Subsidiary of Foreign Company Registration in India
With India's growing economy, business-friendly policies, and large consumer market, many foreign companies are eyeing expansion opportunities in India. One of the most preferred modes for a foreign company to establish its presence in India is by setting up a Wholly Owned Subsidiary (WOS) or a Joint Venture (JV). Establishing a subsidiary company in India is the most preferred route for foreign entities to set up their business presence. It provides a separate legal identity, limited liability, and operational flexibility while ensuring complete control through the parent company
What is a Subsidiary of a Foreign Company?
A subsidiary company is a company that is wholly or partially owned and controlled by another company, called the holding company or parent company. In India, a foreign company can establish a Wholly Owned Subsidiary (WOS) or a Joint Venture (JV) with Indian stakeholders.
- Wholly Owned Subsidiary (WOS): 100% shareholding by the foreign parent company.
- Joint Venture (JV): Partial shareholding with Indian partners.
In other words, A subsidiary of a foreign company is a corporate entity incorporated in India where either:
- The foreign parent company holds more than 50% shareholding, or
- The foreign company has complete ownership (100%) in the Indian subsidiary
The Indian subsidiary is considered a separate legal entity under Indian law, even if fully owned by the foreign parent.
Types of Subsidiaries in India
Foreign companies can set up subsidiaries in two forms:
Wholly Owned Subsidiary (WOS)
- 100% shareholding is held by the foreign company.
- Operates as a separate legal entity under the Companies Act, 2013.
- Can be Private Limited or Public Limited.
Joint Venture (JV)
- Shares ownership with an Indian partner.
- Typically formed for strategic partnerships, leveraging local market knowledge.
Key Features of Indian Subsidiary
| Feature | Details |
|---|---|
| Legal Status | Separate Legal Entity |
| Ownership | 100% (WOS) or shared with Indian Partner (JV) |
| Compliance | Governed under Companies Act, FEMA, RBI regulations |
| Taxation | Subject to Indian tax laws |
| Funding | FDI permitted under automatic or approval route |
Why to Register a Subsidiary in India?
Access to Indian Market
A subsidiary company gives foreign businesses legal access to India’s vast and diverse market, making local operations, hiring, and expansion easier.
Limited Liability Protection
The liabilities of the subsidiary are limited to its assets, protecting the parent company's global assets from local risks.
Separate Legal Entity
The subsidiary is treated as a distinct legal entity, allowing independent contracts, ownership, and tax filings.
Ease of Compliance
Compared to liaison or branch offices, subsidiaries offer more operational freedom with limited RBI restrictions.
100% Foreign Direct Investment (FDI) Allowed
Under automatic route in many sectors, 100% FDI is allowed, making subsidiary formation smooth without prior government approval.
Taxation Advantages
Corporate tax benefits, deductions under startup schemes, and DTAA benefits (Double Tax Avoidance Agreement) can be availed.
FDI Regulations for Subsidiary Registration
Foreign Direct Investment (FDI) in India is regulated by:
- Foreign Exchange Management Act (FEMA)
- Reserve Bank of India (RBI) Guidelines
Automatic Route
- No prior government approval needed.
- Sectors: Manufacturing, IT Services, E-commerce, etc.
Government Approval Route
- Approval required before investment.
- Sectors: Défense, Telecom, Media, etc.
Step-by-Step Process for Subsidiary Company Registration in India
Here’s a detailed guide on the Section 8 Company registration process step by step:
Obtain Digital Signature Certificate (DSC)
- Required for directors to sign e-forms.
- Issued by certifying authorities in India.
Name Reservation
- Apply via Spice+ Part A facility on MCA portal.
- Name must include “Private Limited” or “Limited”.
Drafting of Incorporation Documents
- Memorandum of Association (MOA)
- Articles of Association (AOA)
- Declaration and consent by directors
Filing Incorporation Forms (SPICe+Part B)
- SPICe Part B is a comprehensive form for incorporation.
- Includes PAN, TAN, GST, ESIC, EPF registration.
Issue of Certificate of Incorporation
- Issued by Registrar of Companies (ROC).
- Contains CIN (Corporate Identity Number).
Post Incorporation Compliances
- Open Bank Account
- Allotment of Shares and Issue of Share Certificates
- FDI Reporting to RBI (via FIRMS portal)
- GST Registration (if applicable)
Documents Required for Subsidiary Company Registration
From Foreign Company/Parent Company:
Certificate of Incorporation (duly apostilled/notarized)
Board resolution for subsidiary incorporation
KYC of authorized representative
From Proposed Directors:
Passport copy (notarized & apostilled)
Address proof (utility bill/bank statement)
Photograph
DIN and DSC
Registered Office Documents:
Rent agreement/ownership proof
NOC from property owner
Utility bill (not older than 2 months)
Post Incorporation RBI Compliance
Filing FC-GPR for share allotment within 30 days of allotment.
Reporting through FIRMS Portal of RBI.
Annual return on foreign liabilities and assets (FLA).
Regulatory Framework Governing Foreign Subsidiaries in India
Companies Act, 2013
Foreign Exchange Management Act (FEMA), 1999
Income Tax Act, 1961
Reserve Bank of India (RBI) Notifications
FDI Policy by DPIIT
Key Benefits of Registering a Subsidiary of a Foreign Company in India
Separate Legal Identity & Limited Liability
- The Indian subsidiary is recognized as an separate legal entity distinct from its parent company.
- This shields the parent company from liabilities, debts, and obligations of the subsidiary in India.
- Even in case of financial losses or legal disputes, the parent company's liability is limited to the amount invested.
Full Ownership and Control (in Wholly Owned Subsidiary)
- A wholly owned subsidiary allows the foreign parent to hold 100% ownership, ensuring complete control over business decisions, operations, policies, and financial strategies.
- This helps maintain the integrity of the brand’s global standards without local partner interference.
Access to the Expansive Indian Market
- India is one of the fastest-growing economies with a population of over 1.4 billion, offering immense potential for goods and services.
- A subsidiary enables direct access to local customers, markets, and industries.
- It also provides easier participation in tenders, government contracts, and corporate partnerships within India.
Simplified Repatriation of Profits & Dividends
- Indian regulations allow subsidiaries to repatriate dividends, profits, royalties, and fees for technical services to their foreign parent company.
- This ensures a steady return on investment for the foreign investors, subject to tax and RBI compliance.
Eligibility for Government Incentives
- Subsidiaries may qualify for various government schemes like:
- Production Linked Incentive (PLI) schemes for manufacturers.
- Startup India initiatives if criteria are met.
- Export incentives under SEZ or Export Promotion Zones.
- State governments also offer incentives on employment, infrastructure, and capital investment.
Facilitates Local Hiring and Talent Acquisition
- A registered Indian subsidiary can legally employ local talent.
- This helps in understanding market dynamics, customer preferences, and building a strong operational team.
- Subsidiaries also enjoy the ease of acquiring work visas for foreign nationals for on-ground operations.
Ease of Raising Capital in India
- An Indian subsidiary can raise funds through:
- Equity shares
- Debentures
- Bank loans
- Venture capital & private equity investors
- It can also leverage government-backed funding schemes like MUDRA loans, SIDBI funding, or Startup India Seed Fund.
Local Credibility and Brand Recognition
- An incorporated company under Indian laws earns better trust from customers, suppliers, banks, and regulatory authorities.
- Being registered enhances brand perception and competitive advantage in the local market.
- Helps in opening bank accounts, signing contracts, and participating in government tenders.
Compliance with Local Laws Ensures Business Stability
- Operating as a registered entity ensures adherence to Indian corporate, tax, labour, and environmental laws.
- This minimizes legal risks, penalties, and operational disruptions.
- It also builds a reputation of credibility and ethical compliance.
How We Help in Subsidiary Registration Services?
We offer complete handholding for:
DSC & DIN procurement
Company name approval
Drafting incorporation documents
MCA filings
RBI FDI compliance
Post incorporation legal advisory
Annual compliance management
FAQs on Foreign Subsidiary Registration in India
What is a Subsidiary of a Foreign Company in India?
A subsidiary of a foreign company is a company incorporated under Indian laws where the foreign parent company holds more than 50% of the shareholding. It is considered a separate legal entity in India.
Can a foreign company own 100% shares in an Indian subsidiary?
Yes. In sectors where 100% Foreign Direct Investment (FDI) is allowed under the automatic route, a foreign company can own 100% shares in its Indian subsidiary.
What is the difference between a Wholly Owned Subsidiary and a Joint Venture?
- Wholly Owned Subsidiary (WOS): 100% shareholding by the foreign company.
- Joint Venture (JV): The foreign company shares ownership with Indian partners.
What is the minimum capital requirement for an Indian subsidiary?
There is no minimum capital requirement. A subsidiary can be incorporated with even ₹1 as the authorized share capital.
How many directors are required to register a subsidiary in India?
At least two directors are required, with one being an Indian resident (who has stayed in India for at least 182 days in the previous financial year).
Do directors need to be physically present in India for incorporation?
No. The incorporation process is online. However, one director must be an Indian resident as per law.
What documents are required from foreign directors and shareholders?
- Notarized/apostilled passport copy
- Address proof (utility bill/bank statement)
- Photographs
- KYC documents of the parent company
How long does it take to register a foreign subsidiary in India?
On average, it takes 7-10 working days, depending on documentation and regulatory approvals.
Is it mandatory to open a bank account in India for the subsidiary?
Yes. The company must open a bank account in its name for business transactions and receiving FDI.
What is FC-GPR, and why is it required?
FC-GPR (Foreign Currency-Gross Provisional Return) is an RBI filing required when the Indian subsidiary issues shares to a foreign investor. It must be filed within 30 days of share allotment.
What is the FLA Return?
The Foreign Liabilities and Assets (FLA) Return is an annual return filed with RBI disclosing foreign investment details. It is mandatory even if there are no changes in shareholding.
Can the subsidiary remit profits back to the foreign parent?
Yes, subject to applicable taxes and RBI regulations, the Indian subsidiary can remit dividends and profits to its foreign parent company.
Is GST registration mandatory for a foreign subsidiary?
GST registration is required if the subsidiary crosses the prescribed turnover limit or engages in interstate supply of goods/services.
What sectors are restricted or require approval for foreign investment?
FDI in sectors like defense, telecom, print media, and multi-brand retail require government approval before investment.
Can the foreign company appoint its representatives as directors in the subsidiary?
Yes. Foreign nationals can be appointed as directors, provided at least one Indian resident director is also appointed.
Does the subsidiary need a local office in India?
Yes. A registered office address in India is mandatory for incorporation and compliance purposes.
What are the annual compliance requirements for an Indian subsidiary?
- Filing of Annual Financial Statements with ROC (AOC-4)
- Filing of Annual Return (MGT-7)
- Income Tax Return
- FDI & RBI reporting
- Statutory audits and GST/TDS returns (if applicable)
What happens if the subsidiary fails to comply with RBI/ROC regulations?
Non-compliance can attract penalties, legal actions, and disqualification of directors. It may also impact future business operations and credibility.
Can the Indian subsidiary be closed or liquidated if needed?
Yes. The subsidiary can be closed through voluntary winding up, strike-off, or liquidation as per the Companies Act, subject to settlement of dues and compliance with RBI regulations.