Before taking a look at the Wholly Owned Subsidiary (WOS) Formation Procedure, would like to describe some basics.
What is WOS (Wholly Owned Subsidiary) ?
When one company is 100 % owned by another company, it is called Wholly Owned Subsidiary of the company who has made 1oo % investment in it.
e.g. ABC Pvt. Ltd. is 100% owned by XYZ Pvt. Ltd. Here ABC Pvt. Ltd is Wholly Owned Subsidiary of XYZ Pvt. Ltd.
What is WOS by foreign entities in India?
When an entity which is registered or incorporated outside India (i.e. foreign country), makes 100% Foreign Direct Investment (FDI) in India [as per Indian FDI Policy few sectors are permitted for 100% FDI in India], the Indian Company is said to be Wholly Owned Subsidiary of that foreign entity.
e.g. ABC Private Limited is 100% owned by XYZ Inc, registered in USA. Here ABC Private Limited is Wholly Owned Subsidiary of XYZ Inc.
Mode of Formation
Wholly owned Subsidiary can be formed either as a private or public company, limited by shares of guarantee or an unlimited liability company. There are more exemptions available to a private limited company under the Indian Companies Act 1956, hence most of the companies prefer to form WOS Private Limited company.
Key Features of WOS
- Wholly Owned Subsidiary is regulated by Indian Law i.e. Companies Act 1956.
- All types of business activities are permitted such as manufacturing, marketing, services industry.
- Where 100% FDI is permitted no prior approval of Reserve Bank of India is needed. Refer : FAQ’s on FDI by Reserve Bank of India (RBI)
- It is treated as domestic company under Indian Tax Law and is eligible for all exemptions, deductions benefits as applicable to any other Indian Company.
- Funding can be made in the form of share capital or loan.
1. It requires minimum two directors, two shareholders
2. Minimum Authorised and Paid Up capital of Rs. 1 Lakh.
WOS Formation Procedure in brief
- Two directors shall be required to apply for DIN (Director Identification Number).
- One of the directors needs to apply for Digital Signature Certificate.
- An applicant needs to apply for name in e-form 1A with the Registrar of Companies in which the company is to be incorporated.
- After obtaining approval of name from the Registrar of Companies (RoC), an applicant needs to submit Form 1 (Incorporation of company) 18 (Notice of situation of registered office) and 32 (Appointment of first directors) along with Memorandum and Articles of Association of the proposed company.
- After filing of documents online, an applicant needs to pay RoC fees and Stamp Duty electronically (this is based upon the Authorised Capital of the Company).
- After payment of all stamp duties and RoC fees, RoC verifies all the documents and forms. Form18 and Form32 are approved by STP (Straight through Process) immediately and RoC checks Form 1 in detail and may suggest some changes to be made in the attachments or in form itself. We need to make necessary changes accordingly.
- After verification by RoC and satisfied by it, it shall send soft copy of Certificate of Incorporation via email.
If this article has helped you in any way, i would appreciate if you could share/like it or leave a comment. Thank you for visiting my blog.