Overview
An Indian Subsidiary is an Indian company in which a foreign company holds a controlling interest, typically more than half of the share capital, incorporated under the Companies Act, 2013. It is the most common route for foreign businesses to establish a wholly owned or majority-owned operating presence in India. Foreign investment into the subsidiary must comply with the foreign direct investment policy and the Foreign Exchange Management Act, 1999, with reporting to the Reserve Bank of India. The subsidiary is a distinct Indian legal entity with limited liability.
Objective
To incorporate an Indian company controlled by a foreign parent so the foreign business can operate in India under the Companies Act, 2013 and FDI norms.
Characteristics
- Foreign parent holds a controlling stake in the Indian company
- Incorporated as a private or public limited company in India
- Separate legal entity with limited liability
- Subject to the foreign direct investment policy and FEMA reporting
- Requires at least one director resident in India
Eligibility
- A foreign company or foreign nationals as shareholders
- At least two directors, with at least one resident in India
- A registered office address in India
- Investment in a sector permitted under the FDI policy
- Compliance with FEMA and RBI reporting requirements
Governing law
- Companies Act, 2013
- Foreign Exchange Management Act, 1999 (FEMA)
- Reserve Bank of India (RBI) and FDI policy
- Registrar of Companies (ROC)
The process
- 1Obtain digital signatures and identification
Proposed directors obtain Digital Signature Certificates and Director Identification Numbers, with foreign documents apostilled or notarised as required.
- 2Reserve the company name
A unique name is reserved through the MCA portal, often reflecting the foreign parent's brand where permitted under the naming rules.
- 3File the incorporation application
The SPICe+ form with the Memorandum and Articles, foreign shareholder documents, and director declarations is filed with the Registrar of Companies.
- 4Complete FEMA reporting after funding
After the foreign parent remits share capital, the company reports the foreign investment to the Reserve Bank of India through the prescribed filings within the applicable timelines.
Documents required
- Certificate of incorporation and charter documents of the foreign parent
- Board resolution of the foreign parent authorising the investment
- Passport and address proof of foreign directors and shareholders
- Identity and address proof of the resident Indian director
- Proof of registered office and No Objection Certificate
- Apostilled or notarised documents as required for foreign parties
Benefits
- A distinct Indian legal entity with limited liability
- Full operating presence to conduct business in India
- Ability to receive foreign direct investment under a clear framework
- Access to the Indian market, talent, and vendor base
- Credibility with Indian customers, banks, and authorities
Frequently asked questions
What percentage must a foreign company hold to make an Indian company its subsidiary?
A company becomes a subsidiary when the parent controls the composition of its board or holds more than half of its total voting power, usually through owning more than fifty percent of the share capital. The exact holding depends on the shareholding and control arrangement.
Is Reserve Bank of India approval always needed for foreign investment into the subsidiary?
Many sectors fall under the automatic route where no prior approval is needed, while some sectors require government approval before investment. In all cases the foreign investment must be reported to the Reserve Bank of India through the prescribed FEMA filings.