Indian Subsidiary Company Registration

Overview of Indian Subsidiary Company Registration

A subsidiary company refers to a business entity that is under the control of another company, known as the Parent Company or Holding Company. The Holding Company possesses a majority of the shares in the subsidiary, granting it significant control as the principal shareholder. This arrangement results in the Holding Company having a vested interest in the subsidiary. If the Holding Company owns 100% of the share capital of a particular company, it is termed a wholly-owned subsidiary.

The formation of a subsidiary company can occur through establishment or acquisition, and there is no specific minimum capital requirement for the registration process. However, in the context of Indian Subsidiary company registration, a minimum of two directors is necessary, with one of them being a resident of India. Additionally, the registration process mandates a minimum of two shareholders for Indian Subsidiary Company Registration.

Regulation Relating Indian Subsidiary Company Registration

As per the Companies Act 2013, Section 2 (87), the term “subsidiary company” or “subsidiary” pertains to any company (referred to as the holding company) in which the holding company either:

(i) Exercises control over the composition of the Board of Directors; or (ii) possesses or controls more than fifty per cent of the total share capital, either individually or along with one or more of its subsidiary companies.

It is important to note that certain classes of holding companies, as prescribed, cannot have layers of subsidiaries beyond the prescribed limit.

Explanation: For the purpose of this clause:

(a) If the control over a company, as mentioned in sub-clause (i) or sub-clause (ii), is executed through another subsidiary company of the holding company, the company shall still be recognized as a subsidiary of the holding company.

(b) When a company has the authority to appoint or remove all or a majority of the directors of another company, the composition of that company’s Board of Directors shall be considered under the control of the former.

(c) The definition of “company” encompasses anybody corporate.

(d) In the context of a holding company, the term “layer” pertains to its subsidiary or subsidiaries.

The above definition encompasses the following types of holdings:

• Company A owns a majority of the share capital in Company B.
• Company A has the authority to appoint or remove most of the directors in Company B.
• Company A holds more than 50% of the share capital in Company B, and Company B, in turn, holds more than 50% of the share capital in Company C. Consequently, Company A is the holding company for both Companies B and C.
• Company X has the privilege to modify the directorship structure of Company Y, and Company Y has similar rights in Company Z. In this situation, Company X acts as the parent company for both Companies Y and Z.

Eligibility of Indian Subsidiary Company Registration

The eligibility of Indian Subsidiary Company Registration is as follows:

• For a firm to be classified as a subsidiary, it must be under the control of another entity, owning at least 50% of the firm’s equity. If the ownership falls below this threshold, the firm is considered an associate or affiliate company.
• A subsidiary can be described as an autonomous company, wherein another firm, known as the parent company or holding company, possesses over 50% ownership.
• Subsidiaries operate as separate and distinct legal entities, distinct from their parent companies.
• Companies opt to acquire or establish subsidiaries to benefit from specific synergies or assets, to gain tax advantages, and to mitigate losses.
• There is no requirement for shareholder approval when transforming a company into a subsidiary or when selling a subsidiary.
• A subsidiary’s financials are consolidated and reported on the parent company’s financial statements.

Benefits of Indian Subsidiary Company Registration

The advantages of registering an Indian Subsidiary Company are as follows:

1. Foreign Direct Investment (FDI) Inflow: Indian government permits 100% FDI without prior approval in rapidly growing industries. However, Partnership firms, LLPs, or Proprietorships may require government approval for FDI.
2. Limited Liability Protection: Directors and members of the company have limited liability, restricted to the company’s shares. This shields them from personal liability in case of financial losses or distress faced by the company.
3. Perpetual Succession: The company enjoys perpetual succession, unaffected by changes in members, directors, or other events like insolvency, transfers, or deaths. The company’s existence remains intact.
4. Expansion Opportunities: As an Indian Subsidiary Company, it receives the same benefits as a Private Limited Company. This facilitates business growth and expansion by raising capital from financial institutions, venture capitalists, and investors.
5. Borrowing Capacity: A wholly-owned subsidiary in India can borrow funds from financial institutions in the form of loans.
6. Legal Entity Status: The Indian subsidiary company holds legal personhood, enabling it to initiate legal actions or be subject to legal proceedings.
7. Property Acquisition in India: A foreign subsidiary company in India operates independently and has the authority to acquire properties in the country.

Types of Indian Subsidiary Company Registration

Different types of subsidiaries exist based on their ownership structure, below mentioned are the Types of Indian Subsidiary Company Registration:

1. Wholly Owned Subsidiaries: A wholly-owned subsidiary is fully owned (100 per cent) by its parent company, which established it. The parent company exercises complete control over the subsidiary, including all board seats and voting rights.
2. Partly Owned Subsidiaries: A partly owned subsidiary is not entirely controlled by its parent company. Typically, the parent company owns one to 49 per cent of the subsidiary’s stock, but it holds the controlling votes in significant decisions.
3. Joint Venture Subsidiaries: A joint venture subsidiary is formed when two companies collaborate, with each owning an equal (50 percent) share of the subsidiary’s stock. Both parent companies appoint only half of the board members and possess one vote each in major decisions.

Requirement of Indian Subsidiary Company Registration

To establish a Subsidiary company in India, certain requirements must be met:

1. Directorship and Residency: A minimum of two directors is mandatory for the formation of an Indian Subsidiary Company, and at least one of them must be a resident of India.
2. Shareholders: The Company must have a minimum of two shareholders to be eligible for Indian Subsidiary Company registration.
3. Equity Share Capital: At least 50% of the equity share capital should be owned by the parent company.
4. Director Identification Number (DIN): All Directors involved in the company need to have a valid Director Identification Number.

Documents Required Indian Subsidiary Company Registration

Below mentioned is a list of the required documents for filing the application, which are the same as those needed for the company’s incorporation:

Company Related:

• MOA and AOA
• Proof of Address for the registered place of Business (e.g., rent agreement for rented property or copy of ownership documents for owned property)
• Copy of Utility Bills
• Copy of resolution (by the promoter company)
• Capital Layout of the company
• Copy of the certificate of incorporation for foreign corporation

Directors and Shareholders Related:

• Director Identification Number (DIN) and Digital Signature Certificate (DSC)
• Proof of identity of Directors and Shareholders
• Address (Directors and Shareholders)
• Photographs of Directors and Shareholders
• Information on the first directors’ interests in other entities
• Declaration by Directors and Shareholders

Process of the Registration

Indian Subsidiary Company Registration Procedure: To streamline the registration process, the Ministry of Corporate Affairs (MCA) has introduced the SPICe+ form, comprising two parts: Part A (Name Reservation process) and Part B (includes all incorporation application).

PART A: Name Reservation Process Once the Name reservation process is completed; it includes all the necessary incorporation application details, which are as follows:

1. Capital: No minimum capital requirement is imposed.
2. Directors: A minimum of two directors is essential for forming a Subsidiary company, with one director being a resident of India.
3. Shareholders: A minimum of two shareholders is mandatory for the formation of an Indian Subsidiary Company.
4. Equity Shares: The parent company must own at least 50% of the equity share capital.
5. DIN: Director Identification Number (DIN) is necessary for all Directors.

Below are the steps for incorporating a Subsidiary Company through the SPICe+ form:

1. SPICe+ Login: Access the MCA portal and log in to begin the process.
2. SPICe+ Part A: Fill in the proposed name of the Subsidiary company, along with class, type, sub-category, and category details. An auto-check function verifies the name availability against any discrepancies in the naming rules. Once Part-A is completed, choose to submit for Name Reservation, Proceed for Incorporation, or Cancel as needed.
3. SPICe+ Part B: Upon opting to proceed with incorporation, Part-B of the web form will be enabled, presenting various sections for completion.

During the SPICe+ Part B stage of the Indian Subsidiary Company Registration Procedure, the following steps and information are required:

• • Save & Continue: Each section of Part B includes a ‘Save & continue’ button. Form validations will occur for each segment of the section.
  • Basic Details: Enter the essential details related to the Subsidiary company to be incorporated, including registered or correspondence address, subscriber and director information, and capital details, among others.
  • PAN and TAN Issuance: Provide the necessary basic details for the issuance of PAN (Permanent Account Number) and TAN (Tax Deduction Account).
  • Mandatory Attachments: Upload all the mandatory attachments in the web form and confirm the important declarations. Click on the pre-scrutiny and then submit the form once the pre-scrutiny is successful.
  • Confirmation Message: Upon successful submission of the web form, the user will receive a confirmation message.
  • Download Spice+ Part-B PDF: Users have the option to download the Spice+ Part-B PDF from the dashboard for affixing DSCs (Digital Signature Certificates).
  • Enabled Linked Forms: All the important linked forms will be enabled and available for the user to fill and submit, based on the fields/parameters set by the user in Part-B form.

AGILE –PRO

The AGILE-PRO web form has replaced the old AGILE form (INC-35),
with AGILE representing “Application for Goods and Services identification
numbers, Employees’ State Insurance Corporation (ESIC) registration, and
Employees’ Provident Fund Organization (EPFO) registration.” It must be
filed to fulfill the following requirements:

• Registration with ESIC.
• Registration with GSTIN (Goods and
  Services Tax Identification Number).
• Bank account number.
• Registration with EPFO.
• Professional Tax Registration.

1. eMoA and eAoA Form

• The Electronic Memorandum of
  Association (eMoA) serves as the charter of the company and can be filed
  as a linked form to SPICe+ to facilitate the incorporation process.
• The Electronic Articles of
  Association (eAoA) delineates all the internal regulations and rules
  governing the Subsidiary company. It is submitted as an associated form to
  SPICe+ during the incorporation process for seamless integration.

2. URC-1 and INC-9 PDF
Generations:

• For Part-I companies with an
  existing entity, it is mandatory to file the “URC-1 form,” which
  holds all the necessary details.
• The INC-9 declaration form is
  auto-populated with details of subscribers and directors entered in Part
  B. It is available in the dashboard for download, and after affixing DSCs
  (Digital Signature Certificates), it can be submitted.

3. Spice+ Upload:

• After affixing all other linked
  forms and DSCs in the Spice+ Part B PDF, the user must click on the
  “upload forms” option.
• On successful upload of forms, a
  unique Service Request Number (SRN) is generated and displayed to the
  applicant.
• If any forms require resubmission
  due to processing errors, the SPICe+ form must be resubmitted in a similar
  manner.

Attachments

The following are the detailed attachments required for the SPICe+ form to successfully register an Indian Subsidiary Company:

1. 1. Memorandum of Association (MOA): The MOA, defining the company’s objectives and scope of activities, must be attached.
   2. Articles of Association (AOA): The AOA, outlining the rules and regulations governing the company’s internal affairs, should be included.
   3. Declaration by First Subscribers and Directors: An affidavit is not required, but a declaration by the first subscribers and directors is necessary.
   4. Proof of Office Address: Documents providing proof of the office address of the company need to be submitted.
   5. Copy of Utility Bills: Copies of utility bills (may vary depending on the circumstances) are to be attached as proof of the company’s registered office address.
   6. Copy of COI (Certificate of Incorporation) of Foreign Body Corporate (if applicable): If the subsidiary company is a foreign body corporate, a copy of its Certificate of Incorporation is required.
   7. Passed Resolution by Promoter Company: The promoter company must provide a passed resolution supporting the incorporation of the subsidiary company.
   8. Consent of 1st Directors in Other Entities: The consent of the first directors regarding their involvement in other entities must be obtained.
   9. Consent of Nominee in Form INC-3: If a nominee is appointed, their consent in Form INC-3 should be provided.
   10. Residential Address & Proof of Identity of Subscribers: Documents verifying the residential address and identity of subscribers must be included.
   11. Residential Address & Proof of Identity of the Nominee: Similarly, documents confirming the residential address and identity of the nominee are required.
   12. Residential Address & Proof of Identity of Applicant I, II, III: For the applicants (I, II, III), proof of identity and residential address documents must be provided.
   13. Resolution of Unregistered Companies (For Chapter XXI Part 1 Companies): In the case of Chapter XXI Part 1 Companies, a resolution of unregistered companies needs to be submitted.
   14. Declaration in Form INC-14: Form INC-14 containing the statement for application for the conversion of a public company into a private company, or vice versa, must be included. Declaration in Form INC-15:
   15. Form INC-15 with respect to the declaration for the commencement of business is also required.
   16. Optional Attachments (if required): Additional attachments may be necessary depending on specific requirements or circumstances.
   17. By providing all these necessary attachments, the SPICe+ form can be successfully processed for the registration of an Indian Subsidiary Company.

The following are the detailed attachments required for AGILE-PRO in the Indian Subsidiary Company Registration Procedure:

• Documents Related to the Principal Place of Business: Documents verifying the principal place of business for the Subsidiary company must be provided.
• Documents Related to Appointment of Authorized Signatory for GSTIN: The following documents are required for the appointment of an Authorized Signatory for GSTIN:
  • Letter of Authorization or Managing Committee and Acceptance Letter.
  • A copy of the Resolution approved by the Board of Directors.
• Documents Related to Identity of Authorized Signatory for Bank Account Opening: Documents verifying the identity of the Authorized Signatory for the opening of a bank account need to be submitted.
• Documents Related to Address of Authorized Signatory for Bank Account Opening: Proof of address for the Authorized Signatory for the opening of a bank account must be provided.
• Documents Related to Specimen Signature of Authorized Signatory for EPFO: Documents containing the specimen signature of the Authorized Signatory for EPFO are required.

It’s important to note that Indian Subsidiary Company Registration follows the same norms and regulations as any other Indian company. By diligently following the above-mentioned procedure and submitting the required documents, the applicant company can expect to receive the Certificate of Incorporation on time.

Validity of Indian Subsidiary Company Registration

The registration certificate issued by the registration center of the organization remains valid for the entire duration of the company’s existence. This means that once the company is registered and the certificate is issued, it will remain legally effective and valid as long as the company continues to operate. There is no need to renew or reapply for the registration certificate during the company’s lifespan. It serves as a permanent proof of the company’s legal existence and registration status with the relevant authorities. However, it is essential to ensure that the company complies with all the regulatory requirements and obligations to maintain its active status and enjoy the benefits of the registration certificate throughout its life.

Renewal of Indian Subsidiary Company Registration

The registration of a company remains valid for its entire lifespan, and as a result, there is no need for any renewal. Once the company is officially registered with the relevant authorities and the necessary documentation is completed, the registration status remains in effect for as long as the company continues to exist and operate. Unlike certain permits or licenses that need periodic renewal, the company registration certificate does not have an expiration date or require any renewal process.

This continuous validity of the company registration provides assurance to the company and its stakeholders that the legal existence and recognition by the authorities will persist without the need for any additional administrative steps. However, it is essential for the company to comply with all the applicable laws, regulations, and filing requirements to maintain its active status and uphold the legality of its operations.

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