Foreign Wholly-Owned Subsidiary (WOS) Company
Streamlined incorporation and compliance services for Wholly-Owned Subsidiaries (WOS) in India, ensuring operational readiness and regulatory adherence.
Introduction
A Wholly Owned Subsidiary (WOS) in India is a company incorporated according to the Companies Act, 2013, with 100% of its shares owned by a foreign parent company. It functions independently with its own board and management, but under the ultimate control of the foreign parent. This structure allows the parent company to maintain full control over its operations in the foreign market. India’s booming economy and vast consumer base present a golden opportunity for foreign businesses seeking international expansion.
Features of a Wholly-Owned Subsidiary (WOS) in India
- Full Control: The foreign parent company owns 100% of the subsidiary’s share capital, providing complete control over the Indian entity.
- Independent Legal Entity: The Wholly-Owned Subsidiary (WOS) operates as a separate legal entity under Indian law, distinct from its parent company, with its own rights and obligations.
- Limited Liability: The liability of the parent company is limited to the extent of its investment in the subsidiary, protecting the parent company’s assets from the subsidiary’s liabilities.
- Incorporation Compliance: The subsidiary is incorporated under the Indian Companies Act, 2013, and must comply with all regulatory requirements stipulated by the Act.
- Board of Directors: The Wholly-Owned Subsidiary (WOS) has its own Board of Directors, which includes directors appointed by the parent company. At least one director must be an Indian resident.
- Regulatory Adherence: The subsidiary must adhere to all Indian regulatory requirements, including those related to corporate governance, taxation, labour laws, and financial reporting.
- Operational Autonomy: While the parent company retains control, the Wholly-Owned Subsidiary (WOS) operates independently, making its own operational and managerial decisions within the framework set by the parent company.
- Foreign Direct Investment (FDI): The Wholly-Owned Subsidiary (WOS) is established under the FDI policy of India, which allows foreign companies to invest in most sectors under the automatic route, subject to sector-specific regulations.
- Tax Obligations: The subsidiary is subject to Indian taxation laws, including corporate tax, Goods and Services Tax (GST), and other applicable taxes. It may benefit from double taxation avoidance agreements (DTAAs) between India and the parent company’s country.
- Repatriation of Profits: The subsidiary can repatriate profits, dividends, and capital to the parent company, subject to compliance with the Foreign Exchange Management Act (FEMA) and Reserve Bank of India (RBI) guidelines.
- Local Employment: The Wholly-Owned Subsidiary (WOS) can hire local employees and is subject to Indian labour laws, including those related to employment contracts, wages, working conditions, and employee benefits.
- Intellectual Property Protection: The subsidiary can register and protect intellectual property (IP) in India, ensuring the parent company’s IP rights are safeguarded.
- Market Access: Establishing a Wholly-Owned Subsidiary (WOS) allows the parent company to directly access and operate in the Indian market, leveraging local resources and understanding consumer behaviour.
- Compliance and Reporting: The subsidiary must comply with regular reporting requirements to the Ministry of Corporate Affairs (MCA) and other regulatory bodies, including the filing of annual financial statements, audit reports, and other statutory documents.
- Financial Operations: The Wholly-Owned Subsidiary (WOS) can open and operate bank accounts in India, facilitating smooth financial transactions and capital infusion from the parent company.
- Winding up: Due to their simpler composition, Wholly-Owned Subsidiaries (WOS) can be dissolved or wound up more swiftly compared to other business entities. This is particularly advantageous for companies with minimal assets, no outstanding debts, and facing unforeseen circumstances that necessitate closure.
Procedure of Establishing a Wholly-Owned Subsidiary in India
- Application for Digital Signature Certificate (DSC): Obtaining DSC for all proposed directors of the WOS is mandatory. DSC is required for filing electronic forms with the Ministry of Corporate Affairs (MCA).
- Application for Director Identification Number (DIN): Applying for DIN for all proposed directors of the WOS is mandatory. DIN is a unique identification number, issued by the Ministry of Corporate Affairs (MCA) to all individuals who wish to become a director of a company in India.
- Name Approval: Included filing Form SPICe+ Part A with the Ministry of Corporate Affairs to reserve the company’s name. It ensures that the desired name is available and compliant with the MCA naming guidelines.
- Incorporation Documents: Preparing and filing incorporation documents, including Memorandum of Association (MoA), Articles of Association (AoA), Form SPICe+ Part B, Form AGILE-PRO-S (for GST, EPFO, ESIC, and opening a bank account). These documents outline the company’s objectives, rules and regulations.
- Registration and Certificate of Incorporation: Submitting the incorporation forms and documents to the Registrar of Companies (RoC). Upon verification, the RoC issues a Certificate of Incorporation, officially recognizing the subsidiary.
- PAN and TAN: Applying for Permanent Account Number (PAN) and Tax Deduction and Collection Account Number (TAN). These are important for tax-related activities in India.
- Bank Account: Opening a Bank Account in the subsidiary’s name is required for financial transactions and capital infusion.
- Foreign Direct Investment (FDI) Compliance: Ensuring compliance with FDI regulations under the Foreign Exchange Management Act (FEMA). In most sectors, FDI is under the automatic route, but some sectors require government approval.
What is included in this
FAQs
A Wholly-Owned Subsidiary (WOS) is a company whose entire share capital is held by another company, known as the parent company. In the context of India, it refers to an Indian entity fully owned and controlled by a foreign parent company.
The key benefits include full control over operations, limited liability, direct access to the Indian market, potential tax benefits, and the ability to protect intellectual property. Additionally, it facilitates ease of profit repatriation and alignment with global business strategies.
Process includes obtaining Digital Signature Certificates (DSCs), Director Identification Numbers (DINs) for directors, filing the SPICe+ form for name reservation and incorporation, submitting Memorandum of Association (MoA) and Articles of Association (AoA), incorporation forms to the Registrar of Companies (RoC), applying for Permanent Account Number (PAN), Tax Deduction and Collection Account Number (TAN), and other necessary registrations.
Yes, certain sectors have restrictions or require government approval for foreign direct investment (FDI). It is essential to review the FDI policy for sector-specific regulations and limits.
A WOS in India is subject to corporate taxes, Goods and Services Tax (GST) and other applicable taxes. However, it can benefit from tax treaties between India and the parent company’s country to avoid double taxation.
Yes, a Wholly-Owned Subsidiary (WOS) can repatriate profits, dividends, and capital to its parent company, subject to compliance with the Foreign Exchange Management Act (FEMA) and guidelines issued by the Reserve Bank of India (RBI).
A Wholly-Owned Subsidiary (WOS) must comply with various regulatory requirements, including annual filings with the Ministry of Corporate Affairs (MCA), adherence to corporate governance norms, tax filings, and compliance with labour laws and other local regulations.
Yes, a Wholly-Owned Subsidiary (WOS) can own property in India, provided it adheres to the local laws and regulations governing property ownership by foreign entities.
There is no mandatory minimum capital requirement for setting up a WOS in most sectors in India. However, specific sectors may have their own capital requirements. It’s essential to check sector-specific regulations.
Yes, a Wholly-Owned Subsidiary (WOS) can engage in multiple business activities, provided these activities are mentioned in its Memorandum of Association (MoA) and are permitted under Indian law. The activities should align with the business objectives stated during the incorporation.
