Wholly Owned Subsidiaries in India

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Jan. 13 – Foreign companies can set up wholly owned subsidiaries in sectors where 100 percent foreign direct investment is permitted under India’s national FDI policy. For registration and incorporation, a set of applications have to be filed with Registrar of Companies (ROC). Once a company has been duly registered and incorporated as an Indian company, it is subject to Indian laws and regulations as applicable to other domestic Indian companies.

Establishing a Private Limited Company in India

Option 1

  • Incorporate company with foreign directors and shareholders

Option 2

  • Incorporate company in India with Indian directors and shareholders, and after incorporation transfer shares to foreign entities

Foreign investment in India is regulated under the Foreign Exchange Management Act (1999) and is allowed under two routes: namely the “automatic route” and the “approval route.” As per notifications issued by the Reserve Bank of India, 100 percent investment is allowed in sectors covered under the automatic route. For other industries and sectors, caps are defined and government approval is required which involves a separate set of procedures to be followed.

No specifications or sector-specific caps for companies engaged in event management activities have been issued for the purpose of foreign investment in India. However, sector specific guidelines in the media and entertainment industry have been issued by the RBI.

Apart from the sectors for which specific caps have been defined for foreign investment, 100 percent investment is allowed under the automatic route, wherein no specific approval would be required for setting up an entity in India.

Option 1: Incorporation of private limited company with directors and shareholders of foreign origin

Steps involved:

  • Obtaining Director’s Identification Number – online application
  • Obtaining Digital Signature Certificate for at least one of the directors
  • Filing application for name availability with the Registrar of Companies – online check and application
  • Drawing up Memorandum of Association and Articles of Association
  • Having the appropriate persons to subscribe to the memorandum (minimum of two for a private company) and preparation of other forms
  • Submission of all the documents with ROC along with the requisite fee(s) – submitted online
  • Receipt of Certificate of Incorporation – issued online to companies

Estimated time

Option 2: Incorporation of private limited company with directors and shareholders of Indian origin

Steps involved:

  • Filing application for name availability with the Registrar of Companies
  • Drawing up Memorandum of Association and Articles of Association
  • Having the appropriate persons to subscribe to the memorandum (minimum of 2 for a private company) and preparation of other forms
  • Submission of all the documents with ROC along with the requisite fee(s)
  • Receipt of Certificate of Incorporation
  • Transfer of shares to Foreign Entities after incorporation formalities and allotment of shares to initial subscribers is complete
  • Change in Directors after incorporation formalities are complete in full

Estimated time

Dezan Shira & Associates is a boutique professional services firm providing foreign direct investment business advisory, tax, accounting, payroll and due diligence services for multinational clients in India. For more information, please contact india@dezshira.com, visit www.dezshira.com, or download the firm’s brochure here.