Monday, February 8, 2016


 The Meaning of Wholly Owned Subsidiary Company
A Wholly Owned Subsidiary company is an entity of which 100 per cent shares are held by another company. If a foreign company owns 100% of shares of a Indian company, then Indian Company shall be considered as the wholly owned subsidiary of that foreign company.
What is Foreign Company?
A company that is incorporated outside India (i.e. in a foreign country) is called Foreign Company. For example Coca-Cola. USA.
What is Wholly Owned Subsidiary Company in India by Foreign Company?
When a foreign company makes 100 per cent FDI (Foreign Direct Investment) in India through an automatic route, the Indian company becomes the Wholly Owned Subsidiary Company of that Foreign Company. Let’s say Coca-Cola. USA owns 100 per cent shares in Coca-Cola (India) Pvt. Ltd. Then Coca-Cola (India) Pvt. Ltd. becomes the Subsidiary Company.
This is possible where 100 per cent 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.
FDI up to 100% is allowed under the automatic route in all activities/sectors except the following which require prior approval of the Government:

Ø Activities/items that require an Industrial License;

Ø Proposals in which the foreign collaborator has an existing financial / technical collaboration in India in the 'same' field,

Ø Proposals for acquisition of shares in an existing Indian company in: Financial services sector and where Securities & Exchange Board of India (Substantial Acquisition of Shares and Takeovers ) Regulations, 1997 is attracted;

Ø All proposals falling outside notified sectoral policy/caps or under sectors in which FDI is not permitted.
FDI in sectors/activities to the extent permitted under automatic route does not require any prior approval either by the Government or RBI. The investors are only required to notify the Regional office concerned of RBI within 30 days of receipt of inward remittances and file the required documents with that office within 30 days of issue of shares to foreign investors through online e-filing .
Please note that FDI is prohibited under the Government Route as well as the Automatic Route in the following sectors:

i) Atomic Energy
ii) Lottery Business
iii) Gambling and Betting
iv) Business of Chit Fund
v) Nidhi Company
vi) Agricultural (excluding Floriculture, Horticulture, Development of seeds, Animal Husbandry, Pisciculture and cultivation of vegetables, mushrooms, etc. under controlled conditions and services related to agro and allied sectors) and Plantations activities (other than Tea Plantations) (c.f. Notification No. FEMA 94/2003-RB dated June 18, 2003).
vii) Housing and Real Estate business (except development of townships, construction of residen­tial/commercial premises, roads or bridges to the extent specified in Notification No. FEMA 136/2005-RB dated July 19, 2005).
viii) Trading in Transferable Development Rights (TDRs).
ix) Manufacture of cigars, cheroots, cigarillos and cigarettes, of tobacco or of tobacco substitutes.
(Please also see the website of Department of Industrial Policy and Promotion (DIPP), Ministry of Commerce & Industry, Government of India at for details regarding sectors and investment limits therein allowed, under FDI)
Minimum requirements
1.     Minimum two directors
2.     Minimum two shareholders
3.     Minimum paid up capital of Rs1 lakh
Incorporation procedure
1.     Two directors are required to apply for DSC (Digital Signature Certificate).
2.     All the directors are required to apply for DIN (Director’s Identification No.).
3.     Applicant is required to apply for name of the company in Form INC-1.

4.     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.
5.     After filing of the incorporation documents, you are required to pay online ROC fees and Stamp duty. (This is based on the authorized capital of the company).
6.     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.
7.     Once ROC is satisfied, Certificate of Incorporation is sent through email.
8.     Documents required
9.     Office address
10.                        Address proof (electricity bill or rent agreement) and latest electricity bill in case of rented accommodation.
11.                        Indian National
12.                        PAN Card (mandatory)
13.                        Address proof (electricity bill, telephone bill, bank statement or passbook or rent agreement and latest electricity bill in case of rented accommodation)
14.                        Photo ID Proof (passport, Driving license, voter ID or Aadhar card)
15.                        Foreign National
16.                        Passport (mandatory).
17.                        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 the Indian Consulate).
18.                        Photo ID Proof (Any government license or document containing name in full, photo and date of birth. Document must be certified by Indian Consulate).

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