Why is an Indian subsidiary of a foreign company beneficial for business?

Opening an Indian subsidiary of a foreign company can prove as a highly rewarding decision for any foreign business venture. Over the past two decades, the entire world has shifted its eyes towards Asia, looking at the pace of progress here. India is the locus of this growth. The land that is known for its ancient heritage is also home to over 17.5% of the world population. Hence, one can truly find multiple binding reasons to expand as an Indian subsidiary of a foreign company in this country.

South Asian states such as India and China are particularly exceeding in the education market. India produces hundreds of thousands of professionals, including doctors, lawyers, accountants, and engineers, yearly. This educated populace makes a highly useful workforce for business concerns.

India is also a country that learns to adapt to work with the respective technology innovations. These facts point to the fact that it is a promising decision to have an Indian subsidiary of a foreign company.

What is the meaning of a subsidiary and why setting up an Indian subsidiary of a foreign company can prove life-changing for many entrepreneurs; read more to understand!

What is a Subsidiary Company?

A subsidiary company is referred to as a company that is predominantly controlled by another company, also known as the parent company. As per the Companies Act 2013, a subsidiary company means a company where another company, even called the holding company, directly or indirectly governs more than half of the voting power or manages the composition of the board of directors of such subsidiary. The Indian subsidiary of a foreign company is a company that is controlled by a corporation registered in a foreign state.

Prominent factors to have an Indian Subsidiary of a Foreign Company

Increasing insourcing opportunities in India

A study indicates that India is one of the very ideal destinations to set up offshore development entities due to its exceptional outsourcing market. The growth of the country's outsourcing industry is over 30 percent in various sectors, including finance, HR, IT, and healthcare. However, rather than outsourcing to third-party ventures, one can delegate their operational needs by setting up a subsidiary in India. Deploying the business tasks inside the company rather than outside the company is generally called insourcing. With insourcing, one can tackle the issue of lesser trustworthiness and control. Suppose you set up an Indian subsidiary of a foreign company under your administration. In that case, you have better capabilities than an outsourcing firm to employ a highly skilled person within the company.

Global companies can create such a strategy to thrive ahead. Setting up an Indian subsidiary of a foreign company is a great way to insource your business demands. You can make use of the resources available locally to cater to the growing needs of your business.

Find a vast technical talent pool

India is the land that has contributed immensely by producing many crackerjack scientists, doctors, engineers, and accounting experts. Many multinationals have found enormous progress after setting up their wings in India.
IBM stands as the testimonial of sourcing success, as they were among the first to set up their subsidiary on Indian soil in 1992. IBM had registered a massive growth in its Indian office over the years and now retains thousands of employees and generates millions of dollars in revenue. Many technology companies are now showing a substantial interest in moving their offices to India. Already giants like Microsoft and Google have set up their Indian offices. It is high time for other foreign ventures to have an Indian subsidiary of a foreign company and use the technical skills talent pool flooding the country.

Adopt a low-cost operations approach

In India, the cost of procurement of resources such as labour, raw materials, and land is quite subsidized compared to the first world nations. The government also offers many incentives to foreign investors, which lowers their overall outlay. Many small and medium foreign companies are also opting for insourcing and setting up an Indian subsidiary to profit from the reduced working cost. Thus, they are able to emerge as top competitors beating down their rivalries in style.

Enter into a new and vibrant market

If you decide to have an Indian subsidiary of a foreign company, you will find the advantage of a large market locally. India boasts of a very vibrant market where people from different income strata are available. You can target to sell your products and services to a vast population and find mammoth success in lesser time.

Understanding the Process to set up an Indian Subsidiary of a Foreign Company

India wields considerable human resources and provides the perfect landscape for companies to thrive and diversify in their business. As the fastest growing nation globally, many foreign companies are exhibiting desires to start their branch or launch a project in India.

How to Start an Indian Subsidiary of a Foreign Company?

To start an office, the Indian subsidiary of a foreign company needs to follow a set of legal apparatus and procedures that makes them eligible to have a safe business relationship with the nation. A foreign company can conduct business in India through Subsidiary, Branch Office, Liaison Office, or Project Office. Each of these is unique procedures and requirements; simultaneously, it needs to comply with the RBI rules to qualify for a successful registration. All in all, developing an Indian subsidiary of a foreign company is the best possible way to enter Indian territory.

To become an Indian subsidiary, you need to integrate or incorporate with a Private Limited Company in India, and there are a series of requirements one needs to comply with meticulously. The documents required for an Indian Subsidiary of a foreign company include supporting documents with a minimum of two directors (One Indian Director has to be an Indian Resident) and a good title for the subsidiary. When these paper works are accessible, Digital Signature Certificate and DIN (Director Identification Number)must be obtained by the Indian subsidiary of a foreign company from the Ministry of Corporate Affairs.

Once the DIN and the Digital Signature are obtained, petition for company name availability. After approval of the subsidiary name, a Memorandum of Association is drafted and documented within 60 days to finalize the incorporation procedure. At least two shareholders are expected for a private limited company. Therefore, the foreign country's brandishing company must pass a Board Resolution for incorporating a subsidiary company in India and subscribing shares of the proposed Private Limited Company.

The Indian subsidiary of a foreign company can hold 99.99% of the shares of the Indian Company. In comparison, 0.01% of the Private Limited Company's issued shares can be clenched by an Indian in confidence with the foreign company. Once the Incorporation Certificate is collected, one can open the bank accounts and apply for the essential licenses.

Simplify the Complex Process of Setting up an Indian Subsidiary of a Foreign Company with GoTaxfile!

GoTaxfile can adroitly aid your entity in commencing your journey as an Indian Subsidiary of a foreign company. Our firm can help you immediately access a stellar professional team of CAs, CPAs, and Corporate Secretaries to start and operate your subsidiary seamlessly. We maximize efficiency by taking your stress and managing the end-to-end documentation involved in the process. For your future operations, we can even back you with our accounting and tax proficiency. Schedule a call with our team now!