Introduction
When a company is managed by another company, it is referred to as a subsidiary company. The company that manages the subsidiary company is known as a parent or holding company. The holding company can act as the largest shareholder as it holds the majority of shares in the subsidiary company. In this article, we will discuss all about the registration of an Indian Subsidiary with its four different types.
Registration of Indian Subsidiary Company
A subsidiary company is one that is owned and controlled by the holding company, as defined in Section 2(87) of the Companies Act, 2013. In other words, a subsidiary company can be registered only if the holding company owns 50% of the shares of the Indian Subsidiary.
Four different business structures as an Indian Subsidiary
Private Limited Company as an Indian Subsidiary
The quickest and easiest way to enter India for foreign nationals and businesses is through the incorporation of a Private Limited Company. A Private Limited Company receives 100% of Foreign Direct Investment (FDI) under the automatic method, which exempts such investments from Central Government permission. Therefore, the formation of a Private Limited Company as a wholly owned subsidiary of a foreign company or joint venture is the most reasonable, transparent, and quick way for foreign corporations and foreign nationals to enter India.
Limited Liability Partnership (LLP) as an Indian Subsidiary Company
Because 100 percent FDI in LLP is now permissible, forming a Limited Liability Partnership (LLP) is also an entrance strategy for a foreign national or foreign citizen into India. Due to the fact that an LLP cannot have shareholders and must be represented by partners, it is a great choice for investment vehicles and professional firms.
Partnership Firm or Proprietor Firm as an Indian Subsidiary Company
The most basic company structures are proprietorship and partnership firms, which are commonly used by small businesses or unorganized operators. Foreign investment in partnerships or sole proprietorships must have prior RBI (Reserve Bank of India) approval. As a result, sole proprietorship or partnership businesses are most suitable for foreign investment from companies or foreign individuals in India.
Project Office, Branch Office, or Liaison Office as an Indian Subsidiary Company
Registration of a branch office, liaison office, or project office is required to get approval from RBI and/or other governmental authorities. Therefore, registering a branch office, liaison office, or project office by a foreign company will be more expensive and require more time than starting a Private Limited Company. Moreover, project offices, liaison offices, and branch offices cannot be opened by foreign businesses. Therefore, NRIs are the only group that can use this strategy to join Indian markets.
Bottom line
A company will need to establish subsidiaries if it wishes to expand across industries and geographical boundaries. Subsidiaries act as an additional set of arms for the parent company, enabling it to reach out to various regions, industrial sectors, and countries. An Indian subsidiary company is legally regarded as an Indian business and has to abide by all laws that apply to Indian companies.
