Setting up a subsidiary company is a strategic move for businesses seeking to expand their operations in India or internationally. Subsidiary companies offer flexibility, limited liability, and the ability to operate independently while being controlled by the parent organization. This article provides a detailed, step-by-step guide on how to register a subsidiary company, covering all essential aspects like company incorporation, private limited company registration, and GSTregistration.

What is a Subsidiary Company?

A subsidiary company meaning is an entity owned or controlled by another company, known as the parent company. The parent company holds more than 50% of the subsidiary’s shares, giving it control over the subsidiary’s management and operations.

Key Features of a Subsidiary Company

-Separate Legal Entity: A subsidiary is distinct from its parent company.

-Limited Liability: Shareholders’ liabilities are limited to the extent of their investment.

-Operational Autonomy: The subsidiary can function independently while adhering to the parent company’s strategic directives.

-Scalability: Enables businesses to expand geographically or diversify operations.

Benefits of Registering a Subsidiary Company

-Ease of Expansion: Facilitates market entry without requiring a full-fledged setup.

-Risk Management: Limits liability to the subsidiary, protecting the parent company.

-Tax Efficiency: May benefit from local tax incentives or double taxation avoidance agreements (DTAA).

-Global Reach: Allows international companies to establish a presence in India.

Step-by-Step Guide to Register a Subsidiary Company

Step 1: Choose the Business Structure

Most subsidiaries in India are registered as private limited companies due to their limited liability and flexibility.

Step 2: Obtain Digital Signature Certificate (DSC)

All directors must obtain a Digital Signature Certificate (DSC) to file incorporation documents electronically.

How to Get a DSC:

-Apply through a certified agency.

-Submit identity and address proofs.

Step 3: Acquire Director Identification Number (DIN)

Each director needs a DIN, a unique identification number issued by the Ministry of Corporate Affairs (MCA).

How to Get DIN:

-File Form DIR-3 on the MCA portal.

-Provide identity and address proofs.

Step 4: Reserve the Company Name

Reserve a unique name for the subsidiary using the RUN (Reserve Unique Name) service on the MCA portal.

Tips for Naming:

-Ensure the name aligns with MCA guidelines.

-Avoid using a name already registered.

Step 5: Draft the Memorandum and Articles of Association (MoA and AoA)

-MoA: Outlines the objectives and scope of the company.

-AoA: Specifies the rules and regulations for the company’s management.

Step 6: File Incorporation Documents

Submit the following forms and documents on the MCA’s SPICe+ portal for online company registration:

-SPICe+ Form: Consolidates company incorporation, PAN, and TAN applications.

-AGILE-PRO-S Form: Includes GST registration and ESIC/EPFO enrollments.

-INC-9 Form: Declaration by the directors and shareholders.

-Required Documents:

-Identity and address proofs of directors.

-Proof of registered office address.

-MoA and AoA.

Step 7: Obtain the Certificate of Incorporation (CoI)

Once the documents are verified, the Registrar of Companies (RoC) issues the Certificate of Incorporation, marking the legal establishment of the subsidiary company.

Post-Incorporation Compliance

1. GST Registration: Register the subsidiary under the Goods and Services Tax (GST) to comply with tax regulations.

How to Apply:

-Visit the GST portal (gst.gov.in).

-Submit PAN, business details, and address proof.

-Receive the GSTIN (GST Identification Number).

2. AD Code Registration: If the subsidiary is involved in import-export activities, obtaining an AD Code (Authorized Dealer Code) is mandatory.

Steps to Get AD Code:

-Apply through your bank.

-Submit the Certificate of Incorporation, PAN, and proof of office address.

-Use the AD Code for customs clearance.

3. Open a Bank Account: Open a current account in the subsidiary’s name to handle business transactions.

4. Register Under Other Statutory Laws: Depending on the business activities, register under additional laws such as:

-Shops and Establishments Act.

-Provident Fund (PF) and Employee State Insurance (ESI).

Comparison: Subsidiary vs Private Limited Company

Subsidiary Company vs Section 8 Company

Common Mistakes to Avoid During Registration

-Choosing an Incorrect Business Structure: Assess the business’s long-term goals before selecting the structure.

-Incomplete Documentation: Ensure all required documents are accurate and complete.

-Ignoring Compliance Deadlines: File mandatory returns and registrations on time to avoid penalties.

Benefits of a Subsidiary Company in India

1. Ease of Market Entry: Foreign companies can establish a local presence without fully-fledged operations.

2. Legal Protections: Limited liability shields the parent company from excessive risks.

3. Operational Flexibility: Subsidiaries can independently cater to specific markets or projects.

4. Access to Incentives: Benefit from local tax holidays and government schemes.

Conclusion

Registering a subsidiary company in India is a strategic move for businesses seeking market expansion or operational diversification. The process involves several critical steps, from company incorporation to post-registration compliance like GST registration and AD code registration. Subsidiary companies offer advantages, including limited liability, operational flexibility, and scalability, making them an ideal choice for growth-focused enterprises.

FAQs

1. Can a foreign company set up a subsidiary in India?

Ans. Yes, foreign companies can establish subsidiaries in India, subject to compliance with the Foreign Exchange Management Act (FEMA) and FDI policies.

2. Is GST registration mandatory for a subsidiary company?

Ans. Yes, GST registration is required if the company’s turnover exceeds ₹20 lakhs or if it engages in interstate trade.

3. How long does the incorporation process take?

Ans. The company incorporation process typically takes 10–15 business days, depending on document accuracy and regulatory approval.

4. Can a subsidiary company be converted into a private limited company?

Ans. No, as a subsidiary company is already a type of private limited company, it operates under the same structure.

5. What is the cost of registering with a subsidiary company?

Ans. The cost varies but generally ranges from ₹15,000 to ₹30,000, including professional and government fees.

6. Is AD Code registration mandatory for all subsidiaries?

Ans. AD Code registration is mandatory only for subsidiaries involved in import-export activities.