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Wholly Owned Subsidiary

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Wholly Owned Subsidiary

For Foreign Entities interested in investing in India

Application Filing

Advantages

law
Wholly own Subsidiary is regulated by Indian Law; Companies Act, 2013.
rbi
Where 100% FDI is permitted no prior approval of Reserve Bank of India (RBI) is needed.
tax
It is treated as domestic company under Income Tax Law and is eligible for all exemptions, deductions benefits as applicable to any other Indian Company.
money
Funding can be made in the form of Share Capital and Loan.

MINIMUM REQUIREMENTS

Minimum 2 Shareholders

Minimum Capital of Rs. 1lac

DIN for all Directors

Parent company must hold 50% of total equity capital

WHY TO CHOOSE US

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Safe, Online, Hassle-Free Procedure
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24/7 E-mail Support
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Time Bound Work Delivery
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20+ Years of Experience
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Network of experienced Chartered & Cost Accountants & Professionals
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Transparent pricing no hidden charges

FAQ

How many shareholders are required to incorporate a wholly owned subsidiary?

 To incorporate a wholly owned subsidiary, a minimum of two shareholders are required. A minimum of two shareholders in a wholly owned subsidiary.  The shareholders could be natural persons or companies, including foreign companies.

How many directors are required in a wholly owned subsidiary?

A wholly owned subsidiary must have a minimum of two Directors and can have up to a maximum of fifteen Directors.

What are the requirements to be a Director?

The Director needs to be over 18 years of age and must be a natural person. There are no limitations in terms of citizenship or residency. Therefore, foreign nationals can be directors in a Indian Wholly owned subsidiary.

What is the capital required to start a wholly owned subsidiary?

Minimum authorized capital of Indian Rupees 100,000 (US $ 2250 approximately) is required to form a private company in India. There is no upper limit.

Do you have to be present in person to incorporate a wholly owned subsidiary?

No, you will not have to be present in India for registering of a wholly owned subsidiary.

What are the documents required for registration?

Identity proof and address proof is mandatory for all the proposed Directors of the Company. PAN Card is mandatory for Indian Nationals. In addition, the landlord of the registered office premises must provide a No Objection Certificate for having the registered office in his/her premises and must submit his/her identity proof and address proof. Memorandum of Association and Articles of Association and other documents are prepared by us.

How long will it take to incorporate a Company in India?

We can incorporate a Wholly owned subsidiary in India from 2 to 6 weeks. The time taken for registration will depend on submission of relevant documents by the client and speed of Government Approvals. To ensure speedy registration, please choose a unique name for your Company and ensure you have all the required documents prior to starting the registration process.

What is a Digital Signature Certificate (DSC)?

A Digital Signature establishes the identity of the sender or signee electronically while filing documents through the Internet. The Ministry of Corporate Affairs (MCA) mandates that the Directors sign some of the application documents using their Digital Signature. Hence, a Digital Signature is required for all Directors of a proposed Company.

What is Director Identification Number (DIN)?

Director Identification Number is a unique identification number assigned to all existing and proposed Directors of a Company. It is mandatory for all present or proposed Directors to have a Director Identification Number. Director Identification Number never expires and a person can have only one Director Identification Number.

How long is the registration of the Company valid for?

Once a Company is incorporated, it will be active and in-existence as long as the annual compliances are met with regularly. In case, annual compliances are not complied with, the Company will become a Dormant Company and maybe struck off from the register after a period of time. A struck-off Company can be revived for a period of up to 20 years.

What are the statutory compliances required for a Wholly owned subsidiary?

A wholly owned subsidiary must hold a Board Meeting at least once in every 3 months. In addition to the Board Meetings, an Annual General Meeting must be conducted by the Wholly owned subsidiary, at east once every year.

Can a Foreign National or an NRI be a Director in a wholly owned subsidiary?

Yes, a Foreign National or an NRI can be a Director in a wholly owned subsidiary in India after obtaining Director Identification Number. However, at least one Director on the Board of Directors must be a Resident India.

Can a Foreign National or an NRI hold shares of a Wholly owned subsidiary?

Yes, a Foreign National or an NRI Foreign Companies can hold shares of a Wholly owned subsidiary subject to Foreign Direct Investment (FDI) Guidelines.

Can a Foreign Company or a Foreign Corporation hold shares of a Wholly owned subsidiary?

Yes, Foreign Companies can hold shares of a Wholly owned subsidiary in India subject to Foreign Direct Investment (FDI) Guidelines.

Can a Foreign Parent Company incorporate a Subsidiary in India?

 Yes, Foreign parent or holding Companies, including USA parent companies, can incorporate a subsidiary, as a 100% owned Wholly owned subsidiary in India subject to Foreign Direct Investment (FDI) Guidelines.

What are FDI Guidelines for Foreigners in a Wholly owned subsidiary?

100% Foreign Direct Investment is allowed in India in many of the industries under the Automatic Route. There are called  RBI Approvals – if the percentage allowed for various Sectors is met.  However, an application for approval is required for automatic approvals.

Special Permission – FIPB Approvals – could be obtained to invest over and above the regular percentage allowed for various Sectors.

What are the other requirements for starting business in India?

Besides incorporation there are many other formalities in establishing a business in India. For other requirements for establishing business in India contact us.

What are the modes of payment allowed for receiving Foreign Direct Investment in an Indian company?

 An Indian company issuing shares /convertible debentures under FDI Scheme to a person resident outside India shall receive the amount of consideration required to be paid for such shares /convertible debentures by:

(i) inward remittance through normal banking channels.

(ii) debit to NRE / FCNR account of a person concerned maintained with an AD category I bank.

(iii) conversion of royalty / lump sum / technical know how fee due for payment or conversion of ECB, shall be treated as consideration for issue of shares.

(iv) conversion of import payables / pre incorporation expenses / share swap can be treated as consideration for issue of shares with the approval of FIPB.

(v) debit to non-interest bearing Escrow account in Indian Rupees in India which is opened with the approval from AD Category – I bank and is maintained with the AD Category I bank on behalf of residents and non-residents towards payment of share purchase consideration.

If the shares or convertible debentures are not issued within 180 days from the date of receipt of the inward remittance or date of debit to NRE / FCNR (B) / Escrow account, the amount shall be refunded. Further, Reserve Bank may on an application made to it and for sufficient reasons permit an Indian Company to refund / allot shares for the amount of consideration received towards issue of security if such amount is outstanding beyond the period of 180 days from the date of receipt.

Can a person resident in India transfer security by way of gift to a person resident outside India?

 A person resident in India who proposes to transfer security by way of gift to a person resident outside India [other than an erstwhile OCBs] shall make an application to the Central Office of the Foreign Exchange Department, Reserve Bank of India furnishing the following information, namely:

Name and address of the transferor and the proposed transferee

Relationship between the transferor and the proposed transferee

Reasons for making the gift.

In case of Government dated securities, treasury bills and bonds, a certificate issued by a Chartered Accountant on the market value of such securities.

In case of units of domestic mutual funds and units of Money Market Mutual Funds, a certificate from the issuer on the Net Asset Value of such security.

In case of shares/ fully and mandatorily convertible debentures, a certificate from a Chartered Accountant  on the value of such securities according to the guidelines issued by the Securities & Exchange Board of India or the valuation as per any internationally accepted pricing methodology on arm’s length basis with regard to listed companies and unlisted companies, respectively.

Certificate from the Indian company concerned certifying that the proposed transfer of shares/convertible debentures, by way of gift, from resident to the non-resident shall not breach the applicable sectoral cap/ FDI limit in the company and that the proposed number of shares/convertible debentures to be held by the non-resident transferee shall not exceed 5 per cent of the paid up capital of the company.

The transfer of security by way of gift may be permitted by the Reserve bank provided:

(i) The donee is eligible to hold such security under Schedules 1, 4 and 5 to Notification No. FEMA 20/2000-RB dated May 3, 2000, as amended from time to time.

(ii) The gift does not exceed 5 per cent of the paid up capital of the Indian company/ each series of debentures/ each mutual fund scheme

(iii) The applicable sectoral cap/ foreign direct investment limit in the Indian company is not breached

(iv) The donor and the donee are relatives as defined in section 6 of the Companies Act, 1956.

(v) The value of security to be transferred by the donor together with any security transferred to any person residing outside India as gift in the financial year does not exceed the rupee equivalent of USD 50000.

(vi) Such other conditions as considered necessary in public interest by the Reserve Bank.

What are the reporting obligations in case of transfer of shares between resident and non-resident?

The transaction should be reported by submission of form FC-TRS to the AD Category – I bank, within 60 days from the date of receipt/remittance of the amount of consideration. The onus of submission of the form FC-TRS within the given timeframe would be on the resident in India, the transferor or transferee, as the case may be.

Are the investments and profits earned in India repatriable?

All foreign investments are freely repatriable (net of applicable taxes) except in cases where:

  1. i) the foreign investment is in a sector like Construction and Development Projects and Defence wherein the foreign investment is subject to a lock-in-period; and
  2. ii) NRIs choose to invest specifically under non-repatriable schemes.

Further, dividends (net of applicable taxes) declared on foreign investments can be remitted freely through an Authorised Dealer bank.

Can a foreign investor invest in Preference Shares? What are the regulations applicable in case of such investments?

Yes. Foreign investment through preference shares is treated as foreign direct investment. However, the preference shares should be fully and mandatorily convertible into equity shares within a specified time to be reckoned as part of share capital under FDI. Investment in other forms of preference shares requires to comply with the ECB norms.