Setting up a foreign subsidiary company in India is one of the most practical ways for global businesses to enter the Indian market. India offers a large customer base, competitive talent, and a stable legal system. The government has also simplified foreign investment rules over the years, making it easier for overseas companies to build a strong local presence.
If you are exploring this path, the process is straightforward when you understand how the laws fit together. What often slows companies down is missing documents, improper filings, or confusion about FEMA and RBI rules. This guide breaks down every step in simple terms so you can plan your entry with confidence.
What Is a Foreign Subsidiary Company in India?
A foreign subsidiary company in India is registered under Indian law but owned and controlled by a company based in another country. The foreign parent must hold more than 50 percent of the shares. Many sectors even allow 100 percent foreign ownership under the automatic route, which means no prior government approval is needed.
The foreign subsidiary company is treated as an Indian company. It pays taxes in India and follows the Companies Act, FEMA, RBI reporting rules, and local labor, GST, and operational laws. Even though the parent controls the company, the subsidiary has its own legal identity. This structure helps the parent expand in a stable and compliant way.
Why Companies Prefer Setting Up a Foreign Subsidiary
Before we get into the steps, it helps to know why this model works well.
- Full control over operations and branding
- Limited liability protection
- Local credibility with customers, banks, vendors, and government bodies
- Ability to hire employees directly
- Freedom to enter contracts, own property, and manage finances
- Clear rules for investment and profit repatriation
The subsidiary model offers more privilege than a liaison or branch office.
It allows complete business activity, which is why it has become the go-to structure for most foreign companies entering India.
Foreign Subsidiary Types of Entities Foreign Companies Can Set Up
| Wholly-Owned Subsidiary (100% Ownership) | Partly-Owned Subsidiary (More Than 50% Ownership) | |
| Shareholding | Parent company owns all shares | Parent company holds majority shares |
| Control | Full control over decisions, branding, and operations | Control stays with parent, but shared with local partners |
| FDI Route | Allowed in most sectors under automatic route | Allowed in many sectors; structure may vary by industry |
| Legal Status | Treated as an Indian company for tax and compliance | Also treated as an Indian company |
| Business Scope | Can carry out full commercial activities | Can carry out full commercial activities |
| Local Partnership | No local partner needed | Local partners hold remaining shares |
| Best For | Companies wanting full control | Companies needing local expertise or market access |
| Risk Sharing | Parent bears all risks | Risks shared with local partners |
Step-by-Step Process to Incorporate a Foreign Subsidiary Company in India
Setting up a foreign subsidiary company in india involves two major areas: incorporation under the Companies Act and compliance with FEMA/RBI for foreign investment. Let’s simplify the process:
Step 1: Check the FDI Rules for Your Sector
Foreign Direct Investment in India comes through two ways:
Automatic Route – No prior government approval needed
Approval Route – Prior approval required from the relevant ministry
Most of the manufacturing, IT, trading, consulting, e-commerce support, and service sectors fall under the automatic route. As long as the activity is not restricted, you can set up the foreign subsidiary company without any prior clearance.
It is important to confirm the sector before investing. This avoids delays or compliance issues later.
Step 2: Get Digital Signatures for the Proposed Directors
All company filings in India happen online, so the directors must obtain a Digital Signature Certificate (DSC).
For foreign directors, passport copies and recent photographs are needed. These must be notarized and apostilled or consularized depending on the home country.
Step 3: Apply for DIN for the Directors
A Director Identification Number (DIN), is a unique number issued by the MCA. It is mandatory for anyone who will be a director in the subsidiary. You can apply for DIN directly in the SPICe+ incorporation form, which saves time.
By law, at least one director must be an Indian resident. This person does not have to hold shares. They only need to meet the residency rule of staying in India for 182 days or more in
a financial year.
Step 4: Finalize the Company Details
Before filing the incorporation forms, confirm these details:
- Proposed company name
- Business activities
- Registered office address in India
- Shareholding pattern
- Number of directors
- Amount of share capital
- Details of the foreign parent company
The name should follow the naming rules and must be approved by the MCA. You can file two name options in the RUN or SPICe+ Part A form.
Step 5: Draft the Charter Documents
Two documents define how the subsidiary will work:
- Memorandum of Association (MOA) – outlines the scope of business
- Articles of Association (AOA) – sets rules for management
These must follow the Companies Act. If the foreign parent wants special rights or restrictions, they can be included in the AOA or in a shareholder agreement.
Step 6: Gather the Required Documents
This is often the most time-consuming part, so it helps to prepare early.
Documents from the Foreign Parent Company
- Certificate of Incorporation
- Memorandum and Articles (or equivalent charter)
- Board Resolution approving the investment
- Authorization letter naming a representative
- Identity and address proof of the authorized representative
Documents from Directors and Subscribers
- Passport
- Address proof
- Photographs
- Consent to act as director
Documents for the Registered Office
- Rent agreement or ownership proof
- Utility bill not older than two months
- NOC from the owner
All foreign documents must be notarized and apostilled or consularized.
A professional service provider like Finguru India can help verify the formatting and authentication requirements based on the country of origin.
Step 7: File Incorporation Forms with the MCA
The main incorporation happens through the SPICe+ system of the Ministry of Corporate Affairs. It includes:
- SPICe+ Part A – Name approval
- SPICe+ Part B – Company incorporation
- AGILE PRO – GST, EPFO, ESIC, bank account
- SPICe MOA and AOA
Along with the forms, attach the required documents. The Registrar of Companies reviews everything and may ask for clarifications. Once approved, you receive:
- Certificate of Incorporation
- Company Identification Number (CIN)
- Permanent Account Number (PAN)
- TAN for tax deduction
Your foreign subsidiary company is now officially registered in India.
Step 8: Open the Bank Account and Bring in the Share Capital
After incorporation, open a bank account in the company’s name.
The foreign parent sends the share capital through a bank transfer. The bank issues a Foreign Inward Remittance Certificate (FIRC), along with KYC documents required for FDI reporting.
This money must be allotted as shares within the timelines stated by FEMA.
Step 9: Complete FEMA and RBI Reporting
This step is critical. FEMA rules require reporting foreign investment within strict deadlines.
There are two main filings:
- SMF Form / FC-GPR – filed within 30 days from allotment of shares
- Entity Master and Business User Registration – done before FC-GPR
Along with the forms, attach:
- Valuation report
- FIRC
- KYC report
- Shareholder details
- Board resolutions
Stay organized from the beginning, missing FEMA reports can lead to pennalities
Post-Incorporation Compliance for a Foreign Subsidiary Company in India
Once the foreign subsidiary company is incorporated, it must follow annual and event-based compliance rules. These ensure transparency and good governance.
Company Law Compliance
- Hold the first board meeting within 30 days
- Appoint an auditor
- Maintain statutory registers
- Hold at least four board meetings each year
- Conduct an Annual General Meeting
- File the annual financial statements (AOC-4)
- File the annual return (MGT-7)
FEMA and RBI Compliance
- File Annual FLA return every year
- Report any changes in shareholding
- Report any additional foreign investment within the timelines
These filings help the RBI track foreign investment in the country.
Income Tax Compliance
- File income tax return every year
- Deduct and deposit TDS where applicable
- Comply with transfer pricing rules for related-party transactions
Transfer of the pricing documentation becomes important, when foreign parent provides services, loans or intellectual property to subsidiary.
GST Compliance
If the subsidiary provides goods or services covered by GST, it must:
- Obtain GST registration
- File monthly or quarterly GST returns
- Maintain GST records and invoices
Accounting and Record-Keeping
The subsidiary must maintain proper books of accounts and prepare financial statements of every year.
Books must be kept at the registered office unless the board approves another place.
Conclusion
Setting up a foreign subsidiary in India seem overwhelming at the start, but the process gets much clearer once you understand how the stages fit together. You move through incorporation, bringing in the investment, and completing the required filings in a steady flow. What really makes the difference is getting the paperwork right, meeting deadlines, and staying on top of the ongoing compliance under company law, taxation, and FEMA.
If you want reliable help with incorporation, drafting documents, and FDI compliance, Finguru India is a strong partner to consider.
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