Foreign Subsidiary Company Compliances in India

The subsequent compliances listed below represent significant obligations that must be fulfilled by the foreign subsidiary company according to the provisions outlined in Section 380 and 381 of the Companies Act, 2013:

• Form FC-1 per Section 380: This form holds significance as it requires submission within thirty days of the incorporation of the subsidiary company in India. It must not be submitted alone but should be accompanied by necessary documents, certifications, etc., obtained from other regulatory bodies in India, such as the RBI.

• Form FC-3 per Section 380: Submission of this form to the relevant Registrar of Companies (ROC) depends on the location of the company’s incorporation in India. It necessitates details regarding the areas where the business intends to operate and the company’s financial records.

• Form FC-4 per Section 381: This form pertains to the annual returns of the company and requires filing within sixty days from the conclusion of the preceding financial year.

• Financial statements: The company is required to furnish financial statements regarding its Indian business and operations within six months from the conclusion of the financial year. These statements must encompass details such as fund transfers, repatriated earnings, and related party transactions, including sales, property transfers, purchases, etc.

• Audit of accounts: A Practising Chartered Accountant must conduct an audit of all accounts belonging to the foreign subsidiary company. The company needs to ensure that these accounts are appropriately organized and made accessible for the audit process.

• Authentication and translation of documents: All documents submitted by the company to the ROC must be authenticated by a practicing lawyer in India. Additionally, these documents should be translated into English before authentication and submission.

Importance of Meeting Compliances

Adhering to all compliances is compulsory for a foreign subsidiary company, as non-compliance can result in severe consequences. Failure to meet these obligations may subject the company to fines, penalties, and potential criminal charges, including imprisonment, as stipulated by relevant provisions of applicable law(s). The ensuing penalties for non-compliance may include: 

Under Section 392 of the Companies Act 2013 (effective from April 1, 2014):

• Notwithstanding the provisions of Section 391, if a foreign company violates any regulations outlined in Chapter XXII of the Act, the company will face penalties in the form of fines ranging from no less than Rs 1 lakh to a maximum of Rs 3 lakh. In case the offence persists, an additional fine of Rs 50,000 will be imposed for each day the violation continues.

• Any officer of a foreign company found to be in default can face imprisonment for a period of up to 6 months and/or a fine ranging from a minimum of Rs 25,000 to a maximum of Rs 5 lakh. It is crucial for a company to fulfill all its compliances to ensure smooth business operations without intervention from regulatory authorities.