Formation of Subsidiary Company of a Foreign Company :

As per Companies Act, 2013, A Company is “ Subsidiary Company” of the other company ( i.e. the holding company ) in which holding company holds or controls over fifty percentage of the shareholding / voting power or controls the composition of Board of Directors of the  first company / Subsidiary Company.

  1. The Subsidiary Company can be private limited company or a public limited company depending upon the requirements.
  2. The benefits and requisites of incorporation of a private or public limited company are applicable to the Subsidiary Company.
  3. The Subsidiary of a foreign company incorporated in India is an Indian Company. However, one of the directors must stay in India for at least 182 days during the financial year.
  4. The foreign Company have full control over the business of the Subsidiary Company even with the Sectoral Cap i.e. shareholding less than 100%.
  5. The Investment by the Foreign Company can be on Repatriation basis or on non-repatriation basis.
  6. The Investment by the foreign company in the Subsidiary Company can be subject to Sectoral Caps stipulated in FDI Policy. The FDI is permitted under Automatic Route or with GOI permission as per FDI Policy.