Setting up an Indian Subsidiary

Foreign companies can establish their business presence in India by setting up a wholly owned Indian Subsidiary. Indian Subsidiary is the local entity of foreign company for doing business in India.  Indian Subsidiary is incorporated as a wholly owned subsidiary of parent foreign company.. The parent foreign company holds 100% shareholding in the Indian Subsidiary. Remittance received by Indian Subsidiary from foreign company is subject to Foreign Direct Investment (FDI) guidelines issued by the Government of India.  

Incorporating a private limited company is a preferred choice for setting up an Indian subsidiary. Various global foreign companies operate in India through their Indian Subsidiaries, which in turn are fully owned by the foreign companies. 

To setup an Indian Subsidiary following are some of the requirements:

• At least 2 members are required
• Minimum paid up capital required is Rs. 1 lakh
• Minimum 2 directors are required, of which 1 must be an Indian resident
• Company should be registered with MCA
• Capital infusion in form of FDI
• Filings with Reserve Bank of India

An Indian Subsidiary can receive FDI via either Automatic Route (Government or RBI approval not needed) or Government Route (prior approval required from Government of India) subject to business activity of the Indian Subsidiary.

Benefits of Indian Subsidiary

Incorporating a wholly owned Indian Subsidiary offers various benefits to a foreign company some of which, are listed below-

• Control- The foreign parent company can exercise effective control both operational and management over its Indian Subsidiary. It can control business and strategic decisions with regard to its Indian business considering local requirements.

• Limited Liability- In case Indian Subsidiary incurs/ suffers any liability or claims in India due to its operations, then these liabilities or claims are limited to Indian entity only and same are not passed on to the foreign parent company.

• Cost Synergy- There is good scope for cost synergies as parent foreign company and its Indian Subsidiary can use common accounting, and financial systems, share administrative and other support services and jointly carry out marketing campaigns among others. 

• Identity- Normally, Indian subsidiaries are incorporated with same name as that of foreign parent company. This helps the foreign company to retain its identity and brand value in India.

• Confidential Information- Foreign company is required to share business information with Indian Subsidiary. Setting up a wholly owned Indian subsidiary offers protection of confidential information, trade secrets, business plans and other data concerning business.

The process of opening an Indian Subsidiary requires extensive documentation and requires services of an expert to perform the task. At Legal Dost, our team of experts will handle the entire process for you seamlessly. For more information, check out our website legaldost.com or send an email to info@legaldost.com and get started today.