Sunday, 16 November 2014

Setting up a Wholly Owned Subsidiary (WOS) in India

The most preferred route for the foreign companies to enter into the Indian market is to incorporate a Wholly Owned Subsidiary. This obviates the need of an Indian partner, and the foreign company can control the Board of Directors of the (WOS) to the fullest extent.
To incorporate a Wholly Owned Subsidiary with 100% FDI, a foreign company need not obtain any prior approval in most of the business sectors as it has been permitted to set up the wholly owned subsidiary under the automatic approval route. This facilitates the incorporation of a Wholly Owned Subsidiary in the shortest possible time frame and the business operations of the Wholly Owned Subsidiary can commence soon after incorporation.
However the foreign investment in the WOS by the parent company or other group companies needs to be approved by the Reserve Bank of India (RBI) after the WOS is incorporated.
A Wholly Owned Subsidiary in India normally takes the route of a Private Limited Company. A Private Limited Company needs only two directors and two shareholders and can be incorporated within four weeks provided the foreign company provides all the documents in the proper formats.
Once established as a Wholly Owned Subsidiary in India, the WOS so incorporated is equated to a domestic company in India and as such a WOS pays the same corporate taxes as a domestic company.
Investment by the foreign company can be through either of the following routes:
Equity Capital
Preference Capital
Foreign Currency Convertible Bond (FCCB)

If the foreign company decides to take the debt route in addition to the equity route, the WOS can receive a foreign loan from either the parent company or other recognized financial institutions outside India. These foreign loans obtained by the WOS are governed by the External Commercial Borrowing (ECB)guidelines framed and administered by the Reserve Bank of India (RBI) from time to time.

The firm has assisted more than hundred foreign companies in establishing their wholly owned subsidiaries in India and further assist them in complying with all post incorporation legal compliances.

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