Is prior RBI approval required to set up a wholly-owned subsidiary in India?
For most sectors falling under the automatic route of India's Foreign Direct Investment (FDI) policy, prior RBI or government approval is not required to set up a wholly-owned subsidiary. However, sectors falling under the government route, or investments from specific bordering countries under Press Note 3 (2020), do require prior government approval.
What is the minimum capital required to set up an Indian subsidiary?
There is no minimum capital prescribed under the Companies Act, 2013 for incorporating a private limited company as an Indian subsidiary; however, the actual capital brought in should be commercially reasonable to support the subsidiary's intended operations and any sector-specific FDI conditions.
Does an Indian subsidiary need to repatriate its profits to the foreign parent company?
No, repatriation of profits is not mandatory -- a subsidiary can choose to reinvest profits in India, subject to compliance with applicable tax and corporate law requirements. When dividends are repatriated, they are subject to applicable withholding tax under the Income Tax Act, potentially reduced by an applicable Double Taxation Avoidance Agreement.
Can a foreign company's Indian subsidiary be managed entirely by directors based outside India?
No, not entirely. Under Section 149(3) of the Companies Act, 2013, every Indian company, including a wholly-owned subsidiary, must have at least one director who has stayed in India for a total period of not less than 182 days in the previous calendar year.
What compliance obligations does an Indian subsidiary have beyond standard company law filings?
In addition to the annual RoC filings applicable to any Indian company, a subsidiary with foreign shareholding must file Foreign Liabilities and Assets (FLA) returns with the RBI annually, report share allotments to foreign investors through the RBI's FIRMS portal, and comply with applicable transfer pricing documentation for transactions with its foreign parent.
Do you offer a free legal consultation for setting up an Indian subsidiary?
Yes, an initial consultation is available to discuss FDI route eligibility, incorporation, and post-incorporation compliance for your subsidiary. You can call +91-9815580037 and ask for Mr. Harish Tiwari to schedule a discussion with the team.
