Wholly Owned Subsidiary in India: Step-by-Step Incorporation Guide for Foreign Companies

India continues to rank among the most attractive destinations for global expansion, thanks to sustained economic growth, a large consumer base, and a liberalised FDI policy. For foreign companies seeking full control and long‑term presence, incorporating a wholly owned subsidiary (WOS) in India is usually the most strategic and compliant route.

This guide explains what a wholly owned subsidiary is, key legal and FDI considerations, step‑by‑step incorporation, typical timelines and costs, and post‑incorporation compliances, in a format suitable for practical use by foreign promoters and their advisors.

 

1. What Is a Wholly Owned Subsidiary in India?

A wholly owned subsidiary is an Indian company in which 100% of the share capital is held by a single parent company, typically incorporated outside India. Legally, the subsidiary is a separate company under the Companies Act, 2013, but the foreign parent enjoys complete ownership and strategic control.

Key Legal Characteristics

• Separate legal entity distinct from the foreign parent.
• Liability of shareholders limited to unpaid share capital.
• Treated as an Indian resident company for tax and regulatory purposes.
• Must comply with both Companies Act and FEMA/FDI regulations.\

 

2. Why Foreign Companies Choose a Wholly Owned Subsidiary

Compared with branch office, liaison office, or a joint venture, a wholly owned subsidiary offers the most balanced combination of control, flexibility, and regulatory acceptance.commenda+2

Strategic Advantages

• Complete management control: All key decisions remain with the parent group, without local equity partners.
• Wide scope of activities: Can undertake most lawful commercial activities as per its objects clause, unlike liaison/branch offices which are restricted.
• Stronger brand positioning: Operating as an Indian company improves local credibility with customers, banks, and regulators.
• Better tax profile: Taxed as a domestic company, often at lower effective rates than a foreign branch.
• Profit repatriation: Dividends and other legitimate remittances can be repatriated under FEMA, subject to tax and reporting.

Typical use cases: technology/SaaS, manufacturing, service delivery centres, R&D units, and regional headquarters.

 

3. FDI Framework and Sector Eligibility

Before starting, foreign promoters must confirm that the proposed business falls within sectors where 100% foreign ownership is permitted and whether it is under the automatic or government approval route.

FDI Routes

• Automatic Route: No prior government approval required; only post‑investment reporting.
• Government Route: Prior approval from DPIIT/competent authority required before investing.

Sectors Where WOS Is Common (Illustrative)

• IT/ITeS and SaaS.
• Most manufacturing segments.
• Consulting and professional services.
• Many financial and support services, subject to sector caps.

Some sectors such as defence, multi‑brand retail, and certain financial services continue to have caps or special conditions.

 

4. Eligibility and Basic Requirements

Directors

• Minimum two directors.
• At least one resident director (182 days or more stay in India in the preceding financial year).
• Directors can be foreign nationals, NRIs, or PIOs, subject to KYC and DIN.

Shareholders

• Minimum two shareholders (can be the foreign company plus its nominee or another foreign group entity).
• 100% shareholding may be held by the foreign parent, with a nominee holding shares on its behalf as permitted.

Registered Office

• Must have a registered office address in India (owned, leased, or properly documented virtual/coworking address).
• Landlord NOC and recent utility bill are generally required.

Capital

• No statutory minimum paid‑up capital, but adequate funding is expected to cover initial operations, compliance costs, and bank comfort.

 

5. Documents Required (Indicative List)

Drawing from typical checklists used by law and consulting firms:

From the Foreign Parent Company

• Certificate of Incorporation and charter documents (MoA/AoA or equivalent).
• Board Resolution approving investment, subsidiary formation, and authorised signatory.
• Authorisation/Power of Attorney in favour of India representative.
• Latest financial statements (for FDI and KYC, where requested).

From Directors and Shareholders

• Passport (mandatory ID for foreign individuals).
• Recent address proof (bank statement/utility bill).
• PAN (if available for Indian residents).
• Email and mobile number for DSC and MCA OTPs.

For Registered Office

• Lease deed/property document.
• Utility bill (electricity/water) not older than two months.
• No‑objection certificate from the owner where applicable.

All foreign-origin documents generally must be apostilled or consularised, depending on the home country’s treaty status.

 

6. Step-by-Step Incorporation Process (SPICe+)

The incorporation process is now fully online through SPICe+ and allied forms on the MCA portal.

Step 1 – Parent Company Approval and Planning

• Obtain internal approvals from the parent’s board for forming the subsidiary, capital commitment, and authorised signatory.
• Finalise structure (shareholding, directors, registered office, objects).

Step 2 – Digital Signature Certificates (DSC)

• Obtain Class 3 DSC for all proposed directors and authorised signatories.
• This usually takes 1–3 working days after KYC verification.

Step 3 – Name Reservation (SPICe+ Part A)

• File SPICe+ Part A to reserve the proposed name.
• Name may include/reflect the parent company’s brand, subject to NOC and trademark conditions.
• ROC typically processes name applications in about 2–5 working days.

Step 4 – Drafting and Executing MoA and AoA

• Draft Memorandum of Association (MoA) with appropriate main objects aligned with the intended business.
• Draft Articles of Association (AoA) covering share capital, governance, and rights.
• Get subscriber/nominee pages signed and apostilled/consularised for foreign subscribers.

Step 5 – Filing SPICe+ Part B and Linked Forms

• Complete SPICe+ Part B with details of:
  • Directors and subscribers.
  • Registered office.
  • Capital structure and shareholding pattern.
  • Attach MoA, AoA, KYC documents, board resolution, NOC, etc.
• File linked forms (AGILE-PRO-S, INC‑9, etc.) for:
  • PAN and TAN.
  • GST (if required).
  • EPF, ESIC, and bank account opening (optional).

Step 6 – Issue of Certificate of Incorporation

• On verification, ROC issues Certificate of Incorporation (COI) with Corporate Identification Number (CIN), and PAN/TAN are allotted.
• This marks the legal birth of the Indian wholly owned subsidiary.

Indicative timeline (if documents are ready and no major objections): around 2–3 weeks from start of documentation to COI, with some variability depending on name approval and document quality.

 

7. Early Post-Incorporation and FEMA Compliance

Company Law Post-Incorporation

Immediately after COI, the WOS must complete certain actions:

• First board meeting within 30 days.
• Appointment of first statutory auditor within 30 days.
• Opening of current bank account.
• Deposit of subscription money by shareholders.
• Filing INC‑20A (Declaration of Commencement of Business) within 180 days of incorporation.
• Issue of share certificates to subscribers within 60 days of allotment.

FEMA and RBI (FDI) Compliance

Every foreign investment into the WOS constitutes FDI and requires structured reporting:

• Ensure inward remittance comes through Authorised Dealer (AD) bank with proper purpose code.
• Obtain FIRC and KYC from the bank.
• Allot shares to the foreign parent within permitted timelines.
• File Form FC‑GPR on the RBI FIRMS portal within 30 days of share allotment, through the AD bank.

For any subsequent transfer of shares between resident and non‑resident, Form FC‑TRS must be filed.

 

8. Typical Costs and Practical Challenges (High-Level)

Indicative Cost Heads

• Government fees and stamp duty (depend on authorised capital and state).
• DSC cost per director.
• Professional fees for legal, secretarial, and FEMA advisory.
• Notarisation/apostille/consularisation costs abroad.

Common Practical Challenges

• Identifying and appointing a reliable resident director where the group has no existing India presence.
• Getting foreign documents apostilled/consularised in time.
• First-time navigation of FIRMS portal and FDI reporting.
• Aligning group policies with Indian labour, tax, and corporate law norms.

Most of these can be managed smoothly with experienced local advisors and a clear incorporation checklist.

 

9. Ongoing Compliance Snapshot

Once operational, the wholly owned subsidiary must comply with ongoing corporate, tax, and regulatory obligations, similar to any Indian company.

Annual and Routine Compliances (Illustrative)

• Statutory audit of financial statements.
• ROC annual filings (financials and annual return).
• Income-tax return filing and advance tax payments.
• GST registration and periodic returns, where applicable.
• Transfer pricing documentation for related-party cross‑border transactions.
• Periodic FEMA/FDI reports and Annual Return on Foreign Liabilities and Assets (FLA), where required.

A structured compliance calendar is critical to avoid penalties and late fees.

 

FAQs: Wholly Owned Subsidiary in India

1. Can a foreign company own 100% of an Indian subsidiary?

Yes, a foreign company can own 100% of an Indian private limited company in sectors where 100% FDI is allowed under the automatic or approval route, subject to sector-specific conditions.

2. Is it mandatory to have an Indian partner for setting up a subsidiary?

No, an Indian equity partner is not mandatory. A wholly owned subsidiary allows full foreign ownership, provided the business is in a sector where 100% foreign shareholding is permitted.

3. Do we need prior RBI approval to form a wholly owned subsidiary?

In most automatic‑route sectors, no prior RBI or government approval is required; only post‑investment FEMA reporting (such as FC‑GPR) is needed. In restricted sectors, prior government approval is mandatory.

4. What is the minimum capital required for a wholly owned subsidiary in India?

There is no statutory minimum paid‑up capital under the Companies Act, 2013, but the company should have enough capital to demonstrate viability and support early operational and compliance costs.

5. How long does it take to incorporate a WOS in India?

If documentation is complete and properly authenticated, incorporation via SPICe+ can often be completed in about 2–3 weeks, with additional time for bank account opening and FDI reporting.

6. Is a resident director compulsory for a foreign-owned subsidiary?

Yes, at least one resident director (staying in India for at least 182 days in the preceding financial year) is mandatory for every Indian company, including wholly owned subsidiaries.

7. Can a virtual office be used as the registered office at incorporation?

Yes, a virtual or coworking office can be used as the registered office if it has a proper physical address, NOC from the owner, and acceptable address proof documents.

8. What are the main post-incorporation compliances for a WOS?

Key items include first board meeting, appointment of auditor, bank account opening, deposit of share capital, INC‑20A filing, share certificates, FDI reporting, and obtaining business-specific registrations such as GST and IEC.

9. How are profits of a wholly owned subsidiary repatriated?

Profits can be repatriated mainly through dividends or legitimate service/royalty/interest payments, subject to withholding taxes, board and shareholder approvals, and FEMA/remittance procedures.

10. When should a foreign company prefer a wholly owned subsidiary over a branch or liaison office?

A wholly owned subsidiary is preferable when the company plans full-scale, long-term operations, wants maximum control and brand presence, and needs flexibility to undertake a wide range of commercial activities in India.