subsidiary company formation in india
Comprehensive Guide to Subsidiary Company Formation in India
Introduction
Forming a subsidiary company is a popular business venture in India, offering numerous benefits to entrepreneurs. This article aims to provide a comprehensive guide to subsidiary company formation in India, catering specifically to the Indian audience. We will explore the entire process, legal requirements, and key factors to consider when establishing a subsidiary company in India.
Understanding Subsidiary Companies
A subsidiary company refers to a business entity that is controlled or owned by another company, known as the parent company. The parent company holds the majority of the subsidiary’s shares, allowing it to exercise significant control over the subsidiary’s operations and decision-making process. Often, foreign companies choose to establish subsidiary companies in India to expand their market reach and take advantage of the booming Indian economy.
Legal Structure of a Subsidiary Company
In India, subsidiary companies are commonly formed as private limited companies, as they offer various advantages. A private limited company limits the liabilities of its shareholders while providing a separate legal entity, enabling them to conduct business operations independently. This structure safeguards the parent company from liability risks.
Requirements for Subsidiary Company Formation
1. Minimum Share Capital: To form a subsidiary company in India, a minimum share capital of INR 1 lakh is required. However, it is recommended to evaluate the capital requirements based on the nature and scale of the business.
2. Directors and Shareholders: A subsidiary company must have a minimum of two directors and two shareholders. At least one director must be an Indian resident.
3. Registered Office: The subsidiary company must have a registered office in India, serving as its official address for communication and legal purposes.
4. Company Name: Choosing an appropriate name for the subsidiary is crucial. It should not violate any copyright laws, be offensive, or deceptive.
5. Memorandum and Articles of Association: These legal documents outline the subsidiary’s objectives, rules, and regulations, in compliance with the Companies Act, 2013.
Registration Process
1. Obtain Director Identification Number (DIN): Directors must apply for a DIN through an online portal provided by the Ministry of Corporate Affairs (MCA).
2. Obtain Digital Signature Certificate (DSC): The directors must obtain a DSC, as it facilitates online filing and signing of documents during the registration process.
3. Company Name Approval: Submit an application for the desired company name to the MCA. Once approved, it will be reserved for sixty days.
4. File Incorporation Documents: Prepare and file essential documents such as Memorandum and Articles of Association, along with the required fees, to the Registrar of Companies.
5. Obtain Certificate of Incorporation: After scrutinizing the documents, the Registrar of Companies issues a Certificate of Incorporation, confirming the subsidiary’s legal existence.
6. PAN and TAN Application: Apply for a Permanent Account Number (PAN) and Tax Deduction and Collection Account Number (TAN) with the applicable tax authorities.
Compliance and Regulations
After the successful formation of a subsidiary company, it must adhere to various compliance requirements to ensure smooth operations and avoid penalties. Some important compliance matters include:
1. Annual General Meeting (AGM): Hold yearly AGMs on time to discuss financial statements, appoint auditors, and resolve any outstanding issues.
2. Statutory Audits: Conduct annual audits of the subsidiary’s financial records by a qualified auditor.
3. Tax Filings: Comply with all tax obligations, including filing income tax returns, GST returns (if applicable), and adhering to tax deduction and collection norms.
4. Board Meetings: Regularly convene board meetings to discuss important matters, approve financial statements, and make strategic decisions.
Conclusion
Forming a subsidiary company in India offers a host of opportunities for both domestic and foreign entities. By following the legal process, meeting compliance requirements, and considering the specific needs of the Indian market, entrepreneurs can successfully establish and operate subsidiary companies in India. It is advisable to seek professional guidance throughout the formation and compliance procedures to ensure a seamless and legally compliant subsidiary company.,
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subsidiary company formation in india
This article is only published for informational purposes. Please consult your Chartered Accountant or Financial Advisor before making any important financial decisions.
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