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Subsidiary In India

Subsidiary In India

Foreign companies can set up wholly-owned subsidiary in sectors where 100% foreign direct investment is permitted under the FDI policy. The wholly-owned subsidiary may be either of the following business entities:

  •     Private Limited Company
  •     Public Limited Company
  •     Unlimited Company
  •     Sole Proprietorship

Foreign Companies can also set up their operations in India through the business entities:

  •     Liaison Office/Representative Office
  •     Project Office
  •     Branch Office
Such offices can undertake any permitted activities. Companies have to register themselves with Registrar of Companies (ROC) within 30 days of setting up a place of business in India.
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Private Limited Company as a Subsidiary
A private company is a company which has the following characteristics:

  • shareholders’ right to transfer shares is restricted;
  • the number of shareholders is limited to fifty; and
  • an invitation to the public to subscribe to any shares or debentures is prohibited.
A Private Limited Company is the most popular form of business entity used for Foreign Investors in India, including USA investors in India. It takes some time to incorporate in India as there are various steps required in forming a private limited company in India.
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 Public Limited Company as Subsidiary

A public company is defined as a company which is not a private company. The following conditions apply only to a public company:

  • It must have at least seven shareholders.
  • A public company is not authorized to start business upon the grant of the certificate of incorporation. In order to be eligible to commence business as a corporation, it must obtain another document called "trading certificate".
  • It must publish a prospectus or file a statement in lieu of a prospectus before it can start transacting business.
  • A public company is required to have at least three directors.
  • It must hold statutory meetings and obtain government approval for the appointment of the management.
There are several other provisions contained in the Companies Act 1956 which are applicable only to public companies and should be consulted.
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