Indian Subsidiary Registration

Companies adopt various means to ramp up their operations. Two of the sure-shot ways to expand the existing operations for a company are through the opening of branch offices or incorporating/acquiring subsidiary companies. The later one is preferable, especially when a company desires to create an independent brand or enter a new market segment. However, there are many procedural and compliance aspects involved in the case of Indian subsidiary registration that needs to be taken care of. In this guide, we will obtain a complete understanding of all the aspects relating to Indian subsidiary incorporation and registration.  

What is Indian subsidiary registration? 

As per Section 2(87) of the Companies Act, 2013, ”subsidiary company” or ”subsidiary”, in relation to any other company (that is to say the holding company), means a company in which the holding company— 

1. Controls the composition of the Board of Directors; or 
2. exercises or controls more than one-half of the total voting power either at its own or together with one or more of its subsidiary companies: 

Provided that such class or classes of holding companies as may be prescribed shall not have layers of subsidiaries beyond such numbers as may be prescribed. 

Explanation—For the purposes of this clause,— 

1. a company shall be deemed to be a subsidiary company of the holding company even if the control referred to in sub-clause (i) or sub-clause (ii) is of another subsidiary company of the holding company; 
2. the composition of a company‘s Board of Directors shall be deemed to be controlled by another company if that other company by exercise of some power exercisable by it at its discretion can appoint or remove all or a majority of the directors; 
3. the expression “company” includes any body corporate; 
4. “layer” in relation to a holding company means its subsidiary or subsidiaries; 

The subsidiary company needs to be registered with the Ministry of Corporate Affairs in the same way any other company is registered. 

Why Incorporate an Indian Subsidiary? 

Forming a subsidiary has proved effective to expand business operations and enter a new business segment or product line. Operations can be scaled using any of the following means through a subsidiary: 

• Acquiring a majority stake in an existing company: If the company wants to expand its operation without incorporating a company from scratch, then it can acquire a majority stake in an existing company. 

• Create a new company: If the company wants to enter a new market or start a new product line or separate an existing unit, then it can do so by creating a new company and holding a majority stake in that company. This is usually done by the companies who have intellectual property or a new idea to implement or are looking to demerge their existing operations. 

Following are the requirements for Indian subsidiary company registration 

• A minimum of 2 directors shall be there, at least one of whom shall be a resident director. 

• No minimum capital is required to form an Indian subsidiary company 

• There shall be a minimum of two shareholders. The holding company should hold a minimum of 50% of the equity share capital of the company. 

Following are the documents required for Indian subsidiary company registration: 

• Passport size photos of all the directors and shareholders. 

• PAN Card and Aadhaar Card of all the directors and shareholders. 

• Identity proofs of all the directors [Voter ID Card / Driving License / Passport (Any one of the following)] 

• In the case of a foreign applicant, passports shall be mandatory along with the certification of documents by the Indian Consulate. 

• Address proof of the registered office of the company (Electricity Bill / Any other utility bill). In case the premises are not owned, a NOC or legal agreement to use the premises shall be obtained from the landlord. 

• Residential address proof of all the directors (self-attested) (Mobile bill / Bank Statement / Electricity Bill) (Bills shall not be older than 2 months) 

• eMemorandum of Association and eArticles of Association 

• Any other document as may be required. 

For non-individual shareholders (holding company in the present case), the following additional documents of the subscriber shall be provided: 

• Certificate of Incorporation  

• Resolution to subscribe to the shares of the company 

If a new company is to be incorporated, then the company shall file an application in the SPICe+ form for registration of the subsidiary company. Following is the procedure to incorporate a subsidiary company in India: 

• Obtain Digital Signature Certificate (DSC) for all the directors 

• Obtain Director Identification Number (DIN) for all the directors 

• Check for name availability in the MCA portal 

• Get the name approval. For this, you can apply for a name reservation by using Part-A of the SPICe+ form. Once the name gets approved, it is reserved for 20 days within which Part-B shall be filed. Alternatively, you can submit Part-A and Part-B of the SPICe+ form together. It saves you name reservation costs. 

• File SPICe+ Form. It serves the following purposes: 

• Director Identification Number allotment 

• Reservation of the name 

• Incorporation of the company 

• EPFO Registration (Mandatory) 

• ESIC Registration (Mandatory) 

• PAN and TAN Application (Mandatory) 

• Professional Tax Registration (Mandatory for specific states only) 

• Opening of a bank account of the company (Mandatory) 

• Registration under Goods and Services Tax Act, 2017 (Optional) 

Compliance Required for Indian Subsidiary 

All the compliances as required to be fulfilled by an Indian company shall be fulfilled by the Indian subsidiary. Following are some of the prominent compliances to be ensured by the Indian subsidiary: 

• Annual General Meetings: The company should hold its first AGM within 9 months after the end of the financial year. Thereafter, the company shall hold an annual general meeting within a period of 6 months after the end of each financial year. 

• Board Meetings: The first board meeting should be held within 30 days of incorporation. Thereafter, the company is required to hold a minimum of 4 board meetings for each calendar year such that the gap between two board meetings should not be more than 120 days. 

• Filing of Audited Financial Statements and Annual Return: The company shall file submit its financial statements along with the Director’s Report to the Registrar of Companies in eForm AOC-4. Apart from that, it shall also file its Annual Return in eForm MGT-7.  

• Maintenance of Statutory Registers: The company is required to maintain certain statutory registers as per the provisions of the Companies Act, 2013. This includes Register of Members, Register of Debenture Holders, Register of Charges, Register of Deposits, etc. Non-maintenance of the same can attract penal provisions. 

• Related Party Transactions: Holding and subsidiary companies are related parties to each other. In case of any transaction between the holding and subsidiary company or any other related party that satisfies the criteria provided in Section 188 shall be disclosed in the Board’s Report in Form AOC-2. 

Compliances in case the of Making an Existing company our subsidiary 

An existent company can become a subsidiary of another company if such other company acquires more than 50% of the share capital or controls the composition of the board of directors. These are popularly known as merger and acquisition transactions. Such cases involve an entirely different set of compliances including the filing of e-Form INC 28, e-Form PAS-3, etc.