A Subsidiary Company is also commonly known simply as a subsidiary or a sister company; and the company which practices control over it, is known as the parent company, or holding company. A subsidiary company can be controlled by the parent company partially or completely.
For setting up a subsidiary, the parent company must own at least 50% of the subsidiary. When the holding company owns 100% of the subsidiary then the subsidiary is known as a wholly-owned subsidiary of the parent company. Note that the subsidiary company of a foreign parent company is a separate legal entity, and the subsidiary company is obligated to function under the rules and regulations of the country where it is situated.
A company can be registered as a private limited or public limited company:
- A private limited company is not open to the public and enjoys the privileges over Public Company given by the Companies Act, 2013.
- A public limited company is a company where the public holds an interest in it and it is required to comply with numerous rules and regulations as specified by the Companies Act, 2013.
A foreign company’s wholly owned subsidiary company in India comes into being when a foreign company makes 100% FDI (Foreign Direct Investment) in India through an automatic route. This is possible where 100% FDI is permitted and no former approval of Reserve Bank of India is necessary. Under automatic route, former approval of Government and RBI is not required and FDI is allowed without these permissions.
Documents required for registration of Subsidiary Company
1. Indian National
• PAN Card (mandatory)
• Address proof
• Photo ID Proof
2. Foreign National
• Passport (mandatory)
• Address Proof (Document must be certified by the Indian Consulate)
• Photo ID Proof (Document must be certified by Indian Consulate)
Minimum requirement to incorporate a Pvt. Ltd. Company
1. Two directors
2. Two shareholders
Procedure to incorporate Subsidiary Company
- Once the minimum requirements are fulfilled the owners can begin the incorporation procedure.
- To start with incorporation os subsidiary company, two directors apply for DSC (Digital Signature Certificate), and all the directors must apply for DIN (Director’s Identification No.).
- The applicant is required to apply for the name of the company in Form INC-1.
After obtaining name approval from ROC (Registrar of Companies), an applicant is required to file –
• Form INC-7 (Application for Incorporation of Company (Other than One Person Company)
• Form DIR-12 (Particulars of appointment of directors and key managerial staff; and
• Form INC-22 (Notice of the situation) along with Memorandum and Articles of Association of the Company.
- After filing of the incorporation documents, payment of online ROC fees and Stamp duty is done by the applicant. (This is based on the authorized capital of the company).
- After the fees are paid, ROC verifies the filed documents. Form INC-22 and DIR-12 are approved via the Straight-Through-Process (STP) and the ROC verifies Form INC-7 in detail. The ROC may suggest some changes in the form or attachment.
- Once the changes have been affected and the ROC is satisfied, Certificate of Incorporation is sent to the applicant via email.
If the aforementioned documents are available and the right procedure is followed, then there will not be any unnecessary delays and the company can be incorporated at the earliest. However, We at LegalRaasta can help you to incorporate a subsidiary company easily.