Setting Up an Indian Subsidiary Company : A Step-by-Step Guide

India's dynamic market and abundant talent pool attract foreign companies looking to expand. Starting a subsidiary in India is a straightforward process, but understanding the requirements and steps is essential for smooth incorporation. Here's an expanded guide with a practical scenario to help you understand the process.

Why India?

India is the world's fastest-growing economy, offering access to a diverse market, skilled workforce, and strategic location. By setting up a subsidiary, foreign companies can take advantage of:

100% ownership in sectors permitted under the automatic FDI route.
A burgeoning middle-class consumer base.
Government incentives for foreign investors.

Understanding the Process\

Let’s explore the steps through a scenario:

Scenario: BrightTech Solutions, a tech company based in the US, wants to set up a subsidiary in India to cater to its growing client base in Asia.

Step 1: Choosing the Structure

BrightTech Solutions decides to form a Private Limited Company, which is ideal for limited liability, operational flexibility, and easy compliance.

Requirements for a Private Limited Company:

At least two directors (one must be an Indian resident).
Two shareholders (can be the same as the directors).
Minimum paid-up capital of ₹1,00,000.

For a Public Limited Company, the minimum requirements include:

Three directors and seven shareholders.
₹5,00,000 as paid-up capital.

Step 2: Naming the Company

BrightTech selects a unique name for its Indian subsidiary, ensuring compliance with the Ministry of Corporate Affairs (MCA) naming guidelines. The name reflects its parent company’s branding, adding local relevance.

Step 3: Preparing Documents

To incorporate the company, BrightTech gathers the following:

For Foreign Directors:
- Passport (apostilled if issued abroad).
- Proof of address (bank statement, utility bill).
- Digital signature.
For the Indian Resident Director:
- PAN card.
- Address proof (Aadhaar, Voter ID).
Office Proof:
- Rent agreement or electricity bill of the registered office.

Step 4: Filing with MCA

BrightTech files its incorporation documents online via the SPICe+ form on the MCA portal. These include the Memorandum of Association (MOA) and Articles of Association (AOA).

Timeline: The entire process usually takes 10–15 days, depending on document verification and approval.

Step 5: Opening a Bank Account

The Indian subsidiary sets up a bank account to manage local transactions. Most major banks support foreign subsidiaries with customized services.

Step 6: Compliance and Approvals

BrightTech ensures compliance with:

FDI norms.
Tax registrations (GST, PAN, and TAN).
Local labor and employment laws.

Benefits of Wholly-Owned Subsidiaries

BrightTech’s Indian subsidiary enjoys:

Market Access: Entry into India’s vast market of 1.4 billion consumers.
Streamlined Operations: Full control of the subsidiary’s operations.
Tax Benefits: Eligibility for specific incentives under Indian tax laws.

Conclusion

Setting up a subsidiary in India offers immense potential but requires meticulous planning and compliance. BrightTech successfully navigated the process with the guidance of experts, ensuring a smooth entry into the Indian market.

If you're looking to set up your Indian subsidiary, our team at TaxMarket provides end-to-end assistance. Contact us to turn your business expansion plans into reality!