Formation and Incorporation of Wholly-Owned Subsidiary (WoS) – Step by Step Process 

A foreign company can establish a business or make foreign investment in India by forming a company under the Companies Act, 2013 as a wholly-owned subsidiary, joint venture, or associate company, or by establishing a Liaison Office, Project Office, or Branch Office of the foreign company under the Foreign Exchange Management (Establishment in India of Branch Office or Other Place of Business) Act, 2013.

1. Who can incorporate?

A Foreign Company Can Incorporate a Wholly Owned Subsidiary Company in India by making Investment in any Sector in which FDI is allowed, Subject to the provision RBI/FEMA and Companies Act, 2013.

2. What are the Residency requirements for directors?

There are no restrictive provisions under the Companies Act, 2013 which prohibits the appointment of any foreign nationals or NRI as a director in an Indian Company. However, the provision under section 149 states that every company must have at least one director who is a resident of India.

The term ‘Resident’ in India means a person who has stayed in India for a period of not less than 182 days during the immediately preceding one calendar year.

3. How many Shareholders and Directors a Wholly Owned Subsidiary can have?

In a Wholly Owned Subsidiary (Incorporate as a Private Company), one Foreign Holding Company will act as a Shareholder Along with one Nominee shareholder to fulfill the minimum of the requirement of a shareholder of Section 3(1)(b) of the Companies Act, 2013 and at-least 2 Directors.

4. Is there any requirement to appoint a nominee?

A Wholly Owned Subsidiary Company if 100% shares are held by a company then such a company will appoint a nominee shareholder to fulfill the minimum of the requirement of the shareholder of Section 3(1)(b) of the Companies Act, 2013.

5. Is there any capital requirement for incorporating WoS of a foreign Company in India?

The Ministry of Corporate Affair has notified the Companies (Amendment) Act, 2015 to remove the minimum capital levels required for Incorporating a company. Therefore, there is no minimum capital requirement needed for Incorporating any type of company. The law states that minimum capital may be prescribed by the articles.

6. What are the permissible activities which WoS Company can carry in India?

Foreign Investment in the following sectors/activities is, subject to applicable laws/ regulations, security, and other conditionalities. The onus of compliance with the sectoral/statutory caps on such foreign investment and attendant conditions, if any, shall be on the Company receiving foreign investment.

Sector/Activity

1. 1. Agriculture & Animal Husbandry
   2. Plantation
   3. Mining
   4. Coal and Lignite
   5. Mining and mineral of titanium bearing minerals and ores, its value addition, and integrated activities
   6. Petroleum & Natural Gas
   7. Manufacturing
   8. Defence
   9. Broadcasting
   10. Print Media
   11. Civil Aviation
   12. Construction Development: Townships, Housing, Built-up infrastructure
   13. Industrial Parks
   14. E-Commerce
   15. Pharmaceuticals
   16. Railway Infrastructure
   17. Financial Services
   18. Insurance
   19. Pension Sector
   20. Other Financial Services

FDI is allowed in the abovementioned sector, subject to the sectorial limit as prescribed under RBI Master Direction of Foreign Exchange Management (Transfer or Issue of Security by a Person Resident Outside India) Regulations, 2017.

7. Entry route for foreign Investment

7.1 Automatic Route:

The entry route through which investment by a person resident outside India does not require the prior Reserve Bank approval or Government approval.

7.2 Government Route:

The entry route through which investment by a person resident outside India requires prior Government approval. The foreign investment received under this route shall be under the conditions stipulated by the Government in its approval.

8. What are the documents required for incorporating a WOS Private Company?

The applicant shall be required to attach the following documents with SPICE+ to incorporate a Wholly Owned Subsidiary:

1. 1. Digital Signature Certificate (DSC) of the proposed director
   2. Consent of persons nominated to act as Directors along with Complete KYC Documents
   3. KYC Documents of Shareholder, in case of Holding Company, Complete KYC of Authorised Representative and Nominee shareholder required
   4. Statutory declaration of compliance and other declarations
   5. The registered office of the Company required Lease Deed (if rented property), NOC from Owner and Utility Bill (Not older than 2 months)
   6. Physical copy of MOA and AOA

Notes: Documents of foreign entities or foreign nationals should be duly notarized and apostille.

9. Steps for Registration of a Wholly Owned Subsidiary

Applicants can incorporate the company in two ways

1. 1. In the new web-based form SPICe+, the applicant can mention 2 (two) names in SPICE+ Part-A and then file SPICe+ within 20 days from the date of approval of the proposed name and file SPCIE+ Part B, Agile Pros, INC-9 forms for Incorporation of ‘wholly-owned subsidiary.

1. 2. In the new web-based form SPICe+, the applicant can mention only one proposed name for the proposed company along with all other details and required documents.

Apply with ROC

The Companies Act, 2013 and the Companies (Incorporation) Rules, 2014 prescribes that application for registration of Private Company shall be filed with the Registrar within whose jurisdiction the registered office of the company is proposed to be situated.

Relevant Forms

The application for registration of Wholly Owned Subsidiary shall be submitted in web-based Form No. SPICe+ along with the fee as provided for under the Companies (Registration Offices and Fees) Rules, 2014.

Applicant can apply for incorporation of Private Company in SPICe+. By filing one form, the applicant can avail of the below 9 services:

1. 1. Reservation of Name
   2. Allotment of Director Identification Number (DIN)
   3. Incorporation of New Company
   4. Allotment of PAN
   5. Allotment of TAN
   6. Allotment of GSTIN
   7. Allotment of Importer-Exporter Code
   8. Registration Certificate of PF/EPF
   9. Registration under Shop and Establishment Act

The SPICe+ forms, to incorporate a wholly-owned subsidiary company in India, shall be filed with Physical Copy of Memorandum and Article of Association (Notarized and apostille in the home country of Foreign Holding Company) along with KYC of Director and shareholder, Declaration from director and subscribers, AGILE Pro, INC-9 Forms respectively.

10. Additional compliances in respect of Incorporating a Company having FDI

At the time of Issuance of shares to Foreign Holding Company, Issuing Company must comply with the FEMA provision. Applicant- company needs to file Form FC-GPR with RBI within 30 days from the date of receipt of Money in respect to the shares allotted at the time of Incorporation of a Wholly Owned Subsidiary in India.

Compliance in respect to inward remittance is as follows.

1. 1. Open Capital Account in Bank and generate AD code from Bank to receipt remittance from Investor
   2. Investors remit money in an Indian bank through a swift channel.
   3. Indian bank will update the company about the receipt of money and will share details required to transfer money in companies Capital accounts.
   4. Once documents are received from the company, the bank will transfer money to Company Capital Account.
   5. Indian Bank will issue a Copy of the FIRC and KYC of the Investor to the Company.
   6. The company will file documents with RBI in the form of FC-GPR along with the following documents.
      1. Copy of FIRC
      2. Copy of KYC
      3. Valuation Report
      4. CS Certificate
      5. Debit Authority letter
      6. Other documents, if required by RBI.