Foreign Subsidiary Company Incorporation in India

Incorporation of Foreign Subsidiary in India

Whenever a person wants to incorporate a foreign subsidiary or wholly owned subsidiary in India, there would be few questions that would come in our mind. In this article, I would like to clear such doubts in best possible manner.

Step by step involved in Foreign Subsidiary Company Incorporation in India:

Step 1:  Name Reservation with Ministry of Corporate Affairs:

> The name of the Company has to be finalised at least two names required to apply for the Incorporation.

> The name of the company should be in consonance with the Rule 8 of the Company Incorporation Rules, 2014. If a foreign company is incorporating its subsidiary company in India, then the original name of the holding company as it may be allowed with the addition of word India or name of any Indian State or city if available.

> The documents required to be attached with Name Application:

• The Main Objectives of the Company- The same is required to be mentioned in the Memorandum of Association of Company which has to be submitted with SPICE Main application with MCA.
• The Apostille Board resolution from the Body Corporate to apply for Name reservation with MCA.
• Apostilled copy of COI of the Foreign body corporate which is translated in English Language.

> Once we receive the name approval, the application number will be generated and it will be valid for first twenty days. We have to submit the incorporation application in Spice Part B form. It can be extended by 40 or 60 days by making payment of additional fees in accordance with Rule 9A of Incorporation Rules 2014. Practically we have to extend the name since the incorporation documents has to be apostilled and notarised from the foreign country which needs some more time.

Application Number refers to a system generated number given to an application for Name reservation/Incorporation which is yet to be submitted/uploaded by the user. The application number can be used for any communication with ROC Central department for any queries/ doubts arsing during the application submission process.

Step 2:  Obtaining Digital Signature certificate for the subscribers and Directors:

> Obtaining DSC for the subscribers and Directors is a pre- requisite for any Incorporation. We can obtain the DSC of the resident Director in India first to proceed with the foreign subsidiary In India as Spice Part B form and AGILE form only required to be submitted with MCA as it requires only one Director DSC apart from practising professional which is required in Spice Part B.

Step 1 & Step 2 can be done simultaneously as it helps to reduce the timeline required for Incorporation. it is advisable to apply the Name application first then to submit the incorporation application rather than applying together i.e., Name reservation & Incorporation Application. 

Step 3: Documents required along with Incorporation Application (Spice Part B):

Considering a hypothetical situation minimum two Directors out of which shall be a resident in India & two subscribers out of which one shall be a body corporate holding more than 50% and other one will be a individual subscriber holding the remaining percentage of shares.

Documents/ Information from the foreign Company

> Apostilled/ Notarised copy of board resolution specifying the authorization to subscribe to the memorandum of association of the proposed company/the number of shares proposed to be subscribed by the body corporate/ the name, address and designation of the person authorized to subscribe to the Memorandum.

> Details of Authorised and paid-up capital with share allocation.

> Registered office address in India. NOC from Main Owner and Utility Bill required. If not available, the same can filed within 30 days from the incorporation date. It is advisable to file after incorporation as there is high chances of resubmission if utility bill address is not clear.

> Details of the Resident Director/ Individual subscriber: Name, Father/Mother name, educational qualification, E-mail ID and Phone Number along with soft copy of passport size photo, Notarised/ apostilled copy of passport plus residential address proof i.e., Bank statement/ Electricity Bill/ Telephone Bill which is translated in English.

> Physical copies of MOA/AOA apostilled/notarised.

> INC-9 declaration of subscribers/ Directors apostilled /notarised.

> PAN Undertaking from Subscribers/ Directors / Authorised representative in respect of not having PAN apostilled and notarised.

>DIR-2 of Director apostilled/ Notarised. Apostille and notarisation not required for the resident director.

> Specimen signature of the Resident Director who would be authorised signatory in the AGILE Form.

Points to ponder:

• The Authorised representative of Body Corporate can be a Director in the Indian Company.
• The person so authorized shall not, at the same time, be a subscriber to the Memorandum and articles of association of company
• In case the Subscriber/ Director is already having a DIN, declaration to the effect that particulars provided in the application have been updated as on date of application shall suffice, the proof of identity and residence need not be attached.
• Scanned copies of the above documents would suffice. However, it is advisable to obtain the hard copies for the practising professionals who would be certifying the e-form.

Step 4: fill the information in the Online form.

After the receipt of the above documents, we can proceed with the online application with MCA. This is a web-based form and can be saved online.  Two forms Spice Part B and AGILE.

> We have to input all necessary details in the web-based form and have to attach the necessary signed documents obtained in Step:3.

>PAN & TAN details should be filled in the form and Area code is available in the help kit.

> After filling the form Spice Part B, the AGILE form shall appear.

• GST Registration- If the Company wants to apply for GST, then they can select yes and should add supporting documents. However, it is advisable not to apply as it consumes more time to obtain GSTIN Number while applying through Incorporation.
• EPFO/ ESIC Registration- it is mandatory to apply the same. The Code Registration number will be sent to the Registered e-mail ID after the Incorporation.
• Bank Account- it is mandatory to apply the same. Bank Branch will be assigned according to the nearest location of the Registered Office. Practically, the bank account will be created and the Bank officials shall make a call to the registered phone number for the KYC document processing.
• Professional Tax Registration- it is available for Maharashtra, West Bengal and Karnataka as on date. Practically we won’t receive any e-mail regarding the confirmation of PT Reg Number. Hence, we will apply separately.
• Shop and Establishment Registration- it has been included with effect from 7^th June 2021. However, the database integration is yet to happen. Hence, we will apply separately.

> After filing the above two online forms, we can download the form in pdf and upload the forms as linked forms after affixing the DSC and by making payment of requisite fees.

Step 5:  Certificate of Incorporation

After the CRC verifies the form and it is found to be proper and justified that the application can be approved, the department shall issue Certificate of Incorporation along with PAN and TAN details.

Post Incorporation

• Filing of form INC-22 for the confirmation of registered office within 30 days from the date of Incorporation if not applied along with Incorporation.
• Appointment of First Auditor ADT-1 within 30 days of the Incorporation.
• Receipt of share subscription money from the foreign subscriber and collect FIRC and KYC copies from the AD Bank.
• Filing of form INC-20A for the declaration of commencement of business.
• Issue of duly stamped share certificate to the subscribers
• Filing of FC-GPR web-based form with RBI for the reporting of foreign investment.

Few Things to be taken care in Foreign Subsidiary Company Incorporation in India:

• The same user login ID which was used for reserving the name has to be used for submitting and uploading Spice+ and other linked forms.
• Companies getting incorporated through SPICe+ with an Authorized Capital up to INR 15,00,000 would continue to enjoy ‘Zero Filing Fee’ concession. Such companies will be levied with only stamp duty fees as may be applicable on state-to-state basis.
• Changes/modifications to SPICe+(even after generating pdf and affixing DSCs), can be made up to five times by editing the same web form application which has been saved, generating the updated pdf affixing DSCs and uploading the same. It allows the applicant to modify the data without filing the entire form again, thereby saving substantial time and efforts.
• First directors not having DIN/Subscribers having PAN shall associate their DSC under’ authorised representative’ by providing their PAN. Once DIN is allocated for first directors post approval of SPICe+, DSC may be updated against DIN by using ‘Update DSC’ service.
• Compliances are not required to be carried out in respect of EPFO and ESIC provisions until the company surpasses the threshold limit provided in EPFO and ESIC provisions.
• Signatures should not be copied and pasted in the attached documents (in this regard action u/s 447/448 of the Companies Act, 2013 can be initiated in case of any such case is noticed).
• Maximum size of attachment in SPICe+ is 6 MB for each of the PDF form.
• As per Rule 38 of companies (Incorporation) Rules, 2014 two re-submission are allowed to remove the defects in SPICe+ forms.