operational Control – A subsidiary gives the parent company full control over operations, unlike joint ventures.
4. Tax & Legal Recognition – The subsidiary is a recognized legal entity under Indian law and can avail tax benefits.
5. Talent Pool – India has a large skilled workforce at a comparatively lower cost.
6. Credibility – Indian customers, suppliers and investors prefer dealing with a locally incorporated entity.

Eligibility for Foreign Subsidiary Registration in India

• Foreign Ownership: The foreign parent company must hold at least 50% of the paid-up share capital.
• Minimum Directors: At least 2 directors are required, out of which one must be an Indian resident. Resident Director means a person who has stayed in India for at least 182 days in the previous financial year, as per the Companies Act, 2013.
• Shareholders: Minimum of 2 shareholders (individuals or entities).
• FDI Compliance: The proposed business activity must comply with sectoral Foreign Direct Investment (FDI) limits under the Foreign Exchange Management Act (FEMA).
• Name Approval: The company name must be unique and in line with Ministry of Corporate Affairs (MCA) guidelines.

Step-by-Step Process to Register a Foreign Subsidiary in India

1. Digital Signature Certificate (DSC)

Obtain DSC for all proposed directors to sign incorporation documents digitally.

2. Director Identification Number (DIN)

• Apply for DIN of all directors using SPICe+ (Simplified Proforma for Incorporating Company Electronically) form 

3. Name Reservation

• File the SPICe+ Part A form on the MCA portal to reserve the desired company name.

4. Drafting of Documents

• Prepare the Memorandum of Association (MOA) and Articles of Association (AOA) defining company objectives and governance.
• Draft supporting documents like consent of directors and declaration forms.

5. Filing for Incorporation

• File SPICe + Part B form with MCA.
• Submit details of directors, shareholders, registered office and shareholding pattern.

6. PAN and TAN Application

• Along with incorporation, apply for PAN (Permanent Account Number) and TAN (Tax Deduction Account Number).

7. Opening Bank Account

• Open a current account in the name of the company in an Indian bank to bring in share capital.

8. FDI Reporting

• Report foreign investment through the Single Master Form (SMF) on the FIRMS portal of RBI within 30 days of receiving funds (earlier FIFP system is now integrated).

9. Certificate of Incorporation

• Once it gets approved, MCA issues the Certificate of Incorporation (COI), signifying legal recognition.

Documents Required for Registration

From Foreign Parent Company:

• Certificate of Incorporation of parent company.
• Board resolution authorizing investment in India.
• Memorandum & Articles of Association.
• Address proof of the parent company.

From Directors & Shareholders:

• Passport (mandatory for foreign nationals).
• Identity proof (Aadhaar/Passport/Driving License for Indian directors).
• Residential proof (utility bill, bank statement, not older than 2 months).
• Passport-size photographs.

For Registered Office:

• Rental agreement/ownership proof.
• Utility bill (electricity, water, gas).
• No-Objection Certificate (NOC) from property owner.

Post-Registration Compliances

Once the foreign subsidiary is registered, it must follow ongoing compliance requirements:

1. RBI Filings – File FC-GPR for reporting foreign shareholding.
2. Annual Filings – File Form AOC-4 (financial statements) and Form MGT-7 (annual return) with MCA.
3. Income Tax – File annual income tax return and pay applicable taxes.
4. Statutory Registers – Maintain registers of members, directors and charges.
5. Board Meetings – Hold at least 2 board meetings every year.
6. GST Registration – If turnover crosses the prescribed threshold.
7. MCA compliances – File Form INC 20A (commencement of business) within 180 days from incorporation, Form ADT – 1 within 30 days from appointment of auditor.

Advantages of a Foreign Subsidiary in India

1. Limited Liability – Shareholders’ liability is limited to their shareholding.
2. Global-Local Advantage – Combines international expertise with Indian market presence.
3. Easier Expansion – Indian subsidiaries can easily open branches or liaison offices across the country.
4. 100% Ownership – In sectors under the automatic route, foreign companies can fully own subsidiaries.
5. Operational Flexibility – Independent decision-making authority compared to liaison or branch offices.

Timeline for Registration

• DSC & DIN: 3–5 working days.
• Name Approval: 2–3 working days.
• Incorporation Filing: 7–10 working days.
• PAN, TAN & COI: 3–5 working days.
• Overall Timeline: Around 15–20 working days (subject to document accuracy and government approvals).

Cost of Registering a Foreign Subsidiary in India

The cost of registering a foreign subsidiary in India depends on factors like professional fees, government charges, sectoral approvals and compliance needs. Here’s a breakdown:

1. Government Fees

• Varies based on authorized share capital of the company.

2. Professional Fees

• Chartered Accountants/Company Secretaries/Law Firms charge for end-to-end incorporation, depending on complexity and services included (drafting, filings, RBI compliance).

3. Notarization & Apostille Costs

• Since documents of the parent company and foreign directors must be notarized/apostilled in the home country, the cost may vary. (depending on country rules).

4. Miscellaneous Costs

• Stamp duty for MOA/AOA.
• Office rent/virtual office charges for registered office.
• Bank account opening charges.

Note: The overall cost of registering a foreign subsidiary in India may vary across states, sectors and service providers.

Common Challenges Faced

• Understanding FDI limits in different sectors.
• Delays due to document notarization/apostille from foreign authorities.
• Compliance burden under Indian corporate and tax laws.
• Choosing the right business structure (subsidiary vs branch vs liaison office).

Conclusion

Establishing a foreign subsidiary in India is a strategic way for global businesses to enter one of the most dynamic markets in the world. With a clear process, legal compliance and professional assistance, foreign companies can quickly set up operations, tap into opportunities and scale their business in India. If you need professional help, do contact to Remind Legal experts to setup Foreign Subsidiary in India.