India is one of the fastest-growing economies and a popular destination for foreign businesses looking to expand. One of the most efficient ways for foreign or domestic corporations to establish a presence in India is by forming a Subsidiary Company. This structure allows the parent company to retain control while complying with Indian business laws.
This guide will walk you through everything you need to know—Subsidiary Company meaning, how to incorporate one in India, key legal requirements, its relationship with Holding and Subsidiary Company structures, Subsidiary Company examples, and how it compares with other formats like LLP Registration and One Person Company Registration. We’ll also touch on how it ties into GST Registration and listing on the Government e-Marketplace (GeM).
What is a Subsidiary Company?
A Subsidiary Company is a business entity that is either fully or partially owned and controlled by another company, known as the holding company or parent company. When the holding company owns more than 50% of the subsidiary’s shares, it has majority control, allowing it to make strategic decisions while the subsidiary operates in its own name.
This structure allows the parent company to expand operations, enter new markets, and manage risk by operating through separate legal entities.
Subsidiary Company Meaning and Legal Framework
The Subsidiary Company meaning as per the Companies Act, 2013 (Section 2(87)), is a company in which another company (the holding company):
- Controls the composition of the Board of Directors, or
- Exercise or controls more than 50% of the total share capital (either directly or through another subsidiary).
In India, subsidiaries can be classified into two types:
- Wholly Owned Subsidiary (WOS): The parent company owns 100% of the shares.
- Partially Owned Subsidiary: The parent company owns more than 50% but less than 100%.
Foreign companies often opt for the Wholly Owned Subsidiary model to have complete control over operations in India.
Holding and Subsidiary Company: Key Differences
Understanding the relationship between a Holding and Subsidiary Company is vital for structuring business operations.
- Holding Company controls the subsidiary's strategic decisions, usually by holding most of its equity.
- Subsidiary Company operates as an independent legal entity but must follow compliance and reporting obligations under the Companies Act and RBI (for foreign ownership).
Together, they form a group of companies, allowing the parent company to manage various verticals or regions through its subsidiaries.
Steps to Form a Subsidiary Company in India
Establishing a Subsidiary Company in India requires multiple legal and procedural steps. Here's how to do it:
1. Decide the Business Structure: Typically, a subsidiary is formed as a Private Limited Company. Depending on your ownership goals, you can opt for a Wholly Owned Subsidiary or a partially owned one.
2. Obtain Digital Signature Certificate (DSC): All directors and shareholders (whether Indian or foreign nationals) must obtain a DSC to sign electronic documents.
3. Apply for Director Identification Number (DIN): DIN is mandatory for individuals appointed as directors of the subsidiary.
4. Name Reservation: Use the RUN (Reserve Unique Name) service on the MCA portal to apply for name approval.
5. File Incorporation Documents
Submit SPICe+ forms along with necessary documents:
- Memorandum of Association (MoA)
- Articles of Association (AoA)
- Proof of registered office
- Identity and address proof of directors
- Board resolution and NOC from the holding company
- Declaration from first directors
6. Receive Certificate of Incorporation
Once approved, the Subsidiary Company is legally registered in India and assigned a CIN (Corporate Identity Number).
Documents Required
To register a Subsidiary Company, you’ll need:
- Passport and address proof of foreign directors/shareholders
- Incorporation certificate and resolution of the parent company
- Indian registered office address proof
- Notarized documents (for foreign entities)
- PAN and TAN applications
Subsidiary Company Examples
Some well-known Subsidiary Company examples in India include:
- Google India Private Limited: Subsidiary of Google LLC
- Amazon Seller Services Private Limited: Subsidiary of Amazon
- Microsoft India Private Limited: Subsidiary of Microsoft Corporation
These subsidiaries operate independently but are backed and controlled by global holding companies, enabling them to offer localized services while maintaining global standards.
Subsidiary vs LLP and OPC Registration
While a Subsidiary Company suits foreign investors and large-scale operations, other business structures may be more suitable for small Indian startups.
LLP Registration
A Limited Liability Partnership (LLP) is best for professional service firms and small businesses that want flexibility with fewer compliance requirements. However, LLPs cannot raise equity funding and may not be suitable for foreign direct investment in certain sectors.
One Person Company Registration
One Person Company Registration (OPC) is ideal for solo entrepreneurs. It provides limited liability and corporate status but cannot be used for foreign direct investment. OPCs are easier to manage and cheaper to maintain than subsidiaries.
So, if you're an Indian entrepreneur, consider OPC or LLP. If you're a foreign company looking to expand, a Subsidiary Company is your best bet.
GST Registration for Subsidiary Companies
A Subsidiary Company involved in supplying goods or services must apply for GST Registration if:
- Annual turnover exceeds ₹40 lakhs (goods) or ₹20 lakhs (services)
- It deals in inter-state supply or e-commerce
- It intends to claim input tax credits
GST Registration Online is mandatory for compliance. The process involves uploading company incorporation documents, PAN, business address proof, bank account details, and director KYC on the GST portal. A valid GSTIN is crucial for issuing invoices, collecting tax, and claiming ITC.
Government e-Marketplace (GeM) and Subsidiary Companies
Registered Subsidiary Companies in India can also apply to list on the Government e-Marketplace (GeM). GeM is a government-run procurement portal that allows registered sellers to provide goods and services directly to ministries and public sector undertakings (PSUs).
Having an Indian-registered Subsidiary Company, with valid GSTIN and incorporation certificate, is mandatory for vendor registration on GeM. This opens up vast opportunities in public procurement, boosting revenue and brand credibility.
Conclusion: Why Forming a Subsidiary Company is a Smart Move
Whether you're a global enterprise eyeing the Indian market or a domestic firm wanting to scale strategically, forming a Subsidiary Company in India offers a legally robust, scalable, and efficient solution. It provides complete control, brand flexibility, and tax advantages while enabling participation in government contracts through platforms like GeM.
When compared to LLP Registration or One Person Company Registration, subsidiaries are more suited for foreign direct investment and large-scale operations. However, all these structures share one common requirement—GST Registration—which ensures legal compliance and smooth business operations in India.
By understanding the Subsidiary Company meaning, legal process, and documentation, businesses can confidently make their foray into the dynamic and rewarding Indian market.
