A Guide for Foreigners on Establishing an Indian Subsidiary 

While other entry strategies exist, establishing a wholly-owned Indian Subsidiary offers distinct benefits:

• Complete Control: A subsidiary allows the parent company 100% control over its operations, management, and strategic decisions, ensuring alignment with global objectives.

• Direct Market Access: It provides direct access to India's massive and growing consumer base, enabling businesses to localize products and services and build a strong brand presence.

• Enhanced Credibility: Operating as a registered Indian entity often instills greater trust among local customers, partners, and stakeholders.

• Access to Incentives: Indian subsidiaries can often leverage various government incentives, tax benefits, and schemes designed to promote foreign investment in specific sectors.

• Limited Liability: As a separate legal entity, the Indian subsidiary limits the liability of the foreign parent company, providing a layer of protection.

• Talent Pool: India boasts a rich pool of skilled and cost-effective talent across various sectors, which a subsidiary can readily tap into.

Setting up an Indian subsidiary primarily involves navigating the regulations of the Companies Act, 2013, and the Foreign Exchange Management Act (FEMA). Here's a simplified roadmap:

1. Choosing the Right Structure: The most common and recommended structure for an Indian subsidiary is a Private Limited Company. It offers flexibility, limited liability, and is well-suited for foreign investment.
   
   

2. Digital Readiness – DSC & DIN:

   • Digital Signature Certificate (DSC): All proposed directors of the Indian subsidiary will need a DSC to digitally sign electronic documents and forms for filing with the Ministry of Corporate Affairs (MCA).

   • Director Identification Number (DIN): Every director must obtain a unique DIN by applying through the MCA portal.

3. Name Approval: A crucial initial step is to apply for the proposed company's name through the "RUN" (Reserve Unique Name) service on the MCA portal. The name should comply with naming guidelines and be available.
   
   

4. Drafting Key Documents – MOA & AOA: The Memorandum of Association (MOA) and Articles of Association (AOA) are the foundational documents of the company. These define the company's objectives, rules, and internal management. These are typically drafted by legal experts specializing in corporate law.
   
   

5. Incorporation Filing (SPICe+): The comprehensive SPICe+ (Simplified Proforma for Incorporating Company Electronically Plus) form facilitates the incorporation process. This form integrates applications for company registration, PAN (Permanent Account Number), TAN (Tax Deduction and Collection Account Number), and sometimes even GST registration, EPF, and ESIC.
   
   

6. FEMA Compliance – Reporting FDI: Once the foreign investment is received, it's crucial to comply with FEMA regulations. This involves filing Form FCGPR (Foreign Currency – Gross Provisional Return) with the Reserve Bank of India (RBI) within a prescribed timeframe (usually 30 days from the date of allotment of shares).
   
   

7. Post-Incorporation Formalities:

   • Bank Account Opening: Opening a corporate bank account in India is essential for the subsidiary's financial operations.

   • GST Registration: If your business involves the supply of goods or services, Goods and Services Tax (GST) registration is mandatory.

   • Other Registrations: Depending on the nature of your business, additional registrations like Import Export Code (IEC), Shops and Establishment Act registration, or specific industry licenses might be required.

1. • While the process is streamlined, successfully establishing an Indian subsidiary requires a thorough understanding of Indian corporate law, foreign exchange regulations, and taxation. Challenges can arise from:

     1. Complex Regulatory Framework: India's legal landscape can be intricate, with overlapping regulations and frequent updates.

     2. Documentation Requirements: Ensuring all foreign documents are properly apostilled or notarized and translated can be a meticulous task.

     3. Sectoral Restrictions: Certain sectors have specific FDI limits or require prior government approval.

     4. Ongoing Compliance: Beyond incorporation, regular annual filings and adherence to various statutory compliances are crucial to avoid penalties.

   • This is where the expertise of seasoned professionals becomes invaluable. At Pulkit Kinkhabwala & Associates, we pride ourselves on providing comprehensive guidance and support to foreign entities looking to establish their presence in India. Our deep understanding of Indian corporate laws, FEMA regulations, and practical insights helps streamline the entire process, ensuring a smooth and compliant setup.

   • We believe in empowering businesses with knowledge. While this blog provides a general overview, each foreign investment is unique. We encourage you to reach out to us for a personalized consultation to discuss your specific business objectives and how we can help you successfully navigate the Indian corporate landscape. 

   • Please feel free to reach out us on info.pknassociates@gmail.com or +91 9426173791 in case of any query.