It means establishing a company whose common stock is 100% owned by a parent company in sectors that permits 100% FDI through the FDI Policy formulated by the Department for Promotion of Industry and Internal Trade (DPIIT). Subject to equity caps provided in the FDI Policy concerning the various areas of activity and depending on the investor’s decision, 100% foreign equity in such Indian Companies is permissible. A wholly owned subsidiary feasibly be in a divergent country than the parent company. The subsidiary has its management structure and clients. Owing a wholly owned subsidiary might help the parent company maintain its operations in vast geographic areas and markets or a divergent separate industry.

The key features of a wholly owned subsidiary company are as follows:

• Companies act 2013 manages wholly owned subsidiary within India.
• Different types of business activities are allowed, like manufacturing, marketing etc. and no prior approval of RBI is required or needed where 100% FDI is permitted.
• Under tax law, it is treated as a domestic company and is entitled to all exemptions, deductions, and benefits applicable to the other Indian company.
• It can be financed in the form of share capital and loan.
• Minimum two directors are needed for a WOS and in which at least one shall be an inhabitant of India.
• Minimum two shareholders are necessary; there’s no requirement of any minimum capital to incorporate a wholly owned subsidiary in India.

For Indian directors and shareholders, the documents which are required are:

• Two-colour photographs of the proposed stockholder
• Transcript of PAN card of the proposed Indian directors
• Identity verification issued by the Indian government (passport, voter card, driving license, aadhar card)
• Evidence of address issued by the Indian government ( bank statement, electricity bill, telephone bill, mobile bill) must not be older than two months

For foreign directors and shareholders, the documents which are required are:

• Two-colour photographs of the proposed shareholder
• A copy of passport duly notarized by the public notary or apostilled by the competent authority in the country in which it was provided
• Identity proof (driving license, residence card, bank statement, government-issued form of identification containing address) notarized by the public notary or apostilled by the competent authority in the country in which it as issued
• Residential proof ( bank statement, electricity bill, mobile bill) notarized by the public notary or apostilled by the competent power in the country in which it was issued

For the registered office of the company, the documents which are required are:

• The registered document in the name of the corporate of the title of the premises of the registered office
• The notarized duplicate of the lease/ rent agreement in the name of the organization along with a duplicate of rent paid receipt not older than one month
• A no-objection certificate from the owner of the premises, in case of the leased property

The benefits of a wholly owned subsidiary are as follows:

• Companies that will take control over the providers will benefit from the wholly owned subsidiaries.
• They can form a vertical integration where the companies are under the same owner.
• Wholly own subsidiary companies give space for the parent company to breathe and diversify, meaning they can fully grow and manage risk.
• An organization can keep away from rivalry while setting a foot in the latest market by combining with its subsidiary.
• For doing business abroad, the wholly owned subsidiary can be used for this purpose as well.

The drawbacks of a wholly owned subsidiary are as follows:

• The parent company faces more taxes which are imposed on these subsidiaries.
• Doing multifariousness with the wholly owned business may hamper focus on itself.
• There may be a dispute between the parent and the subsidiary company that will affect the management of both companies.
• Cost structure will shoot up, and other formalities need to be done with the wholly owned subsidiary.
• If the wholly owned subsidiary proves skimpy to function, then it will disturb the flow of business of the parent company as well.

At MAS, we provide the following services:

• Fling for name approval via Spice A
• Company formation via Spice+
• Applying for permanent account number/ tax collection and deduction account number
• Registration under EPFO
• Registration under ESIC
• GSTIN through the AGILE proform is optional
• Opening of bank account
• Filing of declaration for commencement of business- INC 20A
• Obtaining DSC
• Accounting and booking services
• Trademark registration, if any
• Auditing and assurance services
• Registration, returns and certifications
• Handling representation, assessment and litigations