A foreign company enters India by building an Indian company
When an overseas business wants a real presence in India — to sell here, hire here, hold assets here — the usual answer is not a branch of the foreign company but a brand-new Indian one: a wholly-owned subsidiary, incorporated as a Private Limited company and owned by the foreign parent. The incorporation itself is the same SPICe+ process any Indian founder uses. What makes it different are two layers a domestic founder never touches: the foreign-investment rules on the way in, and the RBI reporting that has to follow the money. Get those two right and the rest is ordinary company compliance. Here is the whole path.
The structure: an Indian company, foreign-owned
The vehicle is a normal Private Limited company under the Companies Act, 2013. "Wholly-owned subsidiary" (WOS) means the foreign parent holds 100% of the shares. There is one small company-law wrinkle: a Private Limited company needs a minimum of two shareholders, so a 100%-owned subsidiary is set up with the parent holding all but one share and a nominee — usually another group entity, or an individual holding a single share as nominee of the parent — holding the remaining one. The parent still owns the whole company in substance. The company also needs a minimum of two directors.
The requirement that catches foreign groups: a resident director
This is the one that trips up companies with nobody on the ground. Under Section 149(3) of the Companies Act, 2013, every Indian company must have at least one director who has stayed in India for a total of at least 182 days during the financial year. Your directors can otherwise all be foreign nationals sitting abroad — but one seat has to be filled by a resident of India. For a foreign parent, that means lining up a resident director before incorporation: a trusted local hire, a professional nominee, or someone from the group who genuinely lives in India. Without that person, the company cannot be incorporated.
Before anything else: can you actually invest? The FDI route
Foreign investment into India runs under the Foreign Exchange Management Act, 1999 and the Government's consolidated FDI Policy, and the first question is which route your sector falls into:
- Automatic route: no prior Government approval is needed, and in most sectors 100% foreign ownership is allowed up to the applicable cap. The great majority of ordinary businesses — software, manufacturing, trading, services — sit here.
- Government (approval) route: certain sensitive sectors need prior approval before the investment can come in.
- Prohibited sectors: some activities are closed to FDI altogether — among them lottery and gambling, chit funds, the business of real estate (as distinct from construction-development), atomic energy and the manufacture of cigarettes and tobacco.
There is one more gate that applies regardless of sector. Under the land-border rule (Press Note 3 of 2020), any investment by an entity of a country that shares a land border with India — or where the beneficial owner of the investment is situated in or is a citizen of such a country — requires prior Government approval, even in an otherwise automatic-route sector. If the parent or its ultimate owners have that connection, settle the approval question before you file anything.
Incorporating: SPICe+, with the foreign paperwork
The incorporation runs through the same integrated SPICe+ form — company registration together with PAN, TAN, EPFO, ESIC, GST and the bank account — so the mechanics are familiar. The foreign element is in the documents. The parent company's board resolution authorising the investment and nominating the subscribers and directors, and the identity and address proofs of foreign directors and the foreign subscriber, have to be properly legalised: apostilled where the country is a party to the Hague Apostille Convention, or notarised and consularised where it is not. Each signatory also needs a Digital Signature Certificate. Building in time for that legalisation is the difference between a two-week incorporation and a stalled one.
The step a domestic founder never sees: FC-GPR to the RBI
Here is the part that is genuinely specific to foreign ownership. When the parent remits the share subscription money and the company allots shares against it, the inflow has to be reported to the Reserve Bank of India in Form FC-GPR (Foreign Currency – Gross Provisional Return), filed through the Single Master Form on the RBI's FIRMS portal within 30 days of the allotment — the clock runs from allotment, not from when the money arrived. Two things support it: a valuation confirming the shares were issued at not less than fair value (certified by a Chartered Accountant or merchant banker, under the FEMA pricing rules), and the KYC / foreign inward remittance details from the receiving bank. Miss the 30 days and the RBI charges a Late Submission Fee — a wholly avoidable cost that many first-time subsidiaries walk straight into.
After that: ordinary company compliance, plus one FEMA return a year
Once it exists, the subsidiary is an Indian company like any other and carries the same calendar: the first auditor within 30 days, the INC-20A commencement declaration within 180 days, and the annual AOC-4 and MGT-7 — all set out in our Private Limited compliance calendar. Because it has received FDI, it adds one recurring FEMA obligation on top: the FLA return (Foreign Liabilities and Assets), filed with the RBI every year by 15 July, reporting the company's foreign holdings as at 31 March. That annual return is the piece foreign-owned companies most often forget once the excitement of setting up has passed.
Subsidiary, or branch / liaison office?
A subsidiary is a separate Indian company the parent happens to own, and it is the right vehicle when you intend to actually operate — trade, employ, contract — in India. It is not the only structure. A foreign company can instead register a branch office, liaison office or project office, which are extensions of the foreign company itself rather than a separate entity, set up under a more restrictive, RBI-approval-heavy regime with narrow permitted activities (a liaison office, for instance, cannot earn income in India at all). For most foreign businesses that want to genuinely do business here, the subsidiary is the cleaner and more capable choice — but matching the vehicle to the plan is a decision worth taking advice on before you commit.
Where this sits in the picture
The foreign subsidiary is one of the entry paths in our wider comparison of Indian business structures and the guide to starting a business in India. It shares its incorporation mechanics with every domestic company via SPICe+, and its ongoing life with every Private Limited company — the difference is only the FEMA layer wrapped around the beginning and the annual FLA return that stays for as long as the foreign holding does.
How we handle it at RDA, Baner
At RDA Advisory, Baner, we set up Indian subsidiaries for foreign companies end to end. We settle the FDI route first — including the land-border approval question where it applies — line up the resident director, coordinate the apostille or consularisation of the parent's documents, and run the SPICe+ incorporation. Then we do the part that is easy to get wrong: file the FC-GPR through the FIRMS portal inside the 30 days, with the valuation and the bank KYC in order, and set the annual FLA return and the ordinary company compliance on a calendar so nothing lapses after the launch. Office No. 102, Snehraj Apartment, Baner, Pune 411045 · call +91 77570 45059.
Bringing a foreign business into India? We'll build the subsidiary properly
Setting up your company's India arm and want it done cleanly, FEMA and all? RDA handles the whole subsidiary setup — FDI route check, resident director, apostille coordination, SPICe+ incorporation, the FC-GPR reporting within 30 days and the annual FLA return. Book a consult at rdatax.in or call +91 77570 45059, or see our foreign subsidiary setup service. RDA Advisory, Baner, Pune.
Verification note: The process described here is based on the Companies Act, 2013 (incorporation of a company through the web form SPICe+, the requirement under Section 149(3) that every company have at least one director who has stayed in India for at least 182 days during the financial year, and the minimum of two shareholders and two directors for a private company), and on the framework governing foreign direct investment under the Foreign Exchange Management Act, 1999 and the rules made under it (notably the Foreign Exchange Management (Non-debt Instruments) Rules, 2019) together with the Government's consolidated FDI Policy: the automatic and Government (approval) routes and the caps and prohibited sectors thereunder; the requirement of prior Government approval for investment from an entity of a country sharing a land border with India, or where the beneficial owner is situated in or is a citizen of such a country (Press Note 3 of 2020); the reporting of the issue of capital instruments to a person resident outside India in Form FC-GPR through the Single Master Form on the RBI's FIRMS portal within 30 days of allotment, supported by a valuation under the FEMA pricing guidelines; and the annual filing of the Foreign Liabilities and Assets (FLA) return with the RBI by 15 July. Sectoral caps, forms, fees and time limits are periodically revised by the MCA, the RBI and the Government; confirm the current requirements for your investment with your CA, company secretary or authorised dealer bank. This is general information, not legal or professional advice.
