What is a foreign company’s subsidiary in India?

What makes it a subsidiary?

Section 2(87) is the test. The holding company either controls who is appointed to the board, or exercises or controls more than one-half of the total voting power. Holding every share is a wholly owned subsidiary. Holding more than half, but not all, is still a subsidiary. Holding half or less is not a subsidiary on the voting-power test, unless the board is controlled.

The subsidiary is a separate person. Its assets and debts are its own. The parent’s name on the brand does not merge the two companies.

What is it not?

Section 2(42) defines a foreign company as a body incorporated outside India that has a place of business in India. A liaison office or a branch of that body is the foreign company doing business here. It is not a subsidiary. Incorporating an Indian company is a different step, and it does not turn the overseas body into an Indian company.

A subsidiary is not a section 8 company unless it is incorporated with that licence. A foreign company cannot itself be incorporated as a section 8 company, which is set out on the section 8 page for a foreign company.

Who has to be on the register?

Most of these subsidiaries are private companies. A private limited company needs at least two members and two directors, and at least one director must stay in India for 182 days or more in the financial year. The foreign parent cannot be the only member. The second member holds the shares the parent does not hold.

A one person company cannot be the vehicle. Its only member must be a natural person who is an Indian citizen. A public company, if that is the structure chosen, needs at least seven members and three directors. There is no minimum share capital in the Companies Act. Money brought in by a person resident outside India follows the foreign-exchange rules for the sector, including whether the investment is on the automatic route or needs government approval. Those rules are not a flat permission for every activity.

How is it incorporated?

The company is incorporated on the Ministry portal in the same way as any other Indian company. Part A of SPICe+ reserves the name. Part B files the memorandum, the articles, and the registered-office proof. A director identification number for a first director is taken in that filing. It is not a separate form filed before SPICe+.

The parent’s certificate of incorporation, its charter, and the board resolution that approves the Indian company are attached. Documents signed abroad are apostilled or consularised so the Registrar can rely on them. The registered office is a place in India. A post box is not an office. A public limited company is available where the parent wants that structure. It is not required.

Frequently asked questions

Four questions cover a foreign company, a single shareholder, the resident director, and share capital.