A subsidiary company is an entity controlled by another company, known as the holding company. In India, setting up a subsidiary involves multiple legal processes, including company registration, private limited company registration, OPC registration, Section 8 company registration, GST registration, GST cancellation, and AD code registration. The legal requirements, steps, and compliance obligations are crucial for a smooth registration process.
What is a Subsidiary Company?
A subsidiary company is a business entity where another company (holding company) owns more than 50% of its shares and has control over its decisions and management. The subsidiary may have its own board of directors and operate independently but is still influenced by the holding company.
Subsidiary Company Meaning
The term subsidiary company refers to a company that operates under the ownership and control of another company. The holding company has the authority to make major decisions regarding the subsidiary’s business strategies, policies, and operations.
Subsidiary Company Examples
Some real-world examples of subsidiary companies include:
-Google LLC is a subsidiary of Alphabet Inc.
-Tata Motors and Tata Steel are subsidiaries of Tata Sons
-Reliance Jio and Reliance Retail are subsidiaries of Reliance Industries
Holding Company and Subsidiary Company: The Relationship
A holding company is a business entity that owns controlling shares in one or more companies but does not necessarily conduct business operations itself. Instead, it manages, controls, and directs the activities of its subsidiaries.
A subsidiary company, on the other hand, is an independent legal entity but remains under the ownership and control of the holding company.
Key Difference Between Holding and Subsidiary Company
A holding company primarily serves as an investor and managerial entity, while a subsidiary company engages in business activities and revenue generation.
Legal Requirements for Subsidiary Company Registration in India
To set up a subsidiary company in India, you need to comply with Companies Act, 2013 and other applicable laws. The type of company structure depends on your business goals.
1. Private Limited Company Registration
Most subsidiaries in India are private limited company registration due to limited liability protection and ease of management.
Requirements for Private Limited Company Registration:
-Minimum two directors and two shareholders
-A registered office address in India
-Digital Signature Certificate (DSC) and Director Identification Number (DIN)
-Memorandum of Association (MOA) and Articles of Association (AOA)
2. OPC Registration (One Person Company)
If the subsidiary has only one director and one shareholder, it can be registered as a One Person Company (OPC). OPCs are suitable for small businesses, but they must be converted into private limited companies if their annual turnover exceeds ₹2 crore.
3. Section 8 Company Registration
A Section 8 Company is a non-profit organization that can also be a subsidiary. If the holding company wants to operate in education, charity, social welfare, or research, this registration is applicable.
4. GST Registration
All companies involved in trading, manufacturing, or service activities must apply for GST registration if their annual turnover exceeds ₹40 lakh (₹20 lakh for service businesses).
Documents Required for GST Registration:
-PAN card of the company
-Aadhar card of directors
-Company incorporation certificate
-Bank account details
-Address proof of business premises
5. GST Cancellation
If the subsidiary ceases operations, it must apply for GST cancellation to avoid tax penalties. GST cancellation can be done online via the GST portal by submitting a closure request.
6. AD Code Registration
If the subsidiary is engaged in exports, it must apply for AD Code registration (Authorized Dealer Code). This code is issued by banks and is required for receiving export payments through customs authorities.
Step-by-Step Process for Subsidiary Company Registration
Step 1: Choose the Type of Company
Decide whether your subsidiary will be a private limited company, OPC, or Section 8 company based on your business objectives.
Step 2: Obtain Digital Signature Certificate (DSC) & Director Identification Number (DIN)
-DSC is required for filing electronic documents.
-DIN is mandatory for directors of the subsidiary company.
Step 3: Name Approval from MCA
-Apply for name approval using RUN (Reserve Unique Name) service on the MCA portal.
-Ensure the name is unique and complies with naming guidelines.
Step 4: Draft MOA & AOA
-Memorandum of Association (MOA) defines the objectives of the company.
-Articles of Association (AOA) outlines the rules and regulations.
Step 5: File Registration Application (SPICe+ Form)
-The SPICe+ form is used to register a subsidiary online.
-Attach all required documents, including MOA, AOA, PAN, and address proof.
Step 6: Obtain Certificate of Incorporation
-Once approved, the Certificate of Incorporation (COI) is issued.
-This certifies the legal existence of the subsidiary company.
Step 7: Apply for GST & AD Code Registration
-Register for GST if applicable.
-Apply for the AD Code if involved in exports.
Compliance Requirements After Registration
Once registered, the subsidiary must fulfill the following compliance obligations:
-Annual ROC (Registrar of Companies) Filing
-Filing of Income Tax Returns (ITR)
-GST Return Filing (if applicable)
-Conducting Board Meetings & Annual General Meetings (AGM)
-Maintaining financial records & books of accounts
Failure to meet these compliance requirements can result in penalties and legal issues.
Conclusion
Setting up a subsidiary company in India involves multiple legal steps, from private limited company registration to GST registration and AD code registration. The difference between holding a company and subsidiary company is crucial in understanding ownership structures. Proper compliance ensures smooth business operations and long-term sustainability.
Whether you choose OPC registration, Section 8 company registration, or private limited company registration, it is essential to follow the correct procedures to avoid legal challenges.
Frequently Asked Questions (FAQs)
1. Can a foreign company set up a subsidiary in India?
Ans. Yes, foreign companies can establish a wholly owned subsidiary or joint venture subsidiary in India by complying with FDI (Foreign Direct Investment) regulations and Company Law provisions.
2. What is OPC Registration, and can it be used for a subsidiary?
Ans. One Person Company (OPC) registration is for businesses owned by a single individual. While OPCs can be subsidiaries, they must convert into a private limited company if their turnover exceeds ₹2 crore.
3. What is the role of a Section 8 Company in subsidiary registration?
Ans. A Section 8 Company is a non-profit organization, and subsidiaries under this category work for charitable, educational, or social welfare purposes.
4. Is GST Registration mandatory for a Subsidiary Company?
Ans. Yes, GST registration is mandatory if the subsidiary’s annual turnover exceeds ₹40 lakh (₹20 lakh for services). It is also required if the company is engaged in interstate trade or exports.
5. How can a Subsidiary Company cancel its GST Registration?
Ans. A company can apply for GST cancellation through the GST portal by submitting a cancellation request and clearing all pending tax liabilities.
6. What is AD Code Registration, and is it required for subsidiaries?
Ans. AD Code (Authorized Dealer Code) registration is required for export businesses. It allows companies to process international payments and comply with RBI regulations.
