Wholly Owned Subsidiary in India (1)

1. Wholly Owned Subsidiary in India: Complete 2025 Guide Introduction Setting up a wholly owned subsidiary in India allows a foreign parent company to hold 100% equity in an Indian entity, provided the sector permits full foreign ownership. This model offers complete control over strategy while building a strong local presence. The process is governed by the Companies Act, 2013 and the FEMA/FDI framework. In this guide, we cover eligibility, incorporation steps, documentation, directors and shareholders, sector routes, funding, timelines, tax, compliance, and common pitfalls when establishing a wholly owned subsidiary of a foreign company in India. What is a Wholly Owned Subsidiary? A wholly owned subsidiary (WOS) is an Indian company in which the entire shareholding is owned by a single parent company (Indian or foreign). Unlike a regular subsidiary with majority ownership, a WOS ensures 100% ownership and control.

2. The subsidiary is treated as a separate legal entity with its own contracts, liabilities, and assets. While it operates independently under Indian law, strategic control rests with the parent company. Why Choose a WOS for India Entry? ● Full control and brand alignment – Parent company directs strategy, pricing, IP, and hiring while maintaining brand consistency. ● Limited liability – The subsidiary’s risks and obligations are ring-fenced from the parent’s balance sheet. ● Operational flexibility – A WOS can open bank accounts, sign local contracts, hire employees, invoice in INR, and serve both domestic and export markets. FDI Routes and Sector Eligibility ● Automatic Route – Many sectors allow up to 100% FDI without prior approval, subject to filings under FEMA/RBI. ● Approval Route – Restricted sectors may require government approval or have foreign ownership caps Directors and Shareholders ● Directors – At least two directors are required for a private limited company, with one being an Indian resident. ● Shareholders – Minimum of two shareholders are recorded for statutory purposes, while beneficial ownership remains 100% with the parent. Nominee structures may be used. ● KYC – Foreign directors/shareholders must submit notarized/apostilled identity and address proofs. DSCs and DINs are mandatory for e-filings. Capital, Bank Accounts, and Funding

3. ● Paid-up capital – No minimum requirement, but sufficient capitalization is recommended for 6–12 months of operations. ● Bank setup – A capital account is opened to receive foreign remittances. FDI reporting and share allotment must follow FEMA timelines. ● Funding options – Additional capital, intercompany loans, or ECBs must comply with FEMA and transfer pricing rules. Documents Required ● Parent company – Incorporation certificate, charter documents, board resolution, and details of authorized signatories. ● Indian company – Draft MoA/AoA aligned with sectoral FDI rules, registered office proof, and subscriber sheets. ● Promoters/signatories – Apostilled/notarized IDs, address proof, photographs, PAN for resident director, DSCs, and DINs. Step-by-Step Incorporation Process 1. Name clearance – Reserve a unique and compliant company name. 2. Digital credentials – Obtain DSCs and DINs for directors. 3. Drafting charter documents – Prepare MoA and AoA with permitted business objects. 4. Filing and incorporation – Submit incorporation forms to the Registrar of Companies; receive Certificate of Incorporation, PAN, and TAN. 5. Post-incorporation compliance – Open bank accounts, issue share certificates, appoint an auditor, register for GST/IEC/professional tax (as applicable), and complete FEMA/FDI reporting. Timeline and Costs

4. ● Timeline – 2–4 weeks for straightforward cases; more if approvals, apostille, or restricted sectors are involved. ● Costs – Government filing fees, name reservation charges, notarization/apostille costs, professional fees, and compliance setup. Tax and Repatriation ● Corporate tax – Subsidiaries are taxed as domestic Indian companies. Effective rates depend on chosen tax regime. ● Withholding taxes – Dividends, royalties, and service fees paid abroad may be subject to withholding, with treaty relief available. ● Transfer pricing – All intercompany transactions must be at arm’s length with documentation and benchmarking. ● Repatriation – Profits, royalties, and fees can be remitted abroad subject to FEMA compliance. Compliance Calendar ● Corporate secretarial – First board meeting within 30 days, regular board/AGM meetings, statutory registers, and annual filings. ● FEMA/FDI – Timely reporting of capital inflows, share allotments, and changes. ● Tax and audit – Annual statutory audit, income tax return, GST/TDS filings, and transfer pricing compliance. Common Pitfalls to Avoid ● Entering a sector without verifying FDI rules. ● Weak or missing intercompany agreements for services/royalties.

5. ● Lack of a resident director for statutory compliance. ● Delayed FEMA filings leading to penalties. How We Help ● End-to-end incorporation – Eligibility check, DSC/DIN procurement, charter drafting, filings, and certificate procurement. ● FEMA/FDI compliance – Capital account setup, remittance reporting, and share allotment filings. ● Compliance setup – Auditor appointment, accounting, GST/TDS registrations, and transfer pricing support. ● Expansion support – Payroll, vendor contracts, intercompany SLAs, and HR frameworks aligned with Indian laws. Conclusion A wholly owned subsidiary in India is one of the most effective ways for foreign companies to establish a direct presence in the Indian market with complete control and limited liability. With the right planning, documentation, and compliance, it offers a strong foundation for long-term growth.