How to Set Up a Subsidiary Company in India

Setting up a subsidiary in India allows foreign companies to expand their business into the Indian market while keeping their liability limited and complying with local laws.

Foreign investors can set up either a wholly owned subsidiary or a subsidiary with shared ownership in India. To avoid delays or legal issues, it’s important to understand the registration process, compliance requirements, and the regulatory framework involved.

This guide explains everything you need to know about establishing a subsidiary company in India, including the business structure, benefits, and the steps required to complete the setup smoothly.

What is a Subsidiary?

As per Section 2(87) of the Companies Act, a subsidiary is a company where the parent (or holding) company controls the board of directors or owns more than half of the total share capital.

Types of Subsidiaries

1. Wholly Owned Subsidiary
A wholly owned subsidiary is fully owned by the foreign parent company, meaning it holds 100% of the shares. These can only be set up in sectors that allow 100% foreign direct investment (FDI) in India.

2. Subsidiary with Shared Ownership
In a shared ownership subsidiary, the foreign parent company owns more than 50% of the shares, while the remaining shares can be held by Indian individuals or companies.

Advantages of Setting Up a Subsidiary in India

• Limited Liability: Shareholders are only responsible for the capital they invest, keeping personal assets secure.
• Market Access: Subsidiaries make it easier to enter the Indian market and collaborate with local businesses.
• Funding Opportunities: The parent company can buy more shares if needed, opening doors to additional funding.
• Tax Benefits: Profits earned by the subsidiary can be used to balance losses of the parent company, helping with tax planning.

How to Set Up a Subsidiary in India

Step 1: Choose the Type of Company
You can set up a private limited company (smaller, fewer compliances) or a public limited company (can raise public funds, more regulations).

Step 2: Appoint Directors
At least two directors are required, with one being an Indian resident.

Step 3: Get a Digital Signature Certificate (DSC)
All directors need a DSC for filing digital documents. Required: ID proof, address proof, photo, email, and mobile number.

Step 4: Reserve the Company Name
Reserve the name via the SPICe+ form on the MCA portal. You can use the parent company’s name with “India” added.

Step 5: Register the Subsidiary
File the required forms on the MCA portal. This includes DIN, PAN, TAN, GST, and bank account setup.

Step 6: Submit Documents
Provide notarised documents like the parent company’s board resolution, director ID proofs, and business details. Non-notarised documents include office proof and utility bills.

After approval, you get the Certificate of Incorporation and Corporate Identification Number (CIN),

Post-Incorporation Compliance Requirements

1. Corporate Governance
After incorporation, the company must hold its first Board of Directors meeting within 30 days, as required under Section 173(1) of the Companies Act. Directors are also required to disclose their shareholding interests using Form MBP-1, in accordance with Section 184(1).

2. Financial and Regulatory Compliance

• Maintain statutory registers at the registered office.
• Issue share certificates to shareholders within 60 days of incorporation.
• Keep books of accounts at the registered office, as per Section 128 of the Companies Act.
• Obtain a Certificate of Commencement within 180 days of incorporation.

3. Business and Licensing Requirements

• Open a corporate bank account and establish a registered office within 30 days, as mandated by Section 12(1).
• Display the company name, CIN, GSTIN (if applicable), and contact details at all business locations.
• Obtain any industry-specific licenses or registrations required to legally operate the business.

How We Can Help

We provide complete support for setting up and running a subsidiary in India. Our team can guide you through every step:

• Choosing the right company structure for your business
• Handling company registration smoothly
• Managing all post-incorporation compliance and filings

With us, foreign investors can confidently establish and operate their subsidiary, knowing that all legal and regulatory requirements are taken care of. Get in touch with us to see how we can support your business expansion in India.

Conclusion

Setting up a subsidiary in India is a great way for foreign investors to enter a fast-growing market while enjoying the benefits of limited liability and financial advantages. Whether you choose a wholly owned subsidiary or a shared-ownership structure depends on your business goals and the specific foreign investment rules in your industry.

Successfully incorporating a subsidiary involves careful planning—from picking the right company structure to meeting all post-registration compliance requirements. Working with experts can make this process much easier and help you stay fully compliant with Indian regulations.

Disclaimer: The content on this website is for informational purposes only and does not constitute legal, financial, or professional advice. Please consult qualified experts before acting on any information. K M GATECHA & CO LLP accepts no liability for errors, omissions, or outcomes from the use of this content. This site is not an advertisement or solicitation.