How To Incorporate a Wholly Owned Subsidiary in India? [The Process]
This article is intended to those companies or startups who have registered their companies outside India and want to operate in India as a part of foreign company. We advise that incorporating a company i.e. wholly owned company in India as one of the mode of operating a business in India.
A company can be registered as a private limited or public limited. A private limited company is closely held company and enjoys the privileges given by the Companies Act, 2013. A public limited company is a company, where public is interested and it is required to comply with lot of rules and regulations framed by the Companies Act, 2013.
Lets take a look at the procedure of incorporating Wholly Owned Subsidiary Private Limited Company with some basic definitions:
What is Wholly Owned Subsidiary Company?
A Wholly Owned Subsidiary company is an entity of which 100% shares are held by another company. For example, ABC Pvt. Ltd. owns 100% shares of XYZ Pvt. Ltd. The XYZ Pvt. Ltd. becomes a wholly owned subsidiary company of ABC Pvt. Ltd.
What is Foreign Company?
A company that is incorporated outside India (i.e. in foreign country) is called as Foreign Company. For example ABC Inc. USA.
What is Wholly Owned Subsidiary Company in India by Foreign Company?
When a foreign company makes 100% FDI (Foreign Direct Investment) in India through automatic route, the Indian company becomes the Wholly Owned Subsidiary Company of that Foreign Company. Let’s say ABC Inc. USA owns 100% shares in XYZ Pvt. Ltd. The XYZ Pvt. Ltd. becomes the Subsidiary Company.
This is possible where 100% FDI is permitted and no prior approval of Reserve Bank of India is required.
Under automatic route FDI is allowed without the prior approval of Government and Reserve Bank of India. Read this RBI Circular for more details.
- Minimum two directors
- Minimum two shareholders
- Minimum paid up capital of Rs. 1 lakh
- Two directors are required to apply for DSC (Digital Signature Certificate).
- All the directors are required to apply for DIN (Director’s Identification No.).
- Applicant is required to apply for name of the company in Form INC-1.
- After obtaining name approval from ROC, an applicant is required to file form INC-7 (Application for Incorporation of Company (Other than OPC)), form DIR-12 (Particulars of appointment of directors and the key managerial personnel and the changes among them) and form INC-22 (Notice of situation or change of address of the registered office of the company) along with Memorandum and Articles of Association of the Company.
- After filing of the incorporation documents, ROC fees and Stamp duty is required to pay online (This is based on the authorized capital of the company).
- After the payment of ROC fees and Stamp Duty, ROC verifies the filed documents. Form INC-22 and DIR-12 are approved through the Straight Through Process (STP) and verifies form INC-7 in detail. ROC may suggest some changes in the form or attachment. We will have to make changes accordingly.
- Once ROC is satisfied, Certificate of Incorporation is sent through email.
- Address proof (electricity bill or rent agreement and latest electricity bill in case of rented accommodation
- PAN Card (mandatory)
- Address Proof (Electricity Bill, Telephone Bill, Bank statement or passbook or rent agreement and latest electricity bill in case of rented accommodation)
- Photo ID Proof (Passport, Driving License, Voter ID or Aadhar Card)
- Passport (mandatory)
- Address Proof (Electricity Bill, Telephone Bill, Bank statement or passbook or rent agreement and latest electricity bill in case of rented accommodation. Document must be certified by Indian Consulate)
- Photo ID Proof (Any government license or document containing name in full, photo and date of birth. Document must be certified by Indian Consulate)
That’s it – While the process is quite simple, it is always advisable to take help of a Chartered Accountant while carrying out any company formation procedures.
[box type=”shadow” ]About the Author: Mohit Gangwal is a qualified Chartered Accountant and the founder of Taxnotion.com. He has great insight and vast experience in the field of taxation, company law, auditing, accounting, service tax and other related fields. Prior to founding Taxnotion, he has worked with Larsen & Toubro Ltd. and Ceat Ltd. at middle management levels.[/box]
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