The ever-evolving and ever-changing landscape of global business provides wonderful opportunities for all with a plan and the vision. The barriers of trade at present era are low and the boundaries of the geography are only find in a globe or on a map. This is the main reason businesses across the world are working hard to create a global mark by moving towards global and increasing their offshore operations.
The companies of technology are no remain an expulsion. To increase their offshore activities the technology companies are the latest entrant in this bandwagon and it seems to be a profitable business for them. They are performing this by outsourcing a chunk of their business to resourcefully rich and developing countries such as India or setup a subsidiary company here.
For the technology companies there are various important alternatives are available for the expansion possible. In this blog, we will only discuss about the fully-owned subsidiary model and the important research for setup a subsidiary technology company, mainly via which various tech companies are developing, handling and establishing their businesses in a developing country such as India and earning higher profits while reinforcing the equity-brand.
The main focus of this blog is not only a marketplace which is international, where a company in a country has suppliers and, in another country, they have buyers. But we are going to inspect the implications and process for the subsidiary function technology when a brand of technology enters in the Indian commerce and trade territory.
Before we research more and take a deeper insight into this blog, we need to understand that what is the captive center or structure of a fully-owned subsidiary company. Therefore, a captive center is that company in which the share of the parent or foreign company is 100%, full control. This full ownership permits the parent company for appointment of the leadership and management of the captive center.
Whereas the subsidiary company comes under the purview of the parent, it independently works and its line of business or the industry may differ from its parent. This model provides a vast range of advantages to the foreign company which we discuss in the blog’s later part.
Advantages of a subsidiary company structure/captive center
From the model of captive center or subsidiary company the foreign companies can earn a wide category of economies and various other advantages. The foreign companies can have unlimited savings on the price involved in running the operations and setup the infrastructure and reckon on the subsidiary company.
The structure of the subsidiary company also has the fear of loss of intellectual properties. Both kinds of companies can carry the trade secrets of their business, in-house IP and internal knowledge. Therefore, it keeps them protected and secured.
Because the subsidiary and the parent companies are beneath the similar brand of umbrella, there is the main benefit of a combined financial system. Therefore, for the subsidiary, the parent company do not need to create a different financial report. From the profits earned by the subsidiary company, the parent company can invest some part of the profits in some important projects.
The structure of a subsidy company also permits financial risks mitigation. The subsidiary company can offset the losses of the parent company and vice-versa. This also brought benefits of the tax and good operational efficiency.
By combining operations and breaking advantages of both companies, the parent and the subsidiary company can get strategic and significant operational efficiencies.
The model of subsidiary company can assist the parent company with greater innovation and the value in the marketing’s entire four ps.
These are some advantages which the fully owned subsidiary company can provides in general.
Subsidiary Company/Captive Center in India
In the favorite destinations list, where the subsidiary or the holding company is setup by the parent company and it is running sustainably, profitably and smoothly, India is managed to defended as a place of high-preference for multinational foreign companies such as technology companies. From the last decade, the India has been seen a wonderful technology MNCs influx.
It also seems that within the coming years, this influx is grow at a fast pace. But the question is that why the technology companies want to setup their subsidiary companies in a country such as India. Why leading companies of technologies from the USA want to setup their subsidiary company in India?
The solution to this question is easy and it is natural, that for the purpose of setting up the subsidiary companies, India is an important country for the technology companies across the globe. The main cause of this is ease of running operations, availability of the skilled workforce, cost advantages and the rising economy. Also, the Indian government also appreciates this move by the technology companies.
For example, if the FDI (foreign direct investment) comes via the automatic route, the parent company do no require the government approval. The procedure is expedited by it. For the technology companies, this is a very good opportunity. One of the India’s main activity and core competency area is technology and it grows continuously.
As per the Indian technology companies, by 2022, the digital economy of the India has the power to reach 4 trillion US$. By 2025, IBEF (India Brand Equity Foundation) predicts Indian Business Process Management and IT to reach 350 billion US$.
The future of technology industry of India is very promising and the bright. The workforce is also available easily and highly talented. Those IT MNCs which want to expand definitely discover India a very good opportunity for the business.
In India, what are the requirements to setup a subsidiary company?
There are some basic requirements to setup properly the subsidiary company in India.
Directors and stakeholders:
The foremost and the first condition for setup a subsidiary company in a developing country like India is that the subsidiary company must have a minimum of two directors and two shareholders. It is essential that one director should be resident of India.
The office of the subsidiary company must be situated in the India. Therefore, the physical address of the parent company is official. The activities of the communication and the verification by the MCA (Ministry of Corporate Affairs) can be done easily.
DIN (Director’s Identification Number):
All the directors appointed by the company need to possess a DIN (director’s identification number). The main aim of DIN is to safeguard the stakeholders interest by director’s database maintenance and carry this database traceable. Before changing other important details or their address the directors require to inform the central government. Therefore, the director’s database is up to date.
Digital signature certificates:
The directors need to give digital signature certificates. As per the IT Act, 2000, the provisions make it sure that documents are authentic and safe by deploying the digital signatures and electronically submit these documents.
After completing all the steps, some other formalities are also required such as process of taxation, declaration, documentation, and name approval application etc. The whole procedure generally requires three to six months.
To setup a subsidiary company, how you can partner with a technology company?
The partnership with a technology company of India with solid credentials can increase the chances of success a lot. The reason is that the credibility of the company is supported by proven experience of many years and the company also has advantage of its location.
The company’s partner need to possess full knowledge regarding the dynamics of the market and can access all the needed resources like taxation, logistics, legal and the talent etc. This is the main reason why you require an expert of technology to setup a technology subsidiary company in the India.
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