We explain step-by-step how a wholly owned subsidiary company is incorporated in India and highlight important compliance obligations. 

A company can be registered in India as private limited or public limited. A private limited company is a closely held company. A public limited company is a company where shares of the company held by public and it is required to comply with lot of rules and regulations framed by the Companies Act, 2013. Generally foreign companies prefer the formation of wholly owned subsidiary in India.

What is a wholly owned subsidiary company?

A wholly owned subsidiary company is a company that is incorporated under the provisions of the Companies Act, 2013 and in which holds 100 percent share capital of such company.  In other words, a wholly owned subsidiary company can be defined as an entity whose entire share capital is held by another Indian or foreign company.

Requirements of setting WOS of a foreign company in India

• In order to register the Indian subsidiary company, minimum two directors are required and at least one of the directors shall be Indian citizen and Indian resident.
• Minimum two shareholders are required. Therefore, one nominee shareholder will hold on behalf of the holding company to fulfill the said requirement. There is no condition for residential status of shareholders. Shareholders can be either individuals or entities or a combination of both.

Procedure for incorporation of wholly owned subsidiary

Step 1: To apply for Digital Signature Certificate (DSC)

All the directors of the company are required to obtain class-3 , for which the following information and documents are required:

1. Photo of the proposed director

2. Photo ID proof of proposed director:

• For foreign national: Notarized and apostilled copy of passport
• For Indian national: Voter ID/ driving license/ passport along with PAN.

3. Address proof of proposed director:

• For foreign national: Notarized and apostilled copy of current months’ telephone bill or mobile bill or electricity bill or latest bank statement)
• For Indian national: Telephone bill or mobile bill or electricity bill or bank statement (not older than two months)

4. Email ID and Indian mobile number

Step 2: Apply for name reservation of proposed company

Form Part A of SPICe+ is required to be filed to reserve the . Two names can be filed at a time. The name once approved is reserved for 20 days, which can be extended for 40 days or 60 days on filing the extension application.    

A foreign company can use its complete name or part of it followed by (Pvt. Ltd.) applying for the name reservation of its WOS.

In case of the foreign company using its own name as the name of WOS in India, then the foreign company is required to pass a resolution to this effect and the same needs to be provided while filing the application for name reservation.

Documents required for filing the name reservation application

1. Resolution of the foreign company (duly apostilled)
2. Charter (MOA) of the foreign company (duly apostilled)
3. NOC from the foreign company to use its own name (duly apostilled)
4. If foreign company its trademark, then copy of the trademark registration certificate (duly apostilled)

Step 3: Incorporation of wholly owned subsidiary

Form Spice+ Part B and C are required to be filed on the Ministry of Corporate Affairs (MCA) website for registration of the proposed WOS.

Following are the services offered under the above form:

• Incorporation of Company
• Director Identification Number (DIN) allotment
• Issue of Permanent Account Number (PAN) of company
• Issue of Tax Collection Account Number (TAN) of company
• Social Security registration
• Profession Tax registration (Maharashtra)
• Bank Account Selection
• Goods & Service Tax Registration

Documents required for the above services which shall be duly notarized and apostilled

1. A copy of the resolution passed by the board of Foreign Company, mentioning the following details:

• Name and designation of the authorized representative
• Proposed capital structure of the company
• Subscribers/ Investors details
• Proposed directors’ details

2. ID proofs of the authorized representative; passport is mandatory if such person is non-resident

3. ID proof and address proof of the of the directors

4. A copy of the Certificate of Registration, Charter (MOA), Articles of foreign holding company

5. Information / particulars of nominee of the share of foreign company

6. Business activity/ object of the company along with subscriber sheet

7. Articles/ by-laws of the company along with subscriber sheet

Below documents are not required to be notarized and apostilled

1. Proof of place where the registered office of the companies is to be situated in India, that is, Lease Deed/ Rent Agreement/ NOC from the owner of the property in case the property is taken on lease for use of registered office of the company.
2. Copy of utilities bill of the registered office not older than two months.

After verifying all the details and documents, the MCA will register the WOS and issue Certificate of Incorporation and allot CIN (Corporate Identification Number) to the company.

Step 4: Post incorporation compliance

First board meeting: First meeting of board of directors is required to be held within 30 days of the incorporation of the company.

Appointment of first auditor: First auditor of the company shall be appointed by the board of s within 30 days of incorporation who shall hold the office till the conclusion of the first shareholder meeting of the company, which is required to be held annually.

Declaration of commencement of business: After the opening of the bank account and before the commencement of any business operations, the subscribers are required to deposit of the subscription amount as agreed and provided in the Memorandum of Association of the company. On the deposit of the subscription amount in the bank account, the company is required to file a Declaration of Commencement of business with the Registrar of Companies (ROC) in form INC-20A, which evidences that the subscribers have deposited the subscription money in the bank account of the company, within 180 days of its incorporation. Until such declaration of commencement is filed with the ROC, the company cannot commence any of its business operations.

Name board: Companies are required to paint or affix the name of the company, registered office address, Corporate Identification Number (CIN), contact details, Goods and Services Tax Identification Number (if any) etc. outside every office or place in which it carries on business.

Share certificates: The company has to approve the format of share certificates of the company. And issue the same to the subscribers.

Statutory register: All companies are required to maintain statutory registers for the company viz. register of members, directors and key managerial personnel, charges, etc. The statutory registers must be regularly updated and kept at the registered office of the company. However, these registers can now also be maintained in electronic format.

Authority to obtain licenses required for the running of business: Depending upon the nature of business, the company is required to obtain licenses and registrations with different Government authorities, related to Shop Act License, Goods & Service Tax, Professional Tax, Importer Exporter Code, Start-up etc., as applicable. The company authorizes any director or other signatory to obtain such registrations in its first board meeting.

RBI compliance for FDI received in India

Any contribution from foreign citizen to capital in the company is considered as foreign direct investment (FDI) and accordingly, RBI compliance needs to be secured by the newly registered company in India. It involves the following steps:

1. Remittance of subscription amount in India bank account from foreign country bank account to Indian bank account. Obtaining Foreign Inward Remittance Certificate (FIRC) and Know Your Customer (KYC) documents from the remitter bank.
2. Allotment of shares to the subscriber.
3. Reporting in Form FC-GPR to the concerned AD bank within 30 days of date of allotment and follow up from bank from time to time.