The ever-changing and ever- evolving global business landscape offers tremendous opportunities for everyone with a vision and plan. The trade barriers today are low the geographical boundaries only exist on a map or globe. That is why businesses around the world are trying to make a global mark by expanding their operations offshore and going international. Technology companies are no longer an exception. They have joined the bandwagon to expand their activities offshore, which is proving to be a profitable stride. They are doing so either by outsourcing a part of their business to developing yet, resourcefully rich countries like India.
While there are several effective options available to technology companies for the possible expansion, in this article, we will only talk about the wholly owned subsidiary model and strategic research for setting up a technology subsidiary company, largely through which numerous technology companies are establishing, managing and developing their businesses in India and reinforcing their brand- equity while earning huge profit.
Before we go further, and take a deeper dig at the topic, let’s first understand what a wholly-owned subsidiary company.
Wholly owned subsidiary company:
Foreign companies can set up wholly-owned subsidiary in sectors where 100% foreign direct investment is permitted under the FDI policy. Foreign equity in such Indian companies can be up to 100% depending on the requirements of the investor, subject to equity caps in respect of the area of activities under the Foreign Direct Investment (FDI) policy. For registration and incorporation, an application has to be filed with the Registrar of Companies (ROC). Once a company has been duly registered and incorporated as an Indian company, it is subject to Indian laws and regulations as applicable to other domestic Indian companies.
Features of wholly owned subsidiary company:
100% ownership gives greater control over the operations of the subsidiary company and lead to faster- decision making. This is northworthy feature of the wholly owned subsidiary company.
A wholly owned subsidiary company usually maintain direct or indirect operational control.
The financial advantages of a wholly owned subsidiary company include simpler reporting and more financial services. Additionally, the two companies can integrate their financial and other information technology systems to streamline business processes and reduces cost.
Because the parent company owns all the shares of a wholly owned subsidiary, there is no minority shareholders.
Advantages of technology subsidiary company in India:
In the list of preferred destinations where a parent company can set up a holding or subsidiary company and run it smoothly, profitably and sustainably. India has been able to secure a high-preference place for the foriegn multinationals, especially the technology companies.
But why should technology companies invest in setting up subsidiaries in India? Why is India an irresistible temptation as a location for the leading technology companies, especially from United States, to come and set up a subsidiary company here.
The answer to this question is simple and to a good extent.
Indian really holds an attraction for foriegn companies for subsidiary establishments. The reason is the rising economy, cost advantages, availability of skilled workforce and ease of running operations.
Besides, the government has been encouraging this too. To quote an example, if FDI comes through the automatic route, the parent company doesn’t even need an approval for the government. This expedites the process.
However, the pull is stronger for the technology companies. Technology is one of India’s core-competency areas and activity in this space in India only continues to grow.
According to the technology companies of India, the country’s digital economy has the potential to reach US$ 4 trillion by 2022. India Brand Equity Foundation (IBEF) expects Indian IT and Business Process Management (BPM) industry to grow to US$ 350 billion by 2025.
Clearly, these figures speak a lot. India technology industry has bright prospects and a promising future. The workforce is quite talented and easily available. The IT MNCs looking to expand surely find India a lucrative business geography.
What are the prerequisites for setting up a subsidiary in India?
(Document must be certified by Indian Consulate).
Procedure of establishing subsidiary company in India:
Stakeholders and directors: The first and foremost condition for setting up a subsidiary in India is that needs to have at least two shareholders and two directors. Also, it’s mandatory that at least one of the two directors is an Indian resident.
Digital signature certificates:
The directors must provide digital signature certificates. According to the IT Act, 2000, there are provisions to ensure that the documents are secure and authentic by using digital signatures on them and submitting them electronically.
Director identification number:For obtaining DIN an application in Form No. DIR – 3 should be filed on MCA Portal. DIN application is processed and approved by the Central Government through the office of Regional Director, Ministry ofCorporate Affairs. Form No. DIR – 3 must be accompanied by self attested Identity Proof (Copy of Passport is mandatory) and Address Proof (Utility Bills/Family Registers etc) and one recent passportsize color photograph of the Applicant. All the documents must be attested by a practicing professional viz. Practicing Company Secretary, Practicing Cost & Management Accountant or by a PracticingChartered Accountant. In case the ID Proof and Address Proof is not in the English language, then a certified translated copy of the same must be provided. All the above said documents should be notarized and consularized from Indian Embassies in that Country.
Name approval has to be obtained from the Registrar of Companies (“RoC”) by submitting an application in e form RUN. For this the promoters need to decide various items, which are mentioned in e-Form1. The name once approved by the authority is valid for 20 days. The Subscriber to the Memorandum and Articles of Association shall be the applicant for the availability of name application. A certified true copy of Board Resolution of the holding or parent copy, giving no objection for the incorporation of a Wholly Owned Subsidiary in India and authorising any person to sign the application on its behalf should be provided. The certified true copy of the Board resolution should also be notarized and consularized from the Indian Embassies located in the country, where promoters or the parent company is situated.
The subsidiary company must have a registered office in India so that the parent company has an official physical address and any verification and communication activity by the ministry of corporate MCA can be performed easily.
Once all the steps above completed, only few other formalities remain such as name approval application, documentation, declaration etc, and taxation process to follow. The entire process generally takes three to six months.
How can you a partner with a technology company to set up a subsidiary company?
A partnership with an Indian technology company with strong credentials can multiply the success chances considrebly. It is because its credibility must be backed by years of proven success and it has the location advantage.
The partner must be completely aware of the market dynamics and have access to all required resources including talent, logistic, taxations etc. That’s why you need a consultant who will guide effortlessly.Here are the
professionals will guide you how you can wholly owned subsidiary in India and minimize the obstacles that you may have while incorporating an entity in India. Unilex Business Consultants is one of the fastest- growing companies that sole purpose to help foreign companies to own subsidiary in India effortlessly. So, if you are looking for a renowned legal consultant in India, get in touch with via email or phone number.
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