FOREIGN SUBSIDIARY

Introduction

Because of its developing economy and abundance of resources, India is a popular investment location for NRIs, foreign nationals, and foreign companies. India is one of the world's fastest developing economies, with plenty of business potential in the future decades. In this context, we examine the steps that an NRI, a foreign national, or a foreign company must take to invest in, start, manage, and grow a business in India.

According to Section 2 (42) of the Companies Act of 2013,

A foreign company is a corporation or other legal entity formed outside of India has a physical or electronic presence in India, whether by itself or through an agent; and engages in any other type of economic activity in India.

Even though a firm is incorporated outside of India, it is a foreign company if it has a simple electronic present that may be used for business in India.

Foreign Subsidiary Company

 A foreign subsidiary company is one in which a company formed in another country owns 50 percent or more of the company's equity shares. In this scenario, the foreign corporation is referred to as the holding company or parent company.

A corporation must be incorporated in India in order to be a foreign subsidiary company in India. It makes no difference where the parent firm is registered.

Wholly owned Subsidiary

When a foreign firm invests 100 percent of its FDI (Foreign Direct Investment) in India via an automatic route, the Indian company becomes the foreign company's Wholly Owned Subsidiary. Let's say ABC Inc. in the United States owns 100% of XYZ Pvt. Ltd. The subsidiary firm is then XYZ Pvt. Ltd.

The foreign subsidiary company's compliance in India is dependent on a variety of factors. All compliances must be met according to the type of company that is incorporated, the industry in which it operates, yearly turnover, and the number of workers. Section 2(42) of the Companies Act, 2013 defines a foreign corporation as one that must comply with regulations and rules imposed by a variety of statutes and orders, including:

• Income Tax Act of 1961 – Companies Act of 2013
• SEBI rules and regulations for GST in 2017
• FEMA (Foreign Exchange Management Act) - RBI regulations, etc.

Prerequisite for incorporation

• A Minimum of 2 Shareholders are required to incorporate a Company in India
• A minimum of 2 Directors are required in order to incorporate a Company in India. At least, one of the directors has to be a resident of India.
• The directors and shareholders shall have a valid Digital Signature Certificate.
• The company shall have a valid registered office at the time of filing for registration.

Procedure and Documentation

Process of Incorporating wholly-owned foreign subsidiary/ Foreign Subsidiary

STEP1. File Part-A of SPICe+ for name Reservation

The first step in incorporating a wholly-owned foreign subsidiary/ Foreign Subsidiary company is for reserving the name of the proposed company in part-A of the SPICe Plus (SPICe+) form. In this form choose your business activity and file for two proposed names, if CRC will reject the proposed name then file again with two new name within a certain time limit from the date of rejection (15 days)

STEP2. Apply for DSC

The next step is to apply for DSC (Digital Signature Certificate) which will be used for signing the forms by proposed directors and proposed members respectively. Procure DSC for both proposed directors and members, if both are different. Id there is any foreign director the procure DSC for that foreign director.

STEP3. Fill the SPICe plus Form (SPICe+)

Once, your name gets reserved under it will be valid for 20 days from the date of approval, within 20 days you have to fill-up the form and upload it online.  SPICe+ is advanced form combination of 8 forms in one. Through this proposed company can apply for at once:

• Name reservation
• Incorporation
• Apply for DIN
• TAN
• PAN
• EPFO
• ESIC
• GSTIN

The next step is to fill the part-B of SPICe + which will contain all the detail related to incorporating company like number total number of directors and members, Authorized share capital, paid-up capital, number of shares hold by members, company registered address detail, directors and member detail and will required attachments for proof. Then draft the MOA (memorandum of association) and AOA (Article of Association) of the proposed company and get it signed by foreign members and get it apostilled / consularized/notarizedas applicability from a foreign country, then fill form required for EPFO and ESIC registration with detail, then Fill the AGILE form for procuring GSTIN. After filling all these attach the signature and then upload it on the MCA website.

Documents required for incorporation:

• PAN card
• Aadhar card
• Photograph of proposed directors

1.  ID proof of proposed Directors and members (anyone):

• Passport
• Voter’s ID
• Driving License

2. Address proof of proposed members and directors (anyone):

• Telephone bill
• Mobile Bill
• Bank statement
• Electricity bill

3. Address proof for the principal place of business of the proposed company (anyone)

• Utility bill like telephone bill, electricity bill, gas bill, water bill
• Rent agreement with rent slip
• Proof of ownership (registry documents)

 All the above documents should be apostilled for the countries in this list of Hague Convention, else they should be consularized/notarized as applicable.

 If the above documents are in Foreign Countries Language then an English Translation along with the Foreign Countries Version shall be provided.

 In case any further information or document is required, Our Compliance team will collect the same within 7 days begin the process.

Compliance for foreign subsidiary under companies act, 2013

Essential MCA Compliances:

According to Sections 380 and 381 of the Companies Act, 2013, the overseas subsidiary firm must comply with the following requirements:

Form FC-1, as required by Section 380: The FC-1 form is crucial since it must be filed within thirty days of the subsidiary company's incorporation in India. The form must be filed with the necessary files, certifications, and other documents from other Indian regulatory organisations, such as the Reserve Bank of India.

Form FC-3, as required by Section 380: Depending on where the company is incorporated in India, this form must be submitted to the appropriate Registrar of Companies (ROC). The form must include information on the places where the firm will operate as well as the company's financial records.

FEMA Compliance

As previously said, there are compliances, one of which is based on events. This indicates that certain compliances are only required if the company engages in a specific event or action.

Under RBI regulations and FEMA standards, there are two event-based compliances:

FC-TRS: This refers to the transfer of shares in a foreign subsidiary firm from an Indian resident to a non-resident investor or the other way around. A sale or a gift can be used to make such a transfer. According to the Foreign Direct Investment rules, such a transaction must be notified within sixty days of the transfer date. The Indian resident, or the investee company, as the case may be, is responsible for filing this form. Whether the Indian resident is the transferor or the transferee, this is the case.