Wholly Owned Subsidiary in India
A Wholly Owned Subsidiary in India (WOS) is a company whose foreign parent company owns 100% of shares. Foreign-based companies are eligible to incorporate wholly-owned subsidiaries in India as it has various benefits such as having complete control over operations, diversification, utilization of Indian resources, reduction of risk, etc.
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Wholly Owned Subsidiary in India
A wholly-owned Indian subsidiary is one of the most feasible and viable option for a foreign entity to set up business in India. In case of wholly owned subsidiary (WOS), 100% shares are owned by another foreign company, known as a parent company or holding company.
A Wholly Owned Subsidiary (WOS) can be in the form of a Private Limited Company or Public Limited Company, the parent company or owner’s liability is limited to their shares in the company. A Wholly Owned Subsidiary (WOS) of a Foreign Company in India is governed by the Companies Act 2013 and the Foreign Exchange Management Rules/Regulation issued by the central government and the Reserve bank of India (RBI).
Features of Wholly Owned Subsidiary in India
- A Foreign Company can incorporate a Wholly Owned Subsidiary (WOS) Company with majority stake (For Example 99.99% of the total shares) while the remaining stake shall be issued to a person nominated by a foreign company who shall hold the share in beneficial interest on behalf of the company. This is in order to satisfy the minimum shareholder criteria of number two (2) in case of a Private Company and seven (7) in case of a Public Company.
- All the shareholders in a Wholly Owned Subsidiary (WOS) Company may be foreign nationals, there shall be atleast 2 (two) directors in a Wholly Owned Subsidiary (WOS) out of which atleast one (1) director shall be a permanent resident of India.
- Investments can be made by non-residents or foreign nationals in the equity shares, debentures, or preference shares of Wholly Owned Subsidiary (WOS), through the Automatic Route or the Government Route. Under the Automatic Route, the non-resident investor or the Indian company does not require any approval from the Government of India for the investment. However, under the Government Route, prior approval of the Government of India is required.
- There are certain sectors/fields where investments can be made by non-residents or foreign nationals only to the extent of the percentage of the total capital as specified in the FDI policy. However, major sectors in India except a few are open for 100% foreign investments.
- Investments made by non-residents and foreign nationals have to be reported to the Reserve Bank of India (RBI) as per the Foreign Exchange Management Rules/Regulations.
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