• US citizen - Indian subsidiary company

If a US citizen owns a company in USA, is it possible for him to open an Indian subsidiary while retaining major/total shares in the company?

Can the US citizen be a director in the Indian subsidiary company? If not, then can the US citizen hold major/total shares in the company even without being a director?
Asked 4 years ago in Business Law

2 answers received in 10 minutes.

Lawyers are available now to answer your questions.

27 Answers

Hello,

A shareholder can be a person or a corporate entity. However, a Director has to be a person. Foreign nationals are allowed to become Directors of an Indian Private Limited Company.

You may go through the following link to see all the avenues available for you:

https://www.indiafilings.com/learn/guide-to-indian-private-limited-company-for-foreigners/

Regards

Anilesh Tewari
Advocate, New Delhi
17940 Answers
377 Consultations

5.0 on 5.0

hello

a US-based company can have a subsidiary company in India as can be seen from a vast no. of companies which have set up shop here, Mcdonalds, KFC, etc. but the companies have to be registered under the companies act, 2013.

yes US citizens can be the directors of the Indian Co.

regards

Rahul Mishra
Advocate, Lucknow
13760 Answers
65 Consultations

5.0 on 5.0

Hello,

Yes a US citizen can be a director of a subsidiary company but the majority of shares cannot be held by the US citizens .

Regards

Swarupananda Neogi
Advocate, Kolkata
2941 Answers
6 Consultations

4.7 on 5.0

1. yes , he can open a subsidiary in India but the same must be having one director as well

2. Yes, it can be subsidiary of the main company if there is an Indian as director...

Devajyoti Barman
Advocate, Kolkata
22515 Answers
402 Consultations

5.0 on 5.0

The company’s law in India does not bar foreign nationals to become directors in Indian companies. A foreigner or a non-resident Indian can become an executive or a non-executive/independent director of Indian companies whether public or private.

Yes a US citizen can be major share holder in the company registered in India and subsidiary or sister concern of the US company.

Shubham Jhajharia
Advocate, Ahmedabad
25516 Answers
179 Consultations

5.0 on 5.0

Yes through the foreign direct investment the director can hold the majority of the shares of the Indian company, the rules of the FEMA has to followed in that case.

For appointment of the director (foreigner) please refer the article:

https://taxguru.in/company-law/appointment-foreign-national-director-indian-company.html

Further the remuneration and income earned by director and company in India shall be taxable in India.

Shubham Jhajharia
Advocate, Ahmedabad
25516 Answers
179 Consultations

5.0 on 5.0

Unlike a franchise, an affiliate or a branch of an existing business, a subsidiary is a business entity that has stock shares controlled by another company, which is typically referred to as a parent company or a holding company. The parent company has more than a 50-per cent control over a subsidiary, but that doesn’t mean that the parent fully owns that subsidiary. Parent companies that own 100 per cent of a subsidiary are described as having a wholly-owned subsidiary. Regardless of whether a subsidiary is wholly owned or partially owned, a parent company has a strong say in how that subsidiary operates.

One of the primary advantages of a foreign-owned subsidiary is that the parent company can still provide guidance, direction and support to its subsidiary. While a subsidiary has the right to develop its own set of business practices, the truth is that your parent company will always have significant influence over the principles, vision, and tactics that govern the subsidiary. That control helps ensure that the subsidiary will operate with the same culture and values as those of the parent company, and will have access to the parent company’s talent pool of experienced executives and rank-and-file employees.

Another advantage of a foreign-owned subsidiary is that the parent company can share its resources, especially the financial systems, administrative services and marketing strategies that have proven successful in the past. Rather than starting from scratch, the subsidiary receives a framework, from which it can quickly ramp up its operations. This not only helps ensure the foundation of the subsidiary is strong, it also saves time and money. In addition, the parent company can provide cash flow and investment, should the subsidiary suffer unexpected losses.

Establishing a foreign subsidiary also enables a parent company to expand its target consumer and to introduce its products and services to a new group of prospects. This not only generates revenue in the host country but also it can have the tangential effect of helping the subsidiary access markets in neighbouring countries.

One of the major drawbacks of a foreign-owned subsidiary is that establishing this business can eat up the financial resources of a parent company. That’s why the parent company must conduct feasibility studies to determine not only what the costs are to get the subsidiary up and running but also what it will cost in the next five years to sustain that subsidiary, based on various economic factors.

also, a disadvantage is Cultural and Political Challenges in Host Country.

regards

Rahul Mishra
Advocate, Lucknow
13760 Answers
65 Consultations

5.0 on 5.0

Foreign nationals are allowed to become Directors of an Indian Private Limited Company.

2) foreign national can open subsidiary company in india

3) Every person (including a foreign national) shall be allotted with a Director Identification Number (DIN) before being appointed as a director; Every person (including a foreign national) who is appointed as a Director shall furnish his DIN and shall declare that he is not disqualified from becoming a Director under this Act and

The person (including a foreign national) appointed as a Director shall not act as a Director unless he gives his written consent to act as director in Form DIR-2. Such consent has to be filed with the Registrar within 30 days of his appointment.

Ajay Sethi
Advocate, Mumbai
87947 Answers
6207 Consultations

5.0 on 5.0

Advantages are Having full operational and strategic control over a subsidiary company

2) Both the companies get protection and security for their trade secrets, technical knowledge, and expertise as well as a great degree of control over the operations.

Disadvantages are

Financial performance of the holding company can be seriously affected by any execution error or malfeasance at the end of a subsidiary company

2) loss of operational flexibility

Ajay Sethi
Advocate, Mumbai
87947 Answers
6207 Consultations

5.0 on 5.0

Following are the advantages of opening a subsidiary:

Receive support from the parent company

Your intellectual property is protected

Distinct entity for legal and tax purposes

Anilesh Tewari
Advocate, New Delhi
17940 Answers
377 Consultations

5.0 on 5.0

Opening a subsidiary depends on the nature of business.

Yogendra Singh Rajawat
Advocate, Jaipur
21481 Answers
31 Consultations

4.4 on 5.0

Yes, of course they can. This is what is referred to as Foreign Direct Investment and India has several policies in place to encourage this kind of investment.

Contribution to share capital by transfer from their foreign bank account through normal banking channel.

A foreigner can act as Director of an Indian company.

No permissions are needed for this.

section 149(3) of the Companies Act, 2013 makes it mandatory for every company to have a Director who has stayed in India for a total period of at least 182 days in the previous calendar year.

It may be noted that such a resident Director need not be a citizen of India.

T Kalaiselvan
Advocate, Vellore
78104 Answers
1543 Consultations

5.0 on 5.0

A subsidiary company is considered wholly owned when all of the common stock is owned by another company, the parent company. There are no minority shareholders. The subsidiary's stock is not traded publicly. But it remains an independent legal body, a corporation with its own organized framework and administration. Its day-to-day operations are likely directed entirely by the parent company, however.

In other instances, when entering a foreign market, a parent company may be better off by putting up a regular subsidiary than a wholly owned subsidiary. Local laws may set up ownership restrictions that make a wholly owned operation impossible. Even without legal barriers, there may be other advantages: The regular subsidiary can tap partners that have the expertise and familiarity it needs to function with local conditions.

The definition of subsidiary and wholly owned subsidiary company has been stated under sec. 4 of the Company Act. But the area of their differences and their advantages and disadvantages is somewhat unclear.

Disadvantages

Legal paperwork involved with creating a subsidiary can be lengthy and expensive,

Control also becomes an issue when a subsidiary is partially owned by another outside organization,

T Kalaiselvan
Advocate, Vellore
78104 Answers
1543 Consultations

5.0 on 5.0

For a Company incorporated in the US to open a subsidiary in India, it would have to complete the necessary administrative and legal requirements, such as applying for name availability, preparing the memorandum and articles of association, and tax and labor registrations.

Siddharth Jain
Advocate, New Delhi
5930 Answers
101 Consultations

5.0 on 5.0

The India subsidiary is a separate legal entity from the U.S. company. The operational relationship must be carefully documented and monitored in order to maintain the separate legal status of each company. There must be inter-

company and other agreements between the companies in order to have the intended effect for tax, isolation of liability and other business purposes.

US national can be a director in a subsidiary company in India and also Majority shares can be held by him.

Siddharth Jain
Advocate, New Delhi
5930 Answers
101 Consultations

5.0 on 5.0

Yes he can be, Kindly go through the link provided above by me

Anilesh Tewari
Advocate, New Delhi
17940 Answers
377 Consultations

5.0 on 5.0

US citizen can be director and primary share holder in indian pvt ltd company

Ajay Sethi
Advocate, Mumbai
87947 Answers
6207 Consultations

5.0 on 5.0

US citizen can be a director and primary shareholder in an Indian private limited or LLP company.

Siddharth Jain
Advocate, New Delhi
5930 Answers
101 Consultations

5.0 on 5.0

Foreign direct investment of up to 100% in pvt. Ltd company permitted and for LLP any foreign investment requires prior approval from the Central Government.

Yogendra Singh Rajawat
Advocate, Jaipur
21481 Answers
31 Consultations

4.4 on 5.0

Yes he can be director or shareholder in an Indian company (Independent.)

Shubham Jhajharia
Advocate, Ahmedabad
25516 Answers
179 Consultations

5.0 on 5.0

A shareholder can be a person or a corporate entity. However, a Director has to be a person. Foreign nationals are allowed to become Directors of an Indian Private Limited Company. The Board of Directors of the Indian Private Limited Company must have one Director who is both an Indian Citizen and Indian Resident.

Incorporation of a Limited Liability Partnership (LLP) is not recommended as an India entry strategy for foreign nationals or foreign citizens as it requires Government approval. Limited Liability Partnership is a new type entity, recently introduced in India. Hence, any foreign investment into a LLP requires prior approval from the Central Government.

T Kalaiselvan
Advocate, Vellore
78104 Answers
1543 Consultations

5.0 on 5.0

1. Yes PAN can be obtained.

2. Yes the PAN card is valid , as such no steps required further if no income in India or coming back it can be surrendered.

3. A US citizen based on permission and investment can run a OPC or sole proprietor ship firm but for that RBI permission and fema laws apply.

Shubham Jhajharia
Advocate, Ahmedabad
25516 Answers
179 Consultations

5.0 on 5.0

Yes he can obtain PAN card in India

2) application of a foreign citizen should be filled using Form 49AA, which is especially intended for foreign citizens.

3) If you have already obtained a PAN but wish to have a new PAN card, or if you want some corrections applied in your PAN data, you need to submit your application by filling out the “Request for New Pan Card or/and Changes or Correction in PAN Data” form

Ajay Sethi
Advocate, Mumbai
87947 Answers
6207 Consultations

5.0 on 5.0

1. Yes

2. Yes. It is still valid.

3.No.

Siddharth Jain
Advocate, New Delhi
5930 Answers
101 Consultations

5.0 on 5.0

All Persons of Indian origin (PIO) who have acquired foreign citizenship, must apply for PAN card using the application form for foreigners, i.e. Form 49AA. Hence, even OCI holders, living in India, should apply for a PAN using Form 49AA and not Form 49A. This is because, even OCI holders are actually foreigners.

Since OCI holders are still foreigners and not Indian citizens, you need to apply for a PAN card using the PAN application form applicable to foreigners.

Can US citizen run a sole proprietorship in India

No. He cannot. Only a resident Indian citizen can register one person company in India. Further for foreign citizen , sole proprietorship, in my opinion, is not allowed because investment by him will be foreign direct investment (FDI) and FDI is not allowed in proprietorship and partnership firms by FEMA law.

T Kalaiselvan
Advocate, Vellore
78104 Answers
1543 Consultations

5.0 on 5.0

PAN card can be obtained by applying IT dept.

For the purpose of tax liability pan card always valid till not surrendered.

Wholly owened Subsidiary (A Company registered under Indian Companies Act 1956) is permitted but not proprieotory

Yogendra Singh Rajawat
Advocate, Jaipur
21481 Answers
31 Consultations

4.4 on 5.0

Permanent Account Number (PAN) is a ten-digit alphanumeric number, issued in the form of a laminated card, by the Income Tax Department, to any person for entity who applies for it. PAN can be obtained by Indian Nationals, Foreign Nationals, Indian Entities and Foreign Entities.

3. Yes

Anilesh Tewari
Advocate, New Delhi
17940 Answers
377 Consultations

5.0 on 5.0

Ask a Lawyer

Get legal answers from lawyers in 1 hour. It's quick, easy, and anonymous!
  Ask a lawyer