Incorporating a Wholly Owned Company in India

India is a lucrative destination for foreign investors looking to expand their business presence. One of the most popular ways for foreign entities to establish a business in India is by setting up a Wholly Owned Subsidiary. This article provides a step-by-step guide to incorporating a wholly owned company in India, covering the legal framework, required documents, and compliance procedures.

What is a Wholly Owned Subsidiary?

A Wholly Owned Subsidiary (WOS) is a company in which a foreign entity holds 100% of the share capital. Such companies operate as private limited companies under the Companies Act, 2013, and are treated as separate legal entities from their parent company.

Benefits of a Wholly Owned Subsidiary in India

Limited Liability: The liability of shareholders is limited to their share capital.
Independent Legal Entity: The WOS operates as a distinct legal entity.
Full Control: The parent company has complete control over operations and decision-making.
Tax Benefits: Eligible for various tax exemptions and incentives under Indian law.
Ease of Business: 100% repatriation of profits and investments is allowed subject to RBI regulations.

Steps to Incorporate a Wholly Owned Subsidiary in India

Step 1: Obtain Digital Signature Certificate (DSC)
A Digital Signature Certificate (DSC) is required for filing incorporation documents online. The directors and authorized signatories must obtain a DSC from a certified agency.

Step 2: Name Reservation
The company name must be unique and comply with MCA guidelines. The name approval application (RUN – Reserve Unique Name) is submitted through the MCA portal.

Step 3: Drafting and Filing Incorporation Documents
Key documents required for incorporation include:
Memorandum of Association (MOA)
Articles of Association (AOA)
Identity and Address Proof of Directors
Registered Office Address Proof These documents are submitted along with the SPICe+ (Simplified Proforma for Incorporating a Company Electronically) form.

Step 4: PAN and TAN Application
After incorporation, the company must obtain a Permanent Account Number (PAN) and Tax Deduction and Collection Account Number (TAN) from the Income Tax Department.

Step 5: Opening a Bank Account
A corporate bank account must be opened in the name of the subsidiary for financial transactions.

Step 6: Compliance with RBI and FEMA Regulations
Foreign investment in India is governed by the Foreign Exchange Management Act (FEMA). A wholly owned subsidiary must report Foreign Direct Investment (FDI) to the Reserve Bank of India (RBI) through the FIRMS (Foreign Investment Reporting and Management System) portal.

Post-Incorporation Compliance

Once incorporated, a wholly owned subsidiary must adhere to ongoing compliance requirements, including:
Annual filings with the MCA
Income tax returns and audits
Annual General Meetings (AGMs)
Board meetings as per the Companies Act

Setting up a wholly owned company in India is a structured process that requires compliance with regulatory requirements. With the right legal and financial guidance, foreign entities can seamlessly establish and operate a business in India, leveraging its vast market potential and economic growth opportunities.

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