Setting up a Wholly Owned Subsidiary in India
Introduction
Choosing the appropriate form of business presence is a critical first step in entering the Indian market. This decision depends on several factors, including the nature of operations, regulatory compliance, tax implications, operational control, and long-term business strategy. A well-structured entry strategy ensures seamless compliance and operational efficiency from the outset. For this purpose, the foreign companies mostly prefer to establish a wholly owned subsidiary in India.
What is a Wholly Owned Subsidiary in India?
A Wholly Owned Subsidiary (WOS) is an Indian incorporated company in which 100% of the shareholding is held by a foreign parent entity. It provides a structured and compliant route for foreign companies to establish a business presence in India with full operational control. This structure is ideal for maintaining consistency with global business strategies. The establishment of a Wholly Owned Subsidiary in India serves as a strategic entry route for foreign companies, offering complete ownership, operational control, and limited liability protection within a well-regulated legal framework.
Meaning of 100% control:
- The entire share capital is held by the foreign company
- Direct control over board composition, policies, and operations
- No requirement of Indian shareholders (subject to FDI policy and sectoral restrictions)
Deciding Business Structure in INDIA:
Generally, a Wholly Owned Subsidiary in India is incorporated as a Private Limited Company where there is a requirement of a minimum of 2 shareholders and at least one resident director.
- Shareholders Requirements: As per the Indian Companies Act, a minimum of two shareholders are required to set up a Private Limited Company in India, which may be an Indian or Foreign Body Corporate and/or Indian or Foreign individuals. For wholly owned subsidiary registration, foreign companies owned 99.99 % and .1% in the name of an individual nominee, who may be Indian or Foreign.
- Directors Requirement: As per the Indian Companies Act, a minimum of two directors are required to register a Private Limited Company in India, out of which one should be an Indian Resident, Indian Resident means who stays in India at least 182 days in a calendar year.
Establishment Framework for a Wholly Owned Subsidiary in India
The process for establishing a Wholly Owned Subsidiary in India involves the following steps:
1. Name Reservation
The incorporation process begins with the reservation of the company name through the RUN(Reservation Unique Name) service or SPICe+ Part A
In India, all the incorporation and Companies Act compliance portal is managed on the MCA(Ministry of Corporate Affairs) portal, i.e., mca.gov.in. There is a specific department under MCA called Registrar of Companies that gives all approvals for the incorporation of companies and related compliances.
Key points:
- The name must be unique, non-identical, and legally permissible.
- It may include the foreign parent company’s name, subject to the No Objection Certificate (NOC).
- Must comply with the Companies Act, 2013, naming rules.
- The approved name is valid for a limited period (generally 20 days).
Documents required for Name Reservation
- Board Resolution from Holding Company
- Certificate of Registration of Parent Company and Bye-laws
Note: All the above documents for foreign citizens and non-residents should be notarized and consuralized or apostilled by the competent authority
Notary, consularised, or apostilled documents are not required if foreign citizens are signing documents in India on a valid Business Visa.
2. Obtain Digital Signature Certificate (DSC) and Director Identification Number (DIN) of the directors
A Digital Signature Certificate (DSC) is a secure electronic key, issued by certified authorities, that acts as a digital equivalent to a physical, handwritten signature or stamped seal. It is used to authenticate the identity of individuals or organizations during online transactions, e-filing (e.g., tax, company registration), and to sign digital documents legally.
DIN is a unique Identification Number which is mandatory to become a Director in any Indian Company; it has to be issued by the MCA (Ministry of Corporate Affairs). DIN number application is included in Spice Part B (incorporation application).
ID proofs of promoters/directors; any one of the following:
- Driving License/Passport//Voter ID/Adhar Card
- A passport is mandatory for foreign nationals.
Address proof – any one of the following:
- Bank statement/mobile bill/telephone bill/electricity bill (utility bill should not be older than two (2) months)
Note: All the above documents for foreign citizens and non-residents should be notarized and consuralized or apostilled by the competent authority.
Notary, consularised, or apostilled documents are not required if foreign citizens are signing documents in India on a valid Business Visa.
3. Documents required for incorporation
Documentation includes drafting and finalising Memorandum of Association (MoA) and Articles of Association (AoA), Certification of Incorporation of the parent company, Board Resolution approving investment, and Authorisation for subscriber/signatory.
The following list of documents is required to incorporate a company in India:
- DIR 2 (consent of directors)
- INC 9 (declaration of promoters)
- MOA (Memorandum of Association) and AOA (Articles of Association) subscribers’ sheets
- Undertakings for having Indian Income Tax
Note: All the above documents for foreign citizens and non-residents should be notarized and consuralized or apostilled by the competent authority.
Notary, consularised, or apostilled documents are not required if foreign citizens are signing documents in India on a valid Business Visa.
4. Registered Office
As per section 12(a) of the Indian Companies Act, (1) A Company shall, within thirty days of its incorporation and at all times thereafter, have a registered office capable of receiving and acknowledging all communications and notices as may be addressed to it.
The following documents are required for the registered office:
- NOC (No Objection Certificate) of the owner of the premises
- Latest Utility Bill (not older than 2 months)
- Rent Deed/Lease Deed
- Photograph of any one Director at the registered address/premise
5. Filing of SPICe+ Part B
This process deals with the filing of some integrated forms that cover:
- Incorporation application
- DIN allotment
- PAN (Income Tax –(Permanent Account Number) & TAN (Tax Account Number) issuance
- EPFO (Employees’ Provident Fund Organisation ), ESIC (Employees’ State Insurance Corporation), etc.
6. Issue of Certificate of Incorporation (CoI)
Upon approval by the Registrar of Companies (RoC), the company is legally incorporated, and a certificate of incorporation will be sent to the registered email id. This certificate is issued with a unique 21-digit CIN (Company Identification number) with PAN, TAN, and date of registration with RoC.
7. Bank Account Opening for Wholly Owned Subsidiary in India
After receiving the COI, the Company shall open a current account in the name of the Company required for receiving initial capital, i.e., foreign investment (share subscription money). The said capital compliance has to be reported to the RBI (Reserve Bank of India). There is no minimum capital requirement in India for registration of a company; however, Indian banks generally prefer to open a current account for at least INR 1,00,000/ USD 11,00.
8. Receipt of Foreign Investment and Allotment of Shares
After Bank account activation, the initial capital funds will be remitted through normal banking channels, complying with FDI (Foreign Direct Investment) under RBI guidelines. Shares must be allotted within 60 days of receiving subscription money approved by Board Resolution.
9. FEMA Reporting (Post-Investment Compliance)
The company shall be required to file Form FCGPR on the FIRMS portal to report the investment received from the parent company within 30 days of the share allotment to the shareholders. This is a critical compliance requirement for every Wholly Owned Subsidiary in India receiving foreign investment.
The following documents are required for capital reporting with RBI:
- Declaration of FDI with purpose
- Board Resolution
- FIRC (Foreign Investment Remittance Certificate)
- KYC (6-pointer KYC of investor/remitter)
10.Post Incorporation Compliances and Registrations
Post Incorporation compliances cover forms filing like INC-20A (capital receipt compliance) with ROC, INC-22, Form BEN-2, etc. As applicable to the company, the following registrations may be required to obtain post-incorporation:
- GST Registration
- Shops & Establishment Registration
- Professional Tax
- Other sectoral-specific license or registration
Conclusion
In essence, while India offers a liberalized and investor-friendly regime, the success of a Wholly Owned Subsidiary in India lies in meticulous planning, accurate documentation, and continuous compliance monitoring, particularly under FEMA regulations—areas that remain the most scrutinized during audits and regulatory reviews.
With our comprehensive expertise in Indian regulatory frameworks and hands-on execution experience, we support businesses in selecting the most appropriate entry structure and seamlessly managing the process of establishing operations in India.
FAQ
1. What is a Wholly Owned Subsidiary in India?
A Wholly Owned Subsidiary in India is a company where 100% of the shares are held by a foreign parent entity. It allows foreign businesses to establish a presence in India with full ownership, operational control, and limited liability.
2. What are the requirements to set up a Wholly Owned Subsidiary in India?
To establish a Wholly Owned Subsidiary in India, a minimum of two shareholders and two directors are required, with at least one director being a resident of India. The company must also have a registered office and comply with incorporation requirements under the Companies Act, 2013.
3. Is RBI approval required for a Wholly Owned Subsidiary in India?
RBI approval depends on the sector. If the investment falls under the automatic route, no prior approval is needed. However, in restricted sectors, government approval is required. All foreign investments in a Wholly Owned Subsidiary in India must comply with FEMA regulations and reporting requirements.
4. What is the process for setting up a Wholly Owned Subsidiary in India?
The process includes name reservation, obtaining DSC and DIN, filing incorporation forms (SPICe+), receiving the Certificate of Incorporation, opening a bank account, receiving foreign investment, allotting shares, and completing FEMA reporting.
5. What are the compliance requirements after incorporation?
Post-incorporation compliance for a Wholly Owned Subsidiary in India includes filing forms with the Registrar of Companies, maintaining statutory records, filing annual returns, and obtaining registrations such as GST, Professional Tax, and other sector-specific licenses.