Subsidiary Company Registration In India- Some Advantages

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Subsidiary Company Registration in India- Some Advantages

Subsidiary company registration in India is one of the most popular forms of entity registration by foreign companies when they want to set up business in India in the form of incorporated entity.

As we know that foreign companies can Business set up in India in the form of Branch office, liaison office and project office which are unincorporated form of entity registration and also in the form of Private Limited Company, Public Limited Company and Limited Liability Partnerships which are incorporated form of company registration in India.

In this write up, we would try to understand the process of subsidiary company registration in India in a brief manner.

What is a subsidiary company

When a parent company holds more than 50% shares or control in the Indian company, Indian company becomes subsidiary of the parent foreign company. On the other hand, when parent company holds 100% shares or control of the Indian company, Indian company becomes wholly owned subsidiary of the parent company.

The control can be exercised by the parent ...
... company in the Indian subsidiary company in any of the following manner:

a) By controlling the composition of the BOD (Board of directors)
b) Or exercising control on more than one half of the total voting power in that company either by itself or together with one or more subsidiaries

What are the advantages of registering Indian subsidiary company by foreign company?

Some of the advantages of Indian subsidiary company registration are as under:

a) Indian company can retain or use the brand name of the parent company.

b) Indian company is considered as separate legal entity as compare to its parent, accordingly, unlike branch office which automatically becomes permanent establishment of its foreign company in India, Indian subsidiary company does not automatically becomes PE of its parent company.

c) The legal status of Indian subsidiary company is that of an Indian company, accordingly, it is taxable as domestic company at tax rates of either 15% or 22% or 25% depending upon case to case basis.

d) Indian subsidiary company has lowest tax rates as compared to branch office which is taxable at 40% plus surcharge and education cess and Limited liability partnerships which are taxable at 30% plus surcharge and education cess.

e) Indian subsidiary company has no restriction as far as business operations are considered. Unlike branch office, project office and liaison office which got permission from RBI for registration subject to engaging in only those activities which are permissible by RBI, Indian subsidiary company can be engaged in all the business activities which are permissible by its memorandum and article of association subject to RBI guidelines which prohibits foreign direct investments in some sectors. Also, for obtaining FDI in some sectors which are not covered in automatic routes, prior approval of FIFP or government authorities are required. Most of the sectors are covered under automatic route for FDI and only RBI needs to be intimated once money is received in India. Only in some sectors, prior approval of government authorities are required.

Thus, from the foregoing, it may be seen that there are many advantages of subsidiary company registration in India due to which India has witnessed tremendous growth in more and more subsidiary company registration in recent years.
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