Company registration in India by a Foreigners Archives

What is a Foreign Subsidiary Company? And Foreign Subsidiary Company Compliance in India Introduction Starting a foreign subsidiary company has many advantages, like expanding into new markets and using local skills and resources. In India, all companies must follow government rules, with foreign subsidiaries facing stricter regulations than Indian owned firms. In this article, we shall see what exactly Foreign Subsidiary Company Compliance in India means, benefits, and more information on the same. What is a Foreign Subsidiary Company? A Foreign Subsidiary Company is a business entity that is owned or controlled by a company based in another country. The parent company holds more than 50% of shares, giving it decision making power. A subsidiary follows the laws of the country where it is registered but takes business decisions based on its parent company's guidance. Significance to align with the Indian Compliance by a Foreign Company A foreign subsidiary must follow all rules to avoid serious consequences. A foreign subsidiary must follow all legal regulations to avoid risks. Non compliance can lead to fines, penalties, or legal action. In serious cases, it may even result in imprisonment under applicable laws. Key compliance requirements for a foreign subsidiary in India Form FC-1 (Section 380) : Must be submitted within 30 days of incorporation in India, along with required approvals from bodies like the RBI. Audit of Accounts : A chartered accountant must audit the subsidiary's financial records annually for compliance. Form FC-4 (Section 381) : Covers annual returns and must be submitted within 60 days after the financial year ends. Document Translation & Authentication : All documents must be certified by an Indian lawyer and translated into English before submission to the ROC. Form FC-3 (Section 380) : Filed with the Registrar of Companies (ROC), including details on business locations and financial records. Financial Statements : Must file AOC 4 and MGT 7 (except for OPCs & small businesses) within six months of the financial year end, including details of cash transfers, repatriated earnings, and related party transactions. Consequences of Non-Compliance for Foreign Subsidiary Companies Failure to follow rules in India can lead to serious issues for foreign subsidiary companies, such as: Fines & Penalties : Heavy fines can hurt the company’s financial health. Reputational Damage : Loss of trust from customers, suppliers, and investors. Business Disruptions : Operations may be shut down or goods seized. Legal Action : Risk of costly lawsuits and financial setbacks. Loss of License : In severe cases, the company may lose its right to operate in India. As per Section 392 of the Companies Act, 2013 Under the Companies Act, if a foreign company breaks any rules, you have to abide: Company Fine : ₹1 lakh to ₹3 lakh for rule violations. Ongoing Violation : ₹50,000 per day if the offense continues. Officer Penalty : ₹25,000 to ₹5 lakh fine or up to 6 months jail. We help businesses to open Indian subsidiary and ensure compliance by assisting with filing FC-GPR form for foreign investments, simplifying your expansion into India. Foreign Subsidiary Compliance in India under the Income Tax Act Annual Compliance : Includes GST & TDS reporting, RBI & SEBI regulations, and yearly financial statements. Event-Based Compliance : Required only when a specific business action is taken. Periodic Compliance : Recurring requirements, such as quarterly or biennial filings. Benefits enjoyed by a Foreign Subsidiary Company in India Listing down a few advantages of a Foreign Subsidiary Company set up in India: Access to a Large Market : Expands business reach in India, attracting more customers and increasing revenue. Local Expertise : Uses local suppliers and skilled workers to improve business efficiency. Better Brand Recognition : Builds trust and loyalty by having a strong presence in India. Cost Savings : Saves money by using local resources and benefiting from exchange rates. Operational Efficiency : Being close to customers and suppliers boosts efficiency and growth. More Control & Variability : Gives the parent company better control over business operations. Role of FDI in a Foreign Subsidiary Company Foreign Direct Investment (FDI) allows an Indian company to issue shares or convertible debentures through: Bank Transfers : Payments via regular banking channels. NRE/FCNR Accounts : Debit from a foreign investor’s bank account in India. Conversion of Dues : Royalties, technical fees, or loans (ECB) can be converted into shares. FIPB Approval : Import dues, pre incorporation costs, and share swaps may be converted into shares. Escrow Accounts : Funds held in an RBI approved escrow account can be used for share purchases. Steps to Set Up a Foreign Subsidiary in India Follow these simple steps to Set Up a Foreign Subsidiary in India: Choose the Right Company Type : Select between Private Limited Company, LLP, or Branch Office based on business needs. Get Approval & Register : Most sectors allow automatic approval, but some require RBI or FIPB approval. Register with the Registrar of Companies (ROC). Obtain Licenses & Permits : Get industry specific licenses for import, export, manufacturing, or operations. Comply with Tax & Labour Laws : Register for GST, corporate tax, PAN, and TAN as per Indian laws. Maintain Compliance : File annual reports, tax returns, and other required documents to stay legally compliant. RBI Regulations and FEMA Guidelines Here is the rewritten content in a structured, point wise format: The transfer of shares in a foreign subsidiary company between an Indian resident and a non-resident investor (either way) falls under this regulation. Such a transfer can occur through a sale or a gift. The transaction must be recorded in compliance with foreign direct investment (FDI) regulations within 60 days of the transfer date. The responsibility for submitting the required form lies with either: The investee company, or The Indian resident involved in the transaction. This rule applies whether the Indian resident is the transferor or the transferee. FC-GPR pertains to remittances received by shareholders of a foreign subsidiary company. The form details the method of remittance from the company to its shareholders. Conclusion All businesses in India must follow government rules, whether owned by Indians or foreigners. The only difference is that foreign owned companies have more rules to follow than Indian owned ones. Suggested Read : Shareholding rights of subsidiary company Branch Office and Indian Subsidiary Holding and Subsidiary Company in India How to start a Subsidiary Company in India? Documents required for Indian Subsidiary Registration FAQ Yes, an Indian company can own a foreign subsidiary by investing in or acquiring a company abroad as per RBI and FEMA regulations.Foreign subsidiaries must comply with company laws, tax regulations, labor laws, and RBI guidelines, including FDI policies.It depends on the type of compliance, but annual filings, audits, and tax returns generally take a few weeks to months.Costs vary based on company type, legal fees, government fees, and compliance requirements, starting from a few thousand rupees.A registered business name, Indian director, shareholding structure, approvals (if required), and compliance with tax and company laws.

Company registration in India by a Foreigners

A guide to Foreign Subsidiary Company Compliance in India