India Business Setup - Setting up a Subsidiary
India Business Setup - Setting up a Subsidiary
Welcome to TAXAJ, your trusted partner for seamless and hassle-free business setup in India. Expanding your business by registering a subsidiary company in India is a strategic move that promises many advantages. With its vast market potential, burgeoning middle class, improved regulatory climate, access to a diverse talent pool, government incentives, and more, India offers a compelling proposition for business growth.
However, unlocking these benefits comes with its set of challenges. Navigating the Indian business landscape requires a deep understanding of local regulations and the ever-evolving business environment. This is where TAXAJ steps in, offering our expertise to simplify the complex process.
At TAXAJ, we are dedicated to helping you seamlessly establish your presence in India. Our team of legal and business experts is committed to making your subsidiary setup hassle-free, ensuring that you can focus on growing your business.
Lets dive into the detailed process and steps to Incorporate a Subsidiary Company in India.
Directors: Minimum Two Directors are required to incorporate a Private Limited Company in India. Both should be Individuals and at-least one of whom should be a Resident of India. (A resident of India is a person who has stayed in India for at-least 182 days in the previous year).
Shareholding: Companies Act, 2013 requires that a Private Limited Company have a Minimum of Two Shareholders. There is no condition for residential status of shareholders. Shareholders can be either individuals or entities or a combination of both. In case of Foreign Holding Company, the Authorised Person of Foreign Entity can not hold shares in his Individual Capacity.
Wholly Owned Foreign Subsidiary: 100% Foreign Shareholding is possible in an Indian Subsidiary with a Minimum of Two Shareholders.
Registered Address: A Registered Address is mandatory for any legal entity to be incorporated which we also call as Corporate Address, this can be a physical office or a Virtual Office for Incorporation purpose and later on shifting to a Physical Office to save time.
The next step towards Incorporating a Legal Entity in India is Receiving Complete Set of Documents from Foreign Stakeholders which can be explained below:
1. Passport Copy as a Identity Proof
2. Business Visa (if visiting India)
3. Driving License as an Address Proof
4. Bank Statement/Mobile Bill as a Residency Status Proof. (Latest Month's)
4. Passport Size Photograph
5. Valid Phone Number & Email Address
6. Father's Name of Foreign Stakeholder
If Foreign Entity is going to hold the shares of Indian Company then additional documents for Foreign Entity required:
1. Apostille Copy of Resolution of Foreign Company Mentioning the name of Authorized Representative, Number of Subscription of Shares.
2. Apostille Copy of Charter of Foreign Company (MOA, AOA, Certificate of Incorporation or any other Equivalent Document as per the Country of Incorporation).
3. Apostiled Copy of ID Proof of Authorised Representative, if such person is Non-Resident of India
- If the documents are in any other language other than english, then it must be transcripted/translated to english; that transcripted copy along with the original must also be apostilled by the Indian Embassy in their country (If they are not visiting India for Incorporation).
- All the documents for foreign citizens should be apostilled by the Indian Embassy in their country (If they are not in India).
- All the documents for foreign citizens should be apostilled by their own country's Embassy in India (If they are in India).
The next step towards Incorporating a Legal Entity in India is Receiving Complete Set of Documents from Indian Stakeholder which can be explained below:
1. PAN Card as a Identity Proof
2. Aadhar Card as an Address Proof
3. Bank Statement/Mobile Bill as a Residency Status Proof. (Latest Month's)
4. Passport Size Photograph
5. Valid Phone Number & Email Address
- All Documents needs to be Self Attested, meaning Signed by Self.
The Registrar of the Companies (ROC) across Indian expects the applicant to follow certain criteria while Naming a Company. The approval is also subject to the officer handling the application. The more closely the rules that are listed are followed the better are th4e chances of getting the name of the Company approved.
Uniqueness: The name of the company is a unique component. A name once registered won't be allocated to another company. This name needs to be descriptive For example if the company is a finance company, the word "Finance" should be included in the name. This word describes the nature of the company. So if the company is in the Logistic or restaurant business they cannot have "Finance" in the name.
Avoid abbreviations: Abbreviations, adjectives and generic words will be rejected. The words banks, exchange, and the stock exchange should be approved by RBI.
Trademark: Proposed company name cannot infringe on a registered trademark or an application for registration of a trademark unless the consent of the registered trademark owner or trademark applicant is submitted along with the name approval application.
Patronage: Proposed company name cannot imply association or connection with or patronage of a national hero or any person held in high esteem or important personages who occupied or occupying important positions in Government. The proposed name cannot imply an association with the Indian or Foreign Government.
Block your domain name: An applicant must block the domain name to avoid duplication.
Regulatory approval: The name of the company which has words like insurance, bank, stock, exchange, venture capital, asset management, mutual fund, etc may require regulatory approvals from RBI, SEBI, IRDAI, etc.
Apart from the Shareholder's Documents additional details are also needed for incorporating a legal entity in India which are discussed below:
1. Utility Bill for the Virtual/Registered Office of the Company (Latest Month's)
2. Rent Agreement for the Virtual/Registered Office of the Company (If Rented)
3. No Objection Certificate for the Virtual/Registered Office of the Company (If Owned)
4. Total Authorised Capital of the Company
Known as the Registered Capital or Nominal Capital of the Company, Authorised Capital is the Maximum Amount of Share Capital that a company is allowed to issue to its shareholders as per its constitutional documents. Shares are defined as the financial instruments that form units of the overall capital. It is used to raise funds from the general public.
5. Total Paid Up Capital of the Company
Paid-up capital is the amount of money received by the company when it issues or sells its shares to the shareholders and investors. In other words, it is the money that the investors give to the company on buying a share in that company and this amount has to be deposited into the company's bank account within 180 days of Incorporation of Legal Entity in India which can thereafter be withdrawn and used for business purposes.
6. Shareholding or Ownership Ratio of the Company: Shareholding Ratio means for each Shareholder, the ratio of the number of the Shares held by each such Shareholder bears to the total number of the Shares then issued and outstanding.
7. Main Objects/Activities of the Company
The Main Object Clause of MOA defines the Scope of a Company’s Business Activities. The Object Clause is the one of the 6 clauses a Company’s Memorandum of Association contains, that aims to define the primary business activities of a Company. The company is restricted to conduct only those activities which are mentioned in the Object Clause. So, to expand and alter the scope of its activities, a company will have to first change the object clause of its MOA. Understanding the process of changing the Object clause is thus, quite crucial in this context.
8. Passport of Witness for Memorandum & Articles of Association: Details of One Witness shall be required for Memorandum of Association & Articles of Association who needs to be resident of the same country from where the Stakeholder's belong.
An apostille is a certificate that authenticates a document to be used in proceedings in a foreign country. An apostille guarantees the authenticity of a document signature and any notarial stamps/ seals affixed to the document. Apostilles are attached to the original document they are certifying and ensure that the certification will be accepted in any other countries that are members of the Hague Apostille Convention.
Apostilles are used to ensure that notarized legal documents are recognized as valid across borders. While every country has its own set of laws and procedures for notarizing documents, apostilles provide an international guarantee that these requirements have been met.
Apostilles are issued either by the Secretary of State from the state in which it originated or by the U.S. Department of State when federal documents are involved or by the Indian Embassy in respective country in which project is required/documents are to be verified.
List of Documents to be Apostille:
Personal Documents
1. Passport Copy as a Identity Proof
2. Business Visa (if visiting India)
3. Driving License as an Address Proof
4. Bank Statement/Mobile Bill as a Residency Status Proof.
To Be Prepared By TAXAJ
5. Memorandum of Association of Indian Company
6. Articles of Association of Indian Company
7. Not Having PAN Declaration of Foreign Stakeholders
8. DIR-2 of Foreign Stakeholders
9. INC-9 of Foreign Stakeholders
If Foreign Entity is going to hold the shares of Indian Company then additional documents for Foreign Entity required:
10. Apostille Copy of Resolution of Foreign Company Mentioning the name of Authorized Representative, Number of Subscription of Shares.
11. Apostille Copy of Charter of Foreign Company (MOA, Certificate of Incorporation or any other equivalent document as per the country of Incorporation).
12. Apostiled Copy of ID Proof of Authorised Representative, if such person is Non-Resident of India
Digital Signature Certificate has now become a prominent digital tool for the signing of personal or essential documents, records, and forms. Hence it is a tool for digitally signing the documents and forms to be filed with Ministry of Corporate Affairs for Incorporating a Legal Entity in India and also for compliances after that its used on regular basis for day to day business tax management.
Steps For Creation of Digital Signature Token
1. Sharing of One Time Password on Email or Clicking on "Verify Email" Option sent on Email while DSC Process.
2. Completing Video Verification
- Record video using camera on smartphone or computer.
- Read the statement shown on screen - loud and clear.
- Show documents to camera - Original Passport and Driving License (Both Sides)
- Applicant Face must be visible
- Duration of video will be for 30 seconds
- Click Upload after Completion.
Once the Apostiling process is done please share the scanned copies of the same over the email to connect@taxaj.com and courier the physical copies in 2 sets to our Registered Address mentioned in Footnote. The apostiled documents shall also be needed for bank account opening process thereafter.
This way we can continue the process without any delay.
As soon we receive the scanned copies of apostille documents, we shall be filing the same with Ministry of Corporate Affairs which takes usually 2-7 working days for processing and issuing the Incorporation Documents such as Certificate of Incorporation, Pan Card, TAN Number and related documents.
Once the Company is Incorporated then next step is completing the Immediate Post Incorporation Compliances which are as mentioned below:
Step I : Opening of Bank Account of Company.
Step II : Receipt of Subscription Money from Foreign Subscriber.
Step III : Filing of e-Form 20A – Declaration of Commencement of Business. (Within 180 Days of Incorporation)
Step IV : Collect FIRC Certificate from the Bank as per FDI Guidelines.
Step V : Issue Share Certificate to the subscribers.
Step VI : File FCGPR with RBI as per FDI Guidelines. (Within 30 Days of Incorporation)
Step VII: Appointment of Statutory Auditors for the Company (Within 30 Days of Incorporation)
After a business gets registered there is a long list of Compliances like maintaining Books of Accounts, Filing of Tax Returns, GST Returns, TDS returns, Secretarial Compliances and so on.
Taxation & Accounting
Preparation of Books of Accounts (Balance Sheet, P&L, Cash Flow statement).
Support in Statutory Audit of Accounts.
Filing of Annual Company Returns.
Maintenance of Statutory Registers and Records.
Preparation of Director’s Report and Board Report for Annual General Meeting and Board Meetings as mandated by MCA.
Expert Advisory for the year.
Any Additional Filings shall be on Ad-Hoc Basis as and when needed.
- Personal Income Tax Return filing of all the Directors
- Employees Salary Structure & Pay Slips Preparation for Optimum Tax Savings
- Employees applicable Taxes calculation & payment on Monthly Basis as EPF, TDS, ESI, Professional Tax, etc.
- Employees applicable tax returns filing on Monthly/Quarterly Basis such as EPF, TDS, ESI, Professional Tax, etc.
- Form 16 Generation at the end of the year
Additional Licenses or Compliances may be applicable depending upon the nature of company or business activities.
