Connect with us Process & ComplianceIf you are planning to expand your business to India, then the best way for a foreign company to establish a strong presence in the Indian market and have full control over the activities is to establish a Wholly Owned Subsidiary (WOS). A wholly owned subsidiary makes it easier for foreign investors to enter India and capitalize on the large market and business-friendly environment.
What is a Wholly Owned Subsidiary?
A Wholly Owned Subsidiary is a subsidiary of a parent company in India. The foreign parent company owns 100% of the Share capital of the subsidiary and, therefore, has the strategic and financial control of the company. WOS can engage in almost all forms of activities, including manufacturing, providing services, trading, and information technology, depending on the objectives of the Parent company and regulatory approvals under the Companies Act 2013.
A wholly owned or an Indian subsidiary in comparison with a liaison or branch office has the utmost flexibility to conduct business in India. a wholly owned subsidiary shall have the same footing and be subject to the same rules as apply to the other Indian companies
Benefits of Setting up a Wholly Owned Subsidiary in India
100% Ownership and Control
The parent company retains full authority over business activities, financial planning, and expansion strategies, which provides flexibility and consistency across operations.
Legal Recognition
Under the Companies Act 2013, a subsidiary is recognized as an Indian entity and can, therefore, carry on its business.
Limited Liability
The liability of the shareholders is limited to the unpaid part of shares held by them in the subsidiary of the parent company. This ensures that the parent company is not liable for financial risks that are not predictable.
Access to Indian Markets
The WOS allows businesses to tap into India's consumer base and diverse business opportunities. India has a large economy and a growing middle class, which presents excellent opportunities for companies looking to enhance their presence and gain a competitive edge in emerging markets.
Tax Benefits
In some industries and sectors, wholly owned subsidiaries receive special incentives, including tax holidays, deductions, and exemptions, as provided for by the Income Tax Act, 1961. Proper tax planning assists businesses in utilizing their resources and maximizing their profitability, which in turn ensures long-term sustainability and growth in India.
Easier Regulatory Approvals
A WOS is less stringent on foreign investment as it complies with India's FDI policy, which is governed by the Foreign Exchange Management Act (FEMA), 1999. The procedures for registration, approvals, and compliance are simple.
Registration Process of a Wholly Owned Subsidiary
- Name Approval: The name selected should be unique and relevant to business objectives. The Ministry of Corporate Affairs (MCA) has to approve the name before things can move forward. It is advisable to avoid potential rejections that may arise from similarities with the names of existing registered companies.
- Documentation Preparation: It is important to prepare necessary documents such as the Memorandum of Association (MoA) and Articles of Association (AoA), as well as the company’s objects and shareholding structure.
- Incorporation Filing: Incorporation documents must be filed with the Registrar of Companies (ROC). This includes submitting the SPICe+ (Simplified Proforma for Incorporating Company Electronically) form along with Digital Signature Certificates (DSCs) and Director Identification Numbers (DINs). It is important that the files are filled in correctly to avoid any delay in the approval process.
- Tax and Regulatory Registrations: After Incorporation, the subsidiary must obtain important tax registrations such as PAN (Permanent Account Number), TAN (Tax Deduction and Collection Account Number), and GST (Goods and Services Tax) to comply with the Indian tax laws. Failure to do so may lead to legal consequences and can lead to penalties.
- Bank Account Setup: Opening a bank account is a necessary step to facilitate financial transactions in India. It enables making and receiving payments. The bank account has to be opened by furnishing all the required documents, such as company incorporation certificates and KYC.
Documents Required for Wholly Owned Subsidiary Registration
Incorporating a wholly owned subsidiary in India requires submitting various legal and financial documents; below is a comprehensive list:
For Parent Company
- Certificate of Incorporation: A certified copy of the parent company’s certificate of incorporation as proof of the company’s existence and the right to form a subsidiary in India.
- Board Resolution: The formal resolution of the parent company’s board of directors to establish the subsidiary in India.
- Identity and Address Proof of Authorized Signatories: Identity proofs such as Passports and any utility bill or bank statement as proof of address.
- Director Identification Number (DIN): This is a mandatory unique identification number for the directors who will manage the Indian subsidiary.
For Indian Entity
- Proposed Company Name Approval: The unique name of the business that has been approved by the Ministry of Corporate Affairs (MCA).
- Memorandum of Association (MoA) and Articles of Association (AoA): These documents specify the company’s purpose, operational details, and governance structure.
- Registered Office Address Proof: Copies of documents such as lease agreements, property ownership certificates, or a No Objection Certificate (NOC) from the landlord indicating the location of the registered office.
- Tax Registrations: Applications for Permanent Account Number (PAN), Tax Deduction and Collection Account Number (TAN), and Goods and Services Tax (GST) registration, which enables the subsidiary to meet its tax obligations
Additional Documents
- Financial Statements: The parent company’s audited financial reports may be required to determine the financial standing.
- Power of Attorney (POA): A POA is a document that gives the other party the right to act on behalf of the parent company in connection with the subsidiary’s registration and compliance with the law.
It is very important to ensure that all documents are correct, up to date, and submitted at the right time to avoid any problems in the registration process
Compliance Requirements for a Wholly Owned Subsidiary
Filing financial statements and returns annually to ROC as per the Companies Act, 2013.
Compliance with FEMA (Foreign Exchange Management Act)Â 1999 regulations.
Tax filings under the Indian Income Tax Act, 1961, and GST regulations.
Conducting board meetings and maintaining statutory records as required by the Companies Act 2013.
Our Wholly Owned Subsidiary Registration Services Include
At Mercurius, we offer end-to-end support to foreign businesses in setting up wholly owned subsidiaries in India. Our services for setting up a Wholly Owned Subsidiary (WOS) in India include:
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Company Name Approval
Assisting in choosing and getting your company's name approved by the Ministry of Corporate Affairs (MCA). -
Digital Signature Certificate (DSC) Procurement
Purchase DSCs for authorized signatories to use in electronic filings and compliance procedures. -
Company Incorporation
Assisting in the process of incorporation through the SPICe+ form. -
Tax Registrations
Application for Permanent Account Number (PAN) and Tax Deduction Account Number (TAN) to meet tax requirements. -
Employee Provident Fund (EPF) Registration
Register your company with the Employees' Provident Fund Organization (EPFO) to manage your employees' retirement benefits. -
Employee State Insurance (ESI) Registration
Registration of your company with the Employees' State Insurance Corporation (ESIC) to offer social security cover to your employees. -
Goods and Services Tax (GST) Registration
Help in obtaining GST Registration.
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Bank Account Opening
Helping in opening a corporate bank account for financial transactions. -
Business Commencement Declaration
Filing Form INC-20A to declare the company's commencement of business operations. -
Accounting and Bookkeeping
Full accounting services to ensure that the financial records are up to date and accurate as required by the law. -
Trademark Registration
Assistance in registering trademarks to secure your brand in the Indian market. -
Audit and Assurance Services
To meet statutory audit requirements and to provide assurance services to ensure good financial reporting and compliance. -
Regulatory Compliance
Manage different registrations, returns, and certifications that are required under Indian law. -
Legal Representation and Litigation Support
Handling assessments, representations, and litigation issues before tax and regulatory bodies.
Get Started Today!
Take the first step toward expanding your global presence in India. Our experienced team is here to simplify the process and help your business succeed.
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FAQs
Yes, foreign companies are permitted to own 100% of the shares of an Indian subsidiary as long as they follow the FDI regulations for specific sectors.
A wholly owned subsidiary offers the parent company 100% control over the operations while at the same time fulfilling the legal requirements of an Indian company. It gives a chance to access a large market with ease of doing business, and the parent company is allowed to repatriate profits as permitted by FEMA.
The registration process in India usually takes 4-6 weeks, depending on the availability of documents and regulatory approvals.
At Mercurius, we ensure the early submission of proper documents, meeting legal requirements that can help reduce the time it takes to enter the Indian market.
The wholly owned subsidiary is subject to Indian corporate tax laws, but exemptions and benefits may also apply depending on the sector and compliance with the laws. Corporate tax, GST, and transfer pricing rules apply to business and tax planning.
There is no such legal requirement for the minimum investment. But, ethically, this will depend on the business model and sector-specific rules. Some sectors, like financial services and infrastructure, may have capital requirements that are set by the regulatory authorities.
Yes, profits can be repatriated to the parent company if FEMA rules are followed. However, the company must ensure that it obtains all the necessary documents and tax clearances and complies with RBI rules to easily repatriate profits.
Under Indian company law, a wholly owned subsidiary is treated as a domestic company. It enjoys the advantages of an Indian company while being controlled by a foreign parent company, making it easier to obtain local funding and government incentives.
Although there are many industries that are appropriate for a wholly owned subsidiary in India, some of the sectors that are most suitable for wholly owned subsidiaries due to favorable regulations and market opportunities are :
- Information technology, manufacturing, pharmaceuticals, and financial services.
- Each sector has its own set of compliance and licensing requirements that must be met.
Compliance after incorporation includes regular tax filings, financial audits, and corporate governance. Proper records and meeting legal requirements are important to avoid legal consequences and operate without restrictions.
Mercurius assists with business incorporation and is a one-stop solution for all your business needs. We provide pre- and post-incorporation support to help you run your business smoothly.
