Setting Up an Indian Subsidiary of a Foreign Company

Quick answer

An Indian subsidiary of a foreign company is an ordinary Indian private limited company with foreign shareholding, incorporated through SPICe+. Three things decide whether it is set up cleanly: at least one director who stays in India 182 days in the financial year (section 149(3)); apostilled or consularised parent and director documents, which is where most applications come back; and the FEMA reporting clocks — FC-GPR within thirty days of issuing the shares, filed in the Single Master Form on FIRMS.

Who this is for

You are a foreign company, or a founder abroad, setting up an operating entity in India — one that will hire, contract, invoice and bank here. It is written for the person who has to get the entity right, not just registered.

It does not cover the branch, liaison or project office route, which is what a genuine foreign company under section 2(42) uses. And it does not cover incorporating outside India — that is a different set of jurisdictions entirely.

First: a subsidiary is not a "foreign company"

This trips up a surprising number of people, including advisors, and it changes which rulebook applies.

Section 2(42) defines a foreign company as a company or body corporate incorporated outside India which has a place of business in India and conducts business activity here. That is the branch, liaison and project office world, with its own registration and its own annual filings.

An Indian subsidiary is not that. It is incorporated in India, so it is an Indian company governed by the Companies Act like any other, even where a foreign parent holds 100% of the shares. It files AOC-4 and MGT-7, holds an AGM, appoints an auditor and keeps statutory registers exactly as a domestically-owned private company does. The foreign ownership adds a FEMA layer on top; it does not substitute a different company-law regime underneath.

The practical consequence: everything in our company compliance checklist and ROC annual filing checklist applies to your subsidiary in full, plus the FEMA reporting below.

The resident-director requirement

Section 149(1)(a) requires a private company to have a minimum of two directors. Section 149(3) then adds the requirement that catches foreign parents:

Every company shall have at least one director who stays in India for a total period of not less than one hundred and eighty-two days during the financial year: Provided that in case of a newly incorporated company the requirement under this sub-section shall apply proportionately at the end of the financial year in which it is incorporated.

Three things follow.

It is a physical-presence test, not a nationality or residency-status test. The question is days in India during the financial year. An Indian citizen living abroad does not satisfy it; a foreign national who is actually here for 182 days does.

The proportionate rule genuinely helps in year one. A company incorporated in, say, January does not need someone to have been in India for 182 days by 31 March — the requirement applies proportionately to the part-year. It does not, however, help in year two.

It is a different number from the LLP test. An LLP designated partner needs 120 days under section 7 of the LLP Act. If you are choosing between a subsidiary and an LLP — and an LLP can receive FDI — check the right test rather than assuming they match.

In practice this is a structural decision to make before incorporation, not a problem to solve afterwards: either a founder relocates, or you appoint a resident director who will genuinely be here and genuinely act as a director, with the duties and liabilities that carries. A nominee who is a name on a form and nothing else is not a solution; directors carry personal exposure under the Act, including the section 164(2)(a) disqualification that follows three years of non-filing.

The documents — where applications actually fail

MCA's own published rejection grounds put foreign-subscriber paperwork near the top, and the failures are consistent.

For the foreign parent or foreign directors and shareholders:

• Incorporation documents of the parent, and passport and address proof of foreign directors and shareholders, must be apostilled, notarised or consularised — which one depends on whether the country is a party to the Hague Apostille Convention. Documents that are merely photocopied, or notarised locally when consularisation was needed, come back.
• A board resolution of the parent authorising the Indian subsidiary and naming the authorised representative — and it must actually state the shares subscribed and the representative. A resolution that omits either is an express rejection ground.
• PAN or the certificate of incorporation of the subscribing company missing is a separate listed ground.
• The PAN undertaking where a foreign subscriber has no Indian PAN.
• A business visa, or OCI card, with arrival stamps where required.

For the Indian side: the resident director's PAN, Aadhaar and address proof; and registered-office proof that actually matches the address entered, with the owner's NOC. Office proof is the single largest cluster of rejections across all incorporations — see why MCA rejects company names and applications for the full list and the resubmission mechanics.

One warning MCA states explicitly and that is worth repeating: pasted signatures on attachments are treated as a fraud question, with action under sections 447 and 448 possible — not as a formatting issue. Documents crossing borders get scanned, re-scanned and reassembled, and this is precisely where a well-meaning assistant "helpfully" pastes a signature image. Do not let that happen.

Incorporation, step by step

1. Structure and sector check. Decide the shareholding and confirm the sector position under the FDI framework (see the refusal note below) before anything is filed.
2. Get documents apostilled or consularised. This is the long pole — it happens in the parent's jurisdiction on that jurisdiction's timetable, and it cannot be compressed. Start here.
3. DSC and DIN for the directors, including the foreign ones.
4. Reserve the name through SPICe+ Part A, or file Part A and Part B together. Filed separately, Part A costs ₹1,000; filed together, no separate name-reservation fee arises. An approved name holds 20 days.
5. File SPICe+ with the memorandum and articles reflecting the foreign shareholding.
6. Certificate of incorporation, CIN, PAN and TAN.
7. Open the bank account and bring in the share capital through normal banking channels.
8. Issue the shares, then file FC-GPR within thirty days. The order matters — see below.
9. INC-20A within 180 days of incorporation. Under section 10A(1)(a) a company having share capital cannot commence business or exercise borrowing powers until a director declares that every subscriber has paid the value of the shares agreed to be taken. For a subsidiary funded by an overseas remittance, that declaration and the FEMA reporting are two views of the same event, and both have to be true.

MCA fees are the ordinary ones: nil registration fee up to ₹15,00,000 authorised capital, State stamp duty on the memorandum and articles, PAN ₹66 and TAN ₹65. The company registration cost page carries the full breakdown and the state-by-state stamp duty range.

The FEMA reporting clocks

This is the part that has no equivalent in a domestic incorporation, and where a clean entity quietly becomes a non-compliant one. All of the below comes from RBI's FED Master Direction No. 18/2015-16 on Reporting under FEMA, 1999, as updated to 24 June 2026.

All reporting runs through the Single Master Form (SMF) on the FIRMS platform at firms.rbi.org.in, except where the Master Direction says otherwise. FIRMS replaced the old Regional-Office filing route from 1 September 2018.

Three details that decide whether you make the deadline.

FC-GPR runs from issue of the shares, not from receipt of the money. Money often arrives well before the board allots. The thirty days start at allotment, so the sequencing — remittance in, allotment, then report — is what you have to control.

FC-GPR also covers more than the initial subscription. The Master Direction lists bonus or rights shares, shares issued on an amalgamation, merger or demerger, equity issued on a cross-border merger, and shares issued against funds payable by the company, among others.

FLA catches LLPs too. The obligation applies to an Indian company that has received FDI or an LLP that has received investment by way of capital contribution, in the previous year or the current year. It is filed through the FLAIR portal at flair.rbi.org.in, and it is due every year the investment remains — not just the year it came in. It is the one most commonly forgotten, because nothing happens in the year to prompt it.

What late FEMA reporting costs

RBI operates a uniform Late Submission Fee (LSF) matrix, introduced by A.P. (DIR Series) Circular No. 16 dated 30 September 2022 and most recently amended by Circular No. 25 dated 30 March 2026.

Where A is the amount involved in the delayed reporting and n is the number of years of delay, rounded upwards to the nearest month and expressed to two decimal points.

The notes matter as much as the formula:

• LSF is per return. Several late filings are several fees.
• Maximum LSF is capped at 100% of A, rounded up to the nearest hundred.
• Where an advice has been issued for payment and the LSF is not paid within 30 days, the advice becomes null and void, and if you come back later the date of the fresh application becomes the reference date for computing n — so delay compounds.
• The LSF facility is available up to three years from the due date. Beyond that, you are outside the LSF route and into compounding, which is a different and more serious process.

The shape of it: a small, early delay on FC-GPR is a modest fixed fee plus a negligible variable component. A large capital infusion reported years late is expensive, because A is the whole investment. This is why the thirty days are worth engineering the process around rather than treating as an administrative afterthought.

What we are deliberately not telling you

Two things, and the reason in each case.

Sector-specific FDI caps and entry routes. Whether a foreign parent can hold 100%, whether the sector is on the automatic route or needs government approval, and what conditions attach, are prescribed by the Foreign Exchange Management (Non-debt Instruments) Rules, 2019 — which, as RBI's Master Direction puts it, prescribe the entry routes, sectoral caps and pricing guidelines to be complied with. These change by amendment and by press note.

We attempted to source the current Consolidated FDI Policy directly from DPIIT and could not: dpiit.gov.in returned a page with essentially no readable content to an automated request. Rather than restate percentages from secondary sources that may be out of date, we state the framework and stop. Confirm your own sector against the current NDI Rules and Consolidated FDI Policy, and take advice before committing capital. A structure built on a stale sectoral cap is expensive to unwind.

Pricing guidelines. The NDI Rules also prescribe the valuation basis on which shares may be issued to or transferred from a non-resident. That is a valuation question for a qualified professional on your specific facts, not something an article should reduce to a rule of thumb.

After incorporation: what being a subsidiary changes

Two consequences follow from ownership structure alone, and both surprise people.

A subsidiary is never a small company. Section 2(85) excludes a holding or subsidiary company from the small-company definition regardless of size. So a two-shareholder, pre-revenue subsidiary:

• files the full MGT-7, not the abridged MGT-7A; and
• is inside rule 9B, which requires a private company that is not a small company to dematerialise all its securities within eighteen months of the close of the financial year in which it was not small. For a subsidiary that is its first year end. The rolling test and the two amendments are covered in the rule 9B guide, and it matters here because rule 9B(4) blocks a share transfer until the holding is dematerialised — which is exactly what a parent does when it restructures.

Your first financial year may be fifteen months. Section 2(41) sends a company incorporated on or after 1 January to 31 March of the following year. For a group consolidating on a different calendar this interacts with the parent's reporting, and the provisos to section 2(41) allow the Central Government, on application, to permit a different financial year for a company that is a holding, subsidiary or associate of a company incorporated outside India and needs to align with an overseas consolidation. The first-year derivation is in your first financial year and first AGM.

The recurring calendar

Getting it right

The pattern across every failed setup we see is the same: incorporation is treated as the project and everything after it as admin. In practice the incorporation is routine, and the two things that go wrong are apostilled documents arriving late or in the wrong form, and FC-GPR missed because nobody owned the thirty days between allotment and reporting.

Fix those two and an Indian subsidiary is a straightforward entity to run. Our Indian subsidiary registration service covers the structuring, the document chain and the FEMA reporting, and hands over into ongoing company compliance.

Sources and currency

Applies to: India — Companies Act, 2013; FEMA, 1999 with the Non-debt Instruments Rules, 2019 and RBI's Master Direction on Reporting. Position as at 20 August 2026.

Company law positions were read from the consolidated bare Act on India Code. FEMA reporting timelines and the Late Submission Fee matrix were read from RBI's FED Master Direction No. 18/2015-16 on Reporting, as updated to 24 June 2026. Sources checked 2026-08-20. Sector-specific FDI caps and entry routes are NOT stated here — see the refusal note in the article. Take advice on your own sector before you commit capital.

• RBI — FED Master Direction No. 18/2015-16, Reporting under FEMA, 1999 (updated to 24 June 2026): FC-GPR, FC-TRS, FLA and the Late Submission Fee matrix
• Companies Act, 2013 — consolidated bare Act (India Code): s.149(3) resident director, s.2(42) foreign company, s.2(85) small company, s.10A commencement of business
• MCA — FAQs on Incorporation and Allied Matters (SPICe+): foreign subscriber documents, apostille and rejection grounds
• RBI — FIRMS platform for Single Master Form reporting
• RBI — FLAIR portal for the annual Foreign Liabilities and Assets return