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Incorporation of a Foreign Company in India

An Indian subsidiary is a separate legal entity that is controlled and owned by a foreign company, known as the parent company. The subsidiary operates under Indian laws and regulations while benefiting from the parent company's expertise, resources, and support.

The process of incorporating an Indian subsidiary involves several steps and legal requirements. It is important for foreign companies to understand and comply with the Indian corporate laws, regulations, and procedures to ensure a smooth and successful incorporation process.

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Advantage:

  • Limited Liability: One of the primary benefits of incorporating a subsidiary in India is the limited liability protection it offers. The liability of the parent company is limited to the extent of its investment in the subsidiary, safeguarding the parent company's assets from potential risks and liabilities in India.
  • Local Market Access: Establishing an Indian subsidiary provides foreign companies with direct access to the Indian market. India has a vast consumer base and a rapidly growing middle class, offering significant business opportunities across various sectors.
  • Strategic Expansion: An Indian subsidiary allows foreign companies to expand their operations strategically. They can customize their business model, products, and services to cater to the specific needs and preferences of the Indian market, thereby enhancing their competitive advantage.
  • Tax Benefits: India has a favorable tax regime for foreign companies. The subsidiary can take advantage of tax incentives, exemptions, and treaties to minimize tax liabilities and optimize the overall tax structure.
  • Intellectual Property Protection: India has a robust legal framework for protecting intellectual property rights (IPR). By incorporating an Indian subsidiary, foreign companies can enjoy stronger protection for their patents, trademarks, copyrights, and other intellectual assets.
  • Talent Pool: India is known for its skilled and educated workforce. By establishing a subsidiary, foreign companies gain access to a vast talent pool, enabling them to recruit and retain high-quality professionals who can contribute to the company's growth and innovation.


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Documents:

  • Memorandum of Association (MOA): This document outlines the company's objectives, business activities, and rules for internal governance.
  • Articles of Association (AOA): The AOA defines the regulations for managing the company's internal affairs, including the rights and responsibilities of shareholders and directors.
  • Declaration by Directors: The directors of the subsidiary must declare that they meet the eligibility criteria and are not disqualified from being appointed as directors.
  • Consent to Act as Directors: Each director must provide written consent to act as a director of the subsidiary.
  • Director Identification Number (DIN): Directors need to obtain DIN from the Ministry of Corporate Affairs (MCA). 
  • Digital Signature Certificate (DSC): Directors and authorized representatives must obtain a DSC, as many documents and filings with government authorities in India are done electronically.
  • Address Proof: Proof of the registered office address of the subsidiary, such as a lease agreement, utility bill, or ownership document, is required.
  • Identity and Address Proof: Directors and shareholders must provide their identity proof (passport, PAN card, etc.) and address proof (utility bill, bank statement, etc.).
  • No-Objection Certificate (NOC): If the registered office is not owned by the subsidiary, a NOC from the owner of the premises is required.
  • Power of Attorney: If any person is authorized to act on behalf of the subsidiary during the incorporation process, a power of attorney document is required.
  • Form DIR-2: This form contains the consent to act as a director by the individuals proposed to be appointed as directors of the subsidiary.

 



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