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Compliances by indian subsidiaries of foreign company

CA Darshak Shah (Practicing CA) (1889 Points)

18 April 2013

Please help....

We have recently incorporated a company under companies Act whereby canadian company have 99.99% shares of the same. The company is engaged in IT Parts trading and distribution.

I would like to know the details about various compliances to be made by such subsidiary company after incorporation,

> With ROC

> & Specially with RBI?

Moreover,

Please let me know the procedure/provision for money remitance to India and from India from holding to subsidiary company and vice versa.

It would be great if someone can share relavant link for studying the same.

Awaiting guidance and valuable suggestion

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18 Replies

sudarshan (CA) (745 Points)
Replied 18 April 2013

1.whether the co is private ltd or public limited?

2.whether nominees are holding only one share or more?

3.whether required forms filed us 187c?

4.whether company eligible for FDI as it engaged in trading?

CA Darshak Shah (Practicing CA) (1889 Points)
Replied 18 April 2013

Originally posted by : sudarshan

1.whether the co is private ltd or public limited?

Private Limited

2.whether nominees are holding only one share or more?

Indian person holding only 1 share.

rest 9999 are held by parent company

3.whether required forms filed us 187c?

Please guide about this. I am unaware about it

4.whether company eligible for FDI as it engaged in trading?

They will import it hardware parts from USA and sell it in Indian market.

I know that they are not into approval route.

What other criteria should be observed?

Dear Sir,

Thank you for the reply. Please find answers in bold as mentioned above

sudarshan (CA) (745 Points)
Replied 18 April 2013

since shares are held in the name of nominees, forms have to be filed with Roc to note that they are holding shares on behalf of company. you may go thru sec 187c for required forms.

RBI , company has to file form FC GPR for receipt of money and allotment.

1 Like

CA Darshak Shah (Practicing CA) (1889 Points)
Replied 19 April 2013

Thank you for your guidance sir.

Regards

Shridhi Jain (Company Secretary) (1678 Points)
Replied 20 April 2013

hi,

Yours is a private ltd co, WOS of foreign company.

Following points you shud consider:

1. If the company is holding 100% equity of indian co., then that one share, held by other person on behalf of the company, has to be reported to ROC u/s 187C in form 22B. Attachment should be the declarations by both the parties.

2. As far as receiving foreign currency is concerned, you can get the same in two ways, as FDI and as ECB. In FDI, you have to report each Foreign exchange receipt to RBI within one month of receipt of such funds and within six months you have to allot the shares and file form FCGPR to RBI through AD bank.

3.In ECB, it depends for what purpose you are going to take ECB. You should refer ECB Master circular in this regard. You have to take LRN (Loan registration number) from RBI in case of ECB and time limit for repayment of loan which you should consider.

4. Profits earned by indian company can go to foriegn holding co. only in form of dividend and not otherwise. Dividend is subject to divident distribution tax which is I think 18% now.

1 Like

(Guest)

I think this also will required to be considered:

Section 4 of Companies Act

A private company, being a subsidiary of a body corporate incorporated outside India, which, if incorporated in India, would be a public company within the meaning of this Act, shall be deemed for the purposes of this Act to be a subsidiary of a public company if the entire share capital in that private company is not held by that body corporate whether alone or together with one or more other bodies corporate incorporated outside India.

CA Darshak Shah (Practicing CA) (1889 Points)
Replied 20 April 2013

Thanks a lot for prompt guidance mam,

The situation is that

99.99% is hold by foreign director on behalf of their cmpany. While 0.01% is hold by Indian nation person independently.

Whie in this case also, are we supposed to report u/s 187c?

Thank you

Regards

Shridhi Jain (Company Secretary) (1678 Points)
Replied 06 May 2013

If one person is holding the share independently without any beneficial interest to other party then section 187 C is not applicable. But in that case foreign company cannot be the 100% owner of that indian subsidiary.

The foreign company can only be 100% holding company if that person is holding the share on behalf of foreign company. Then 187C applies and you have to comply with the formalities.

1 Like

CA Darshak Shah (Practicing CA) (1889 Points)
Replied 06 May 2013

Shridhi Mam....

Thanx a lot....

You releive me from confusion...

I believe that form 22B needs to be filed now...

In that,

1) Annexure B will be signed by director of foreign company since body corporate cant sign it.. Am I right ??

2) Is that form of Annexure B needs to be signed and stamped by Indian Embassy of canada? If sign on plain paper by director of foreign country on the format of annexure B is sufficient or not...?

Please guide mam...

I believe this is the last 2 queries...

Thank you

Shridhi Jain (Company Secretary) (1678 Points)
Replied 06 May 2013

Pls check as to why the foreign director is holding shares on foreign company's behalf? Why doesnt the company hold shares in its name? And if the foreign director is holding the shares then whether proper complainces have been made in that country w.r.t. to benificial interest. Because 100% shares should be held by the company. Pls confirm

CA Darshak Shah (Practicing CA) (1889 Points)
Replied 06 May 2013

Madam,

99.99% of shares are held by foreign company only.

Remaining 1 share was only held by Indian Person for ease of incorporation.

Now benificial interest u/s 187c will be shown for that 1 share so that the foreign company holds 100% shares and Indian Company becomes WOS...

Regards

ARUN KUMAR MAITRA (Practicing Company Secretary) (1016 Points)
Replied 08 July 2014

Can any one tell me the compliance requirement for a WOS in our country of Holding Company incorporated abroad say Japan?The WOS is a Pvt. Ltd. Company.

ARUN KUMAR MAITRA (Practicing Company Secretary) (1016 Points)
Replied 08 July 2014

What are the compliance requirements of a WoS Pvt. Ltd. Company in India by a Holding Company incorporated abroad under the Companies Act,2013?

Nisha Shetty (Article) (132 Points)
Replied 16 August 2016

There is holding company in Dubai having two subsidiary company in India A & B holding company is holding 51% share in A and 98 % share in B can Holding company transfer some of the share from B company to A company if yes what is the procedure and mode of transfer if no then can Holding company give loan to subsidiary company ie A company to purchase share of B company if form of equity