Check out the details about how to create a Foreign Subsidiary in India.

1. Indian Entry Strategy : Foreign Company Registration in India

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4. MEANING – FOREIGN SUBSIDIARY (WOS) ▪ A subsidiary is a company with voting stock (that is more than 50%) controlled by another company, usually referred to as the parent company or the holding company. ▪ A wholly owned subsidiary is a company whose common stock is 100% owned by another company, the parent company. A wholly owned subsidiaries retain legal control over operations, products, and processes. ▪ If a foreign subsidiary is incorporated in India, it has to follow the applicable laws in India.

5. SELECTING THE TYPE OF COMPANY • According to FEMA guidelines, Foreign Direct Investment (FDI) allowance is as per below Chart Entities in which FDI is Not allowed Entities where FDI is Allowed Remarks on allowance Proprietorship LLP Investment in LLP’s is allowed, but it requires prior approval of the RBI. Partnership Private limited Fastest route One Person Company Public Limited If Parent wants to list or publicly trade on stock exchange in India. • The easiest and fastest way set up a business in India by NRI’s and Foreign Nationals/entities is through incorporation of a Private Limited Company.

6. OPTION 1 : PRIVATE LIMITED ▪ A foreign company can set up a wholly owned subsidiary in India to engage in business activities permitted under India’s FDI policy. ▪ In addition, two directors are required, with one of them being an Indian resident. ▪ Income tax is Company Turnover Below 250 Cr. Turnover Above 250 Cr. WOS (Foreign Company) 25% 30% ▪ Surcharge on Income Tax Company Profit less than 1cr. Profit in range of 1- 10 cr Profit above 10 cr WOS (Foreign Company) Nil 7% on Tax 12% on Tax ▪ Dividend Distribution Tax is 20.56%

7. OPTION 2 : LLP ▪ In India, an LLP is structured as a hybrid entity, with the advantages of a company (since it is a separate legal entity with ‘perpetual succession’) and at the same time enjoying the benefits of organizational flexibility associated with a partnership structure. At least two designated partners are required, of which one needs to be an Indian resident. • Taxation at the rate of 30% is applicable on LLPs • No tax is levied on distribution of profits as dividends to partners, unlike in the case of a company where Dividend Distribution Tax (DDT) is applicable on repatriation. • Foreign investment in LLPs is permitted in sectors where 100% FDI is permitted under the automatic route without any performance-linked conditions.

8. MINIMUM REQUIREMENTS ▪ Capital: There is no minimum capital required to form a Private Limited Company in India. Though it is always advisable to have a company with 10 lacs authorised capital. ▪ Directors: Minimum two directors are required to incorporate a Private Company in India. Both should be individuals and at-least one of whom should be a resident of India. ▪ Shareholders: Companies Act, 2013 requires that a Private Limited Company have a minimum of two shareholders. There is no condition for residential status of shareholders. Shareholders can be either individuals or entities or a combination of both.

9. DOCUMENTS SIGNING ▪ In the documents are signed outside India, then the same have to be notarized by a Public notary of the residence country and consularized or apostilled by the competent authority, as the case may be. ▪ If the documents are signed in India, then copy of Visa and stamped passport, proving his/her presence in India at the time of signing is required. ▪ If the subscriber is a foreign entity, then the Incorporation documents should be signed by the representative of the foreign entity. An Authorization Letter duly stating the name of the Authorized Person and the number of shares subscribed should be notarized, consularized or apostilled, as the case may be in the home country of the subscriber company. ▪ If a foreign company is incorporating its subsidiary company in India, then the original name of the holding company as it is may be allowed with the addition of word India or name of any Indian state or city.

10. STEP 1: OBTAINING DIN & DSC The first step towards Foreign Company Registration in India is applying for the DSC (Digital Signature) and DIN (Director’s Identification Number) of the Directors. 1) Apostille / Notarized copy of resolution of foreign Company ‘mentioning the name of authorized representative, no. of subscription of shares’. 2) Apostille/ Notarized copy of Charter of Foreign Company. 3) Apostille/ Notarized copy of ID Proof of authorized representative, I. Proof of Identity (PAN for Indian Nationals and Copy of Passport for Foreign Nationals) II. Copy of Driving License, Bank Statement or any utility bill (not older than two months) III. Residence permits for foreigners, if residing in India. IV. Passport size photograph 4) Name of Nominee (in case of incorporation of WOS)

11. STEP 2: NAME APPROVAL ▪ Selecting a unique and acceptable name for the proposed Company is one of the important steps in the whole Incorporation process. ▪ The name should be in consonance with the Object of the Company and should not be identical to existing entities or Undesirable by Law. ▪ In case if Name of Foreign company is to be used with (India) then foreign company has any trademark registered than copy of that trade mark is required and NOC from company to use the name. ▪ No Re-submission of application is allowed in case of reservation of Name. The application either Approved or Rejected. ▪ Reserved name shall be valid for 20 days in case of allotment of name for New Company.

12. STEP 3: PREPARATION OF DOCUMENTS 1. Memorandum of Association of Company – (Physical copy of MOA shall be prepare Duly apostille or notarized in country of origin). 2. Article of Association of Company – (Physical copy of AOA shall be prepare Duly apostille or notarized in country of origin). 3. INC-9 Affidavit / declaration by first subscriber(s) and director(s) (Duly apostille or notarized in country of origin). 4. DIR-2 declaration from first Directors along with Copy of Proof of Identity and residential address. (Duly apostille or notarized in country of origin). 5. Declaration from the foreign subscribers in respect of not having PAN. (Duly apostille or notarized in country of origin)

13. STEP 3: CONTINUE… 6. NOC from the owner of the property where company is to be registered. 7. Proof of Office address (Conveyance/ Lease deed/ Rent Agreement etc. along with rent receipts); 8. Copy of the utility bills (not older than two months) 9. In case of subscribers/ Director does not have a DIN, it is mandatory to attach: Proof of identity and residential address of the subscribers (Duly apostille or notarized in country of origin) 10. Digital Signature with only one Subscriber is enough for Incorporation of Company. 11. DIR-2 from the Resident Director along with self attested copy of PAN and resident. 12. Certificate from Chartered Accountant.

14. POST INCORPORATION FORMALITIES Step –I: Open Bank Account to receive Subscription Money. Step –II: Receipt of Subscription Money from Foreign Subscriber. Step -III: Collect FIRC Certificate from the Bank as per FDI Guidelines. Step IV: Issue Share Certificate to the subscribers. Step V: File FCGPR with RBI as per FDI Guidelines.

15. TIMELINES Timelines are shown below in Gantt chart with expected end date Sr. No.Nature of Procedure in India 1 DIN for Directors 2 DSC for Directors 3 Name Approval 4 MOA and AOA Drafting 5 Assess stamp duties online 6 Filling of Documents and forms 7 Certificate of incorporation 8 Commencement Certificate Register under Shops and Establishment Act Register for GST in the ward in which the company’s office is located 11 Register for Profession tax Register with Employees' Provident Fund Organization 13 Register with ESIC Filing for Government Approval before RBI/FIPB for Foreigners and NRI's 01-05 06-10 11-15 16-30 31-45 46-50 51-60 61 -70 71-80 9 10 12 14

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