Foreign Subsidiary Registration

What do we understand by the word ‘Foreign’? Generally, we associate this word with something or someone which/who is not from our country. Belongs to another country. Thus, it is connected with geography, location, a distinct place from one’s own place.

Subsidiary- in plain English where it is used as a describing tool, it means something that is at a lower level. When it is used in business terms it means: a company that is being managed and controlled by another company.

Joining both these words together gives us the definition of foreign company and it may be read as a Company which is not incorporated in India and is owned and controlled by another Company.

But is this what you were searching for? Definitely not

What you are searching for is a company incorporated in India which is a subsidiary of a Foreign company. Thus, you are looking to register/ incorporate an Indian Subsidiary of a Foreign Company.

Thus, the topic should be read of instead like this:

Registration / Incorporation of an Indian Subsidiary of a Foreign Company.

What is a Subsidiary Company? How has it been defined in Companies Act, 2013? 

Let us understand with examples:

Say there are 2 companies - A and B. Company A has power to appoint the Directors on the Board of the Company. In such a case, B is the subsidiary company of A.

Suppose instead of controlling the composition of the Board, Company A holds securities in company B such that it gives Company A more than 50% of voting power in Company B, then too, B is the subsidiary of A.

Thus, a soldering subsidiary relationship can be construed by either

• The power to control the Board composition or management of the Company 

Or

• 2.   The investing company, by itself or with its other subsidiary companies, has more than half of the total voting power in the subsidiary company.

      Important point to understand here is that voting power comes through investment in the securities of the Company.

IMP NOTE: 

When incorporating a subsidiary company, the holding company can only do this through the mode of investing in the securities and not by showing control of the board.

Types of Subsidiary Company based on shareholding

A holding company can have 

• a 100% subsidiary company or 
• a subsidiary where the holding company has more than 50% voting rights. 

This distinction is important because under the Companies Act, 2013 a wholly owned subsidiary has certain rights or certain sections of the Companies Act, 2013 are applicable / not applicable to them that are different from those applicable to a simple subsidiary. 

Process for registration of a wholly owned Indian subsidiary of a foreign company

The process for this is very similar to that of a Private Limited Company. 

A. Collection of data:

Incorporation of wholly owned subsidiary has the following data collection stages:

1. Name reservation for Company:
2. DSC application
3. Subscriber information
4. Director Information
5. Registered Office information
6. Registrations information (PAN/TAN/GST//ESIC etc)
7. Common-  Documents required for each step 

B. Collection of documents:

1. of Subscribers including holding
2. of Directors
3. of Registered Office

C. Drafting of documents:

1. Name options with meaning and any resolution required
2. Memorandum of Association
3. Articles of Association
4. Consent Letter from each director
5. List of interest in other entities of each director
6. Rent Agreement, if any
7. No Objection Certificate from Landlord, if any
8. Authority letter under ESIC

D. Verification and certification of papers and documents

1. of director
2. of subscriber
3. of registered office
4. of Memorandum of Association
5. of Articles of Association

E. Filling of Forms:

1. Spice part A (name application)
2. Spice Part B (Subscriber, Director and Company details)
3. AGILE PRO (Application for GSTIN, ESIC Registration, EPFO registration, Profession Tax Registration, Opening of bank account)
4. INC-9 (Declaration by directors)
5. INC-33 (Memorandum of Association)
6. INC-34 (Articles of Association)

Areas of special note whilst incorporating wholly owned subsidiary of a Foreign Company

1. What other laws will be applicable at the time of incorporation?

Incorporation of a wholly owned subsidiary in India by a foreign Company will also require compliance with FEMA (The Foreign Exchange Management Act, 1999) and filing of forms etc with RBI. To get more clarity, please click here and speak to an Expert at www.seedup.in

2. Who will be the 2 (two) First Subscribers?

This has to be understood very very clearly. Remember- a corporate entity is going to subscribe to the Memorandum of Association of the company to be formed. Also it will hold all the shares as it is incorporating a ‘wholly’ owned subsidiary. But the Companies Act, 2013 states that minimum 2 subscribers are required at the time of incorporation and also after such incorporation, minimum 2 shareholders are required for a private company to continue as such.

What happens if the number of members of a Company drops below the minimum requirement?

If a company's total members drop below two for a private company, and the company continues to do business for over six months with this reduced number of members, then every person who is a member of the company during this time, and knows that the company is operating with less than two members, will be personally responsible for paying all the debts the company takes on during that period. These people can also be individually taken to court for these debts (s per Section 3A of the Companies act, 2013).

Thus, the First subscribers in the case of wholly owned subsidiary will be as follows:

Subscriber No.1

The Holding Company, acting through its authorised representative has to and will be one of the Subscribers

Subscriber No.2

At least one share has to be held by a nominee shareholder of the holding company. This nominee relationship is created  u/s 89 of the Companies Act, 2013, through creation of Registered holder and beneficiary holder. The Registered holder is the nominee shareholder and the beneficiary holder is the holding company. Forms MGT-4 and 5 have to be filed by the registered j=holder and beneficiary holder respectively. Form MGT 6 has to be filed by the wholly owned subsidiary. These forms are filed after incorporation of the Company. To get more clarity, please click here and speak to an Expert at www.seedup.in

A Company may have more than 1 such nominee shareholder. Incase of incorporating a wholly owned subsidiary that is a public company, since minimum 7 subscribers will be required, the wholly owned subsidiary should have minimum 6 (six) such nominee shareholders.

3. Who will be the 2 (two) First Directors?

Every company incorporated in India has to have one resident Indian as its Director. Resident Indian means an individual who has been staying in India in the previous year for at least 182 days. The other directors maybe NRI, foreign nationals.

4. What are the Important pointers before selecting the document?

• Each document to be in the name of the individual Director. Spelling of the name across all documents should be the same.
• The address across all documents to be attached should be same, unless the director/subscriber is showing the present and permanent residential addresses as different.
• All documents have to be uploaded in Pdf format duly scanned.
• Image file has to be uploaded as a jpeg file. 
• All documents to be Self Attested and signed on each page

5. What are the documents required from Subscribers?

A.           Individual  subscriber (Indian, NRI or Foreign Resident)

The mandatory documents are documents related to address proof, identity proof, and date of birth proof.

For address proof:

trade licence or municipal bills are not allowed. Mobile, landline telephone bills, electricity or bank statements are good. Any one of these will be allowed. 

To be kept in mind:

1. that from the date of first filing, these documents should not be more than 2 months old. 

2. document should be self attested 

3. The name in this document should be the same in all places where the name of the subscriber is being mentioned- like in Spice part B, PAN, Aadhaar etc.

For identity proof: 

Passport, Voter Id, Driving License are allowed as these documents have the photo of the subscriber. Aadhaar is not allowed. 

To be kept in mind:

1. document should be self attested 

2. the name in this document should be the same in all places where the name of the subscriber is being mentioned- like in Spice part B, PAN, Aadhaar, bank statement, electricity bill, mobile or landline bill  etc.

Other requirements:

PAN and Aadhaar have to be mandatorily attached other than the documents required to be attached for Address proof and identity proof. Since a foreign subscriber(s) will not have PAN, a declaration from the foreign subscriber has to be attached stating that the subscriber being a foreign person, does ot hold an ‘Indian’ PAN.

To be kept in mind:

1. document should be self attested 

2. the name in this document should be the same in all places where the name of the subscriber is being mentioned- like in Spice part B,passport, bank statement, electricity bill, mobile or landline bill  etc.

Passport size photo: in colour of each subscriber is required in jpeg format.

B.            Non Individual Subscriber

The non individual subscriber, i.e. the holding company, will be acting through an authorised representative who has to be an individual. This individual (who is representing the holding company) will have to be give all the documents as stated in the point ‘Individual  subscriber (Indian, NRI or Foreign Resident)’. Alongwith these documents, the holding company has to give the following additional documents.  The Holding Company has to give its Certificate of Incorporation or such other proof of incorporation of the holding company. The Memorandum of Association (MOA) and Articles of Association (AOA) of the holding company. A Board Resolution from the holding Company authorising such investment in the wholly owned subsidiary. Alo, the holding company too will not have an ‘Indian’ PAN. Thus, a declaration from the foreign holding company in respect of not having PAN has to be furnished.

Proof of address of the foreign holding company being any one of Bank Statement,

Electricity Bill, Telephone (landline)Bill or Mobile Bill

To be kept in mind:

1. that from the date of first filing, these documents should not be more than 2 months old. 

2. document should be self attested 

3. The name in this document should be the same in all places where the name of the subscriber is being mentioned.

6. What are the documents required from the Directors?

A.           Documents required for DIN- Indian Director

Mandatory documents: are documents related to address proof, identity proof, and date of birth proof.

For address proof, both present and permanent: trade licence or municipal bills are not allowed. Mobile, landline telephone bills, electricity or bank statements are good. Any one of these will be allowed, one for each address.

To be kept in mind:

1. that from the date of first filing, these documents should not be more than 2 months old. 

2. document should be self attested 

3. The name in this document should be the same in all places where the name of the subscriber is being mentioned- like in Spice part B, PAN, Aadhaar etc.

For identity proof: Passport, Voter Id, Driving License are allowed as these documents have the photo of the subscriber. Aadhaar is not allowed. 

To be kept in mind:

1. document should be self attested 

2. the name in this document should be the same in all places where the name of the subscriber is being mentioned- like in Spice part B, PAN, Aadhaar, bank statement, electricity bill, mobile or landline bill  etc.

For interest in other entities: A list of interest in other Company(ies), LLP(s), Partnership(s), Sole Proprietorship(s) giving Name of entity, registration No., Designation, etc.

Other requirements: PAN and Aadhaar have to be mandatorily attached other than the documents required to be attached for Address proof and identity proof. Since a foreign subscriber(s) will not have PAN, a declaration from the foreign subscriber has to be attached stating that the subscriber being a foreign person, does ot hold an ‘Indian’ PAN.

To be kept in mind:

1. document should be self attested 

2. the name in this document should be the same in all places where the name of the subscriber is being mentioned- like in Spice part B,passport, bank statement, electricity bill, mobile or landline bill  etc.

Passport size photo: in colour of each subscriber is required in jpeg format.

B.            Documents required for DIN- NRI Director

Mandatory documents: are documents related to address proof, identity proof, and date of birth proof.

Verified and attested copy of Passport is mandatorily required.

For address proof, both present and permanent: trade licence or municipal bills are not allowed. Mobile, landline telephone bills, electricity or bank statements are good. Any one of these will be allowed, one for each address.

To be kept in mind:

1. that from the date of first filing, these documents should not be more than 2 months old. 

2. document should be self attested 

3. The name in this document should be the same in all places where the name of the subscriber is being mentioned- like in Spice part B, PAN, Aadhaar etc.

For identity proof: Passport, Voter Id, Driving License are allowed as these documents have the photo of the subscriber. Aadhaar is not allowed. 

To be kept in mind:

1. document should be self attested 

2. the name in this document should be the same in all places where the name of the subscriber is being mentioned- like in Spice part B, PAN, Aadhaar, bank statement, electricity bill, mobile or landline bill  etc.

For interest in other entities: A list of interest in other Company(ies), LLP(s), Partnership(s), Sole Proprietorship(s) giving Name of entity, registration No., Designation, etc.

Other requirements: PAN and Aadhaar have to be mandatorily attached other than the documents required to be attached for Address proof and identity proof. Since a foreign subscriber(s) will not have PAN, a declaration from the foreign subscriber has to be attached stating that the subscriber being a foreign person, does ot hold an ‘Indian’ PAN.

To be kept in mind:

1. document should be self attested 

2. the name in this document should be the same in all places where the name of the subscriber is being mentioned- like in Spice part B,passport, bank statement, electricity bill, mobile or landline bill  etc.

Passport size photo: in colour of each subscriber is required in jpeg format. 

C.           Documents required for DIN- Foreign Director

Mandatory documents: are documents related to address proof, identity proof, and date of birth proof.

Verified and attested copy of Passport is mandatorily required.

For address proof, both present and permanent: trade licence or municipal bills are not allowed. Mobile, landline telephone bills, electricity or bank statements are good. Any one of these will be allowed, one for each address.

Points to be noted:

1. that from the date of first filing, these documents should not be more than 2 months old. 

2. document should be self attested 

3. The name in this document should be the same in all places where the name of the subscriber is being mentioned- like in Spice part B, PAN, Aadhaar etc.

For identity proof: Passport, Voter Id, Driving License are allowed as these documents have the photo of the subscriber. Aadhaar is not allowed. 

To be kept in mind:

1. document should be self attested 

2. the name in this document should be the same in all places where the name of the subscriber is being mentioned- like in Spice part B, PAN, Aadhaar, bank statement, electricity bill, mobile or landline bill  etc.

For interest in other entities: A list of interest in other Company(ies), LLP(s), Partnership(s), Sole Proprietorship(s) giving Name of entity, registration No., Designation, etc.

Other requirements: PAN and Aadhaar have to be mandatorily attached other than the documents required to be attached for Address proof and identity proof. Since a foreign subscriber(s) will not have PAN, a declaration from the foreign subscriber has to be attached stating that the subscriber being a foreign person, does ot hold an ‘Indian’ PAN.

To be kept in mind:

1. document should be self attested 

2. the name in this document should be the same in all places where the name of the subscriber is being mentioned- like in Spice part B,passport, bank statement, electricity bill, mobile or landline bill  etc.

Passport size photo: in colour of each subscriber is required in jpeg format. 

7. What are the points to be kept in mind while creating attachments?

The scanning may be in black/white or colour, but the file size has to be adhered to as stated in the forms. Sometimes they vary between 100 KB to 2 MB. The file size should be kept as low as possible but should be legible. Imp: It might have been observed from the above list that the passport is a good document to be attached as it acts as photo id proof, address proof and date of birth proof

8. How are the documents that are to be attached to the forms to be attested? 

The Directors and/or Subscribers of the wholly owned subsidiary may be Indian Resident, Non-Resident Indian or a Foreign National or a Foreign Body Corporate. They have to follow the following method of attestation from the government agencies or Professional. Each page of the document has to be attested.

9. From whom will attestation of documents be done?

Generally, attestation of documents are done as follows:

Level 1- Self attestation

Level 2- Notarised in India 

Level 3- Embassy in a foreign country (for Indian citizens living abroad)

Level 4- either apostilled (if person staying in a country which is under Hague Convention or notarised from a notary public (if person staying in a country which is a Commonwealth country)

When director/ subscriber is an Indian Citizen -

where he may be a resident Indian or Non-Resident Indian (NRI), and is residing outside India, then all the documents for proof of identity should be attested by the Indian embassy in the country where he is has a present address.

Proof of address of such a person should be either notarised from a notary public or apostilled by the competent authority of that foreign country. The permanent address, being in India, can be attested by any practising professional CA/CS or CMA in India.

For further clarity, please click here and scroll down to the section to ‘Procedure for attestation of documents’.

When the director/ subscriber is a foreign national-

The proof of identity For Foreign National residing in his own country which is under Hague Convention it has to be notarised by the Public Notary of that foreign country; and apostilled by the competent authority of that foreign country.

For Foreign National residing outside his country and that country where he resides is under Hague Convention-either notarised by the Public Notary of that foreign country and apostilled by the competent authority of that foreign country OR attested by Embassy of his country of origin at place where he resides

For Foreign National residing in his own country which is under commonwealth country, it has to be notarised by the Public Notary.

For Foreign National residing outside his country and that country where he resides is under commonwealth country- either notarised by the Public Notary of that foreign country;OR attested by embassy of his country of origin at place where he resides The same method to be followed for attestation of proof of address. But when the Foreign National is from a country which is outside the Commonwealth and also not a party to the Hague Apostille Convention, 1961, then the document has to be notarised before the Notary (Public) of such country; and the certificate of the Notary (Public) shall be authenticated by a Diplomatic or Consular Officer.

10.  Links for hague or commonwealth countries?

Link or checking list of Commonwealth countries: http://thecommonwealth.org/member-countries

Link for checking List of Hague Convention countries

http://www.internationalapostille.com/hague-apostille-member-countries/

11. Why is a registered office of the wholly owned subsidiary important?

These documents are the ones for which generally the incorporation forms come for resubmission. A company incorporated in India has to have a physical place of business and a primary office which is called the Registered office of the wholly owned subsidiary.  This address is very very important. When the company is incorporated, the website that displays all the details of the Company, displays the registered office of the wholly owned subsidiary. This address will be used by both the government and all its other agencies like the Income tax, GST, ESIC, EPFO, courts, trade licence department etc. for any communication with the wholly owned subsidiary.Similarly the Company has to display this registered office in all its communications with anyone. 

The wholly owned subsidiary may have multiple places of work, factory, branch office, satellite office, administrative office, but the registered office will be one and one only. This address has to be principally displayed in letterheads, bills, invoices, agreements, contracts etc.

12. What are the documents required for the registered office of the wholly owned subsidiary?

Since the wholly owned subsidiary is yet to be incorporated, it will not be capable to own any real estate or property in its own name. It will have to take on rent (maybe NIL rent) from any of its Subscriber, director or from a totally third person. The wholly owned subsidiary has to show the MCA that it has the right to operate out of that address as its registered office. This can be shown by producing certain documents. Thus, firstly the wholly owned subsidiary will enter into a rent agreement with the person who owns the property. This will be done through a rent agreement/ lease agreement. Thus, a copy of the same has to be attached to the form.

Secondly, the Wholly owned subsidiary has to take a No Objection Certificate from the person who owns the property. In this certificate, the property owner states that he/she has ‘no objection’ to the company being incorporated, using the property as its registered office.

Thirdly, a utility bill in the name of the owner of the property. This utility bill can be either an electricity bill or a telephone (landline bill) or municipal charges bill (but this last one is generally not accepted by the MCA, even though they have written this option in the drop down menu). The utility bill should be maximum, 2 months old.

13. Content of the Board Resolution

This Board resolution from the holding company should be passed prior to filing the Spice part A for name approval. This Board resolution should have the following content:

• Name of the proposed company
• Power to invest
• Authorised representative of the company
• Registered holder on behalf of the company
• Subscription to the paid up capital at time of incorporation
• First directors of the Company
• Authority to director/ authorised representative to sign all papers and affix DSC
• Authority to a professional to coordinate in India with the authorities and to certify all forms

ANNEXURE:

Draft resolution to be passed by the holding company for name approval, investment and naming of the subscribers and first directors.

“Resolved that:-

1.       A wholly owned subsidiary be incorporated under the provisions of Indian Companies Act, 2013 in the State of …………………., in the name and style of ……………………………(“Proposed Company”) or such other name as may be approved by the Central Registration Centre (“CRC”);

2.               The Authorised Share Capital of the Proposed Company shall be INR ……………………./- (Indian Rupees Fifteen Lakhs only) divided into ……………………..Equity Shares of INR …../- (Indian Rupees …..only) each;

3.               An initial investment of INR …………………./- (Indian Rupees …………………….Only) in the share capital of the proposed Company be made in such a manner that ……………..(...........................only) Equity Shares of INR. …./- (Indian Rupees ………..only) each shall be subscribed and held in the name of the Company;

4.    …………………………., residing at ……………………….be and is hereby appointed as Authorised Representative (“Authorised Representative”) of the Company to subscribe for and on behalf of the Company and to sign and execute the Memorandum of Association (MoA) and Articles of Association (AoA) of the Proposed Company and other necessary forms, affidavits, declarations, and such other deeds and documents as may be incidental and ancillary for the incorporation of the Proposed Company on behalf of the Company;

5.               ………………………………, will hold …. (.........) equity share as the registered owner, the beneficial owner being the Company, pursuant to the provisions of section 89 of the Indian Companies Act, 2013 and the rules made thereunder,.

6.    The paid up capital of the proposed Company shall be subscribed in the following manner-

S. no.	Name	Number of shares	Amount  (in Rs.)
1	[Name of holding Company]. Auth Rep: ………………………..	…………………	…………………
2	………………………………. -Registered Owner  (Nominee of [name of holding co].)  (Beneficial owner- [name of holding co].)	…………………	…………………
	Total	…………………	…………………

7.  The following persons be and are hereby named as the First Directors of the Proposed Company in the Articles of Association thereof at the time of incorporation:

1. ……………………………..

2. ……………………………..

8.  The Authorised Representative be and is hereby authorised to sub-delegate any of the powers herein conferred upon him to such persons as he may deem necessary;

9.  Any and all actions of the authorised Representative in pursuance to, or in furtherance of the intent and purposes of this resolution, are hereby in all respects adopted, approved, confirmed and ratified as the valid and subsisting acts of this Company;

10.  Being one of the subscribers to its Memorandum of Association, the pre-incorporation expenses for the Proposed Company be incurred and that this amount may be recovered from the Proposed Company after its incorporation; if applicable

11.   Any Director be and is hereby authorised to appoint …………………., Practising Company Secretary, to represent the Company before the Registrar of the Companies, ………………..or Central Registration Centre, in relation to the matters related and incidental to the incorporation of the Proposed Company;

12.  Any Director of the Company be and is hereby authorised to execute, sign, seal and deliver in the name and on behalf of the Company, any and all agreements, deeds, forms, notices, communications or documents relating to, or ancillary to, the incorporation of the Proposed Company, with full power to approve any amendment, alteration or modification to such agreements, deeds or documents, and to do and execute such other deeds, documents, acts and things as may be necessary, desirable or expedient for the purpose of giving effect to any of foregoing resolutions.”