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.
Minimum requirements
1. It requires minimum two directors, two shareholders
2. Minimum Authorised and Paid Up capital of Rs. 1 Lakh.
WOS Formation Procedure described 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.
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Legal Disclaimer:
Please guide me in detail in the following-
1. In case of new Pvt. Ltd. company, two individual directors are holding 1 share each and the remaining 998 shares of FV Rs. 100 per share are held by Holding Company which is also a Pvt ltd company.
My query is –
a) Whether the Holding company can lend the amount as and when it is required for the use of the subsidiary company? if yes, the procedure, formats, time limits etc.,
b) If, the entire shares are held by the two individuals who are also the directors, how the financing requirements for expansion can be met?
a) Holding company is body corporate -lending money to its Subsidiary will attract FEMA regulations. As per FEMA, any amount received in foreign currency by way of loan, the company shall require to get prior approval of RBI by filing form 83 along with Agreement with holding company. Also company shall file ECB return quarterly and yearly basis to RBI to comply FEMA provisions.
As per Company law, after getting approval of RBI, the company shall file CHG-1 form to Registrar of companies.
b) For expansion, only Holding company can provide loan or invest in equity shares.
The WOS in India wants to conduct an AGM and the holding company being a foreign body corporate wants to appoint the director of Indian WOS as its representative for the AGM and the nominee member is abscond. How can quorum for the AGM be ascertained?
Thank you in apprehension of your reply.
Holding company has to appoint new nominee in order to hold AGM in India and to fulfill requirement of quorum.
hello ma’am
There is a indian company, having two shareholders. They are transferring the shares to Foreign company.
Mr. A is holding 9999 Equity shares transferring to Foreign Co.
Mr. B is holding 1 equity share transferring on Mr.A’s name as nominee authorised by a foreign company vide board resolution.
can Mr. A act as a nominee capacity for a foreign company?
In FCTRS fillings, what is to be inserted as buyers details for that One Equity shares?
Though as per Company law, you will have to keep minimum requirement of two member and hence you will have to appoint one nominee to hold 1 equity share on behalf of Company incorporated outside India at the time of transfer, while reporting of FCTRS form to RBI, you will mention name of company incorporated outside India as buyer of whole share 10000.
ma’am,
can we mention the name of the company and Mr. A, nominee appointed by foreign co.,duly authorised by board resolution vide dated___ in the name of the buyer column?
we shall also attach the Board resolution of the foreign company along with MGT -4 and MGT-5 with FCTRS? will that be ok?
1. Yes, you can give reference of board resolution. 2. Yes, for safer side you can attach Board resolution of foreign company along with form MGT-4 abd MGT-5 with FCTRS form.
Hello Mam,
Your blog is quite informative. But i have a query that if we holding company transfer its 3 of business to its 3 Wholly Owned Subsidiaries companies, then what are the compliances under companies act, 2013?
Each Subsidiary company shall file FCGPR form to RBI about remittance of initial subscription of money towards transfer of shares within 30 days from date of remittance. Also company shall issue share certificates within 60 days from date of receipt of amount.
Dear mam
What would be the procedure in case nominee share holder of wholly owned foreign subsidiary died.how his shares would be treated?Weather it would be transmitted to his legal heir or it Foreign holding company will appoint new nominee?
As per my view, foreign holding company have to appoint new nominee.
Thanks for your reply.Is there any reporting to Roc in form MGT-4,5 & 6 required in that case?
Yes Reporting to ROC in form MGT-4, 5 and 6 is required in case of appointment of new nominee.
.
Hello Ma’am,
Can a newly incorporated LLP be wholly owned by a Pvt Ltd company?
Regards,
Prajwal
NO.
Hi mam
a German company incorporated WOS in india, 1 shares given to foreign individual as Nominee. if Indian (WOS ) company wants conduct AGM , what is qourum if the nominee Unable to attend the AGM
Can the german company appoint Two Authorised representatives for the sake of Qourum???
In Annual General meeting in case of Private Limited company, quorum should be two. If one of the members is Body corporate or company incorporated outside India then that Body corporate shall appoint nominee who can attend the meeting and vote on its behalf because body corporate cannot vote on its own. The Body corporate can nominate person who can attend and vote in AGM by passing board resolution.
Dear Mam,
Japan company wants to start a business in India and the director of the proposed business will be two ( Indian and Japanese) with the authorised capital will be 10 lakhs. The directors will be holding 50% of shares each. In this situation what type of company can start whether WOS or Branch or joint venture. Kindly suggest this with detail explanation.
Thanks and regards,
S.Kavitha.
Company can start with Private Limited having two directors cum shareholders holding 50% each of total equity.
I have one query that there is a requirement that every company must have 2 min members so how can a company can hold 100% shares of other company. It means only one shareholder exist in that subsidiary company.
For every private limited company minimum two members are required. If a company or body corporate wants to hold 100% shares of other ( i.e. subsidiary company) company then one shareholder shall declare to ROC that he holds 1 share on behalf of company and not having beneficial interest in share. One shareholder will become nominee of that company.
Hi Madam,
This is nagarjuna , chartered accountant from Ongole
As you told one shareholder declare to ROC that he holds 1 share on behalf of holding comapny and not having beneficial interest .Is there any form to intimate to ROC. How to fill SPICe form now. with respect to Individual who is subscriber
As per Section 89 of Companies Act 201, declaration in respect of beneficial interest in any share, holder of share shall make a declaration to the company inform MGT-4 that individual will hold shares on behalf of company but not having beneficial interest in shares. The parent company which actually holds shares shall declare in form MGT-5 and Indian company shall disclose the information in form MGT-6 to ROC within 30 days of receipt of declaration.
I want form a 100% subsidiary Company of my Private Limited Company and transfer a division of the business to the new company.
What is the procedure?
Time required to complete all the formalities
Sorry for late reply. Please call my office.
Hello Ma’am,
Appreciate your well written responses here.
My query is can an existing company become 100% wholly owned subsidiary of a foreign Company by transferring all its shares to Foreign Company? Will there be any extra compliance apart from share transfer and filing of FCTRS forms in this case.
Thanks & regards
Indian company shall file FCTRS to RBI towards transfer of shares.
Existing Indian Public Limited Company wants to open 100% subsidiary in India as Private Limited Company.
What all is required to be done by existing Company, i.e. resolutions to be passed by Board/ Shareholders and other formalities.
Existing Indian Public Limited company shall be required to pass board resolution to open 100% subsidiary in India as private limited company and MOA AOA, certificate of incorporation is to be filed with INC-1 ( i.e. name application).
Very detailed information, Thank you Meenal Abhyankar.
Which are the sectors in India which allows 100% foreign investments?
Please check FDI policy on RBI site.
Hii mam i am himanshu tiwari and i want to starts opc company which works on product and marketings services(pesticides only marketing)
1. what is the procedure to start opc company.?
2. is trade mark is required in pesticides..?
3. can we open subsidiary company in opc firm.?
Please call me.
hi Maam, we are setting up indian subsidiary for companies in UAE and turkey (two diff companies), what is the formality or documentations required from the foriegn companies,
File documents require for DIN, Name application, registration in one form only SPICE i.e. INC-32, INC-33 ( Memorandum of Association ) INC-34 ( Articles of Association). If you need guidance please call me.
Hii mam,
can a parent company appoint nominee to any person other than it’s director, shareholder or employee.
Yes
Ma’am,
What is the procedure of winding upof a Wholly Owned Indian Subsidiary of a Foreign Company??
Will it attract any section of FEMA, 1999? And as per company’s act,how will it differ than any other winding up????
WOS of Foreign subsidiary can apply for removal of name of company from the Registrar by filing form STK 2 with Government fees Rs 5000/-.
madam, i have a doub.
In WOS, the company formed must have min. of 2 directors. Whether these two can be indians? or one must be the director of the forien company?
yes two can be Indian or One Indian and foreign director.
Ma’am, WOS in India of foreign company with paid up capital of Rs. 1 Lac is small company ?
Yes it is small company
Dear Mam,
I have basic question, regarding approval from FIPB, when we need to take approval before incorporation or after incorporation, if the object of new wholly owned foreign subsidiary is under approval route. what is the procedure.
Thanks in advance
The company shall required to obtain prior approval from FIPB (RBI) before investment of subscription money in company’s bank account.
IN INDIA THERE ARE MANY WHOLLY OWNED SUBSIDIARY COMPANIES.IF HOLDING COMPANY HOLDS ALL THE SHARES OF THE SUBSIDIARY THEN HOW CAN THAT COMPANY HAS 2 MEMBERS WHICH IS NECESSARY TO FORM A PVT.LTD COMPANY OR 7 MEMBERS TO FORM A PUBLIC CO. ?
If holding company holds all shares then for minimum two members, Holding company appoints nominee who can hold single share on behalf of Holding company.
What Complainces to be done for follow this procedure for appointing a nominee by the holding company.
The Holding company shall pass Board resolution for appointing a nominee of Holding company and nominee has no beneficial interest in shares held by Holding company then Indian company shall file MGT-4.MGT-5 and MGT-6 with ROC within 30 days of receipt of consent by Holding company. As secretarial practice, the company shall update Register of member and enter the name of nominee and create separate folio.
dear mam,
I would be really grateful if you could clarify a doubt. If a company X registered under companies act 2013 is a subsidiary of a foreign company Y and its not mentioned whether the subsidiary is wholly owned or not. whether company X is a foreign company or indian company? and according to which sections?
X is an Indian company because it is registered under Companies Act 2013 . As per Section 2(20) of the Companies Act 2013, company means a company incorporated under this Act or under any previous law. Though it is subsidiary of foreign company. It is Indian company.
how documents can be apostiled and noterised? What is diffrence in it? and who apostile the document..?is it coumpolsory to notrised and apostile all document while forming WOS.?what is procedure in india for same WOS?
Please refer Companies Incorporation Rules 2014 and Hague Convention Act. The Apostil is different authority who provides certificate on notarised documents. Please check whether the foreign national is staying in country which is common wealth or non common wealth country. Based upon apostil is necessary.
if indian company OPEN SUBSIDIARY IN SINGAPORE THAN WHAT ARE THE REQUIREMENTS AND RESOLUTIONS TO BE NEED TO PASS IF THEY ARE INVESTING SINAPORE 800$ AS ODI.
Board resolution for opening of subsidiary in India with details of promoters ( names) , amount of capital , authority to person shall be specified in Resolution.
Dear Mam,
I have a query a holding company is holding 99.98% whereas 0.02% is holding by the directors. The holding company want total 100% of Holding. Can he hold 100% of Holding.
Yes , Parent company can hold 100 % in subsidiary company. other two subscribers have to give declaration to Registrar of Companies that they don’t have beneficial interest in shares 0.02%. They are holding on behalf of parent company.
Dear Ma’am,
I have the same query. Can you tell me declaration in which form and it has to be filed with Spice form?
Declaration by CS is not required in SPICE form.
Hello Mam,
One of my client want to open a branch office in India. They first want to start with giving me job opportunity and later want to have more employees on board.
They want to have 100% ownership in the company, but want to spend less. Can you please suggest to the procedure of opening a branch office in India with all different procedures like Proprietor, PVT LTD, Partnership
If Parent company open Wholly Owned subsidiary company in India instead of having branch office , this will be simple process.
Ma’am,
Can we incorporate a 100% subsidiary of a foreign LLC , it is incorporated in Kuwait
Yes
Hello Madam,
Thanks for informative article. I have query.
For Singapore based foreign national or NRI, whether both attestation from foreign public notary and Indian Embassy will require or only attestation from foreign public notary is sufficient. I think as per Hague Convention apostille is not mandatory.
Please guide.
Thanks for your comment. Please refer Companies (Incorporation Rules). You will have to check the list of common wealth countries and Hague Convention Act and guide accordingly.
Where subscriber to the memorandum is a foreign national residing outside India-
(a) in a country in any part of the Commonwealth, his signatures and address on the
memorandum and articles of association and proof of identity shall be notarized by a
Notary (Public) in that part of the Commonwealth.
(b) in a country which is a party to the Hague Apostille Convention, 1961, his signatures and
address on the memorandum and articles of association and proof of identity shall be
notarized before the Notary (Public) of the country of his origin and be duly apostillised
in accordance with the said Hague Convention.
(c ) in a country outside the Commonwealth and which is not a party to the Hague Apostille
Convention, 1961, his signatures and address on the memorandum and articles of
association and proof of identity, shall be notarized before the Notary (Public) of such
country and the certificate of the Notary (Public) shall be authenticated by a Diplomatic
or Consular Officer empowered in this behalf under section 3 of the Diplomatic and
Consular Officers (Oaths and Fees) Act, 1948 (40 of 1948) or, where there is no such
officer by any of the officials mentioned in section 6 of the Commissioners of Oaths Act,
1889 (52 and 53 Vic.C.10), or in any Act amending the same;
(d) visited in India and intended to incorporate a company, in such case the incorporation shall be allowed if, he/she is
having a valid Business Visa.
Explanation.- For the purposes of this clause, it is hereby clarified that, in case of Person is of Indian Origin or Overseas
Citizen of India, requirement of business Visa shall not be applicable.
Thanks Madam for your guidance.
Thank you
can a WOS invest in the shares of its Holding company.
No.
While filing MGT-7 in case of WOS, minimum shareholders required are 2 whereas entire shares are held by one company. How to fill the form ?
you will have to specify names of two shareholders as per Register of Members.
If 100% shares acquire by one company, it means only shareholders in wos company, than how it is possible ?(PVT. Ltd. Co)
To make wholly owned subsidiary in subsidiary company, all shares shall be held by Parent company. To comply the provision of company law to have minimum two members, one member shall hold 1 % share on behalf of Parent company and 99 % share will be held by Parent company.
Hello Ma’am,
As per FCTRS filed by the company in the year 2013, all 100%shares are transferred to the Parent Company, but the Company law documents shows 1 share is held by an Individual, for which MGT-6 has been filed in the year, 2015.
So what would be the Status of the Company??
Indian company will be wholly owned subsidiary of Parent company.
hello mam my query is…if a pvt. company holds 9900 shares in another pvt. conpany and 100 shares are held by director of company which is common in both the companies…will it be it considered as wholly owned subsidiary
Yes.
thanku so much mam…mam my main doubt is it is 99% and1% here and not 99.99% and .01%…will it still be wholly owned
no.
In case of the 99.99% & 0.01% being held by Body corporates. Do we require to file MGT-6.
Yes
We have opened an account in India for our subsidiary from USA.
How to fund the account?
Whether we have to send fund via Money transfer / bank channel transactions?
Please clarify the funding side.
Where is subsidiary formed ??
Hi Mam,
My query is what shall be the status of the foreign entity (which has WOS in India). Whether this entity be recognised as the Foreign Company under the Companies Act 2013?
Please refer Section 2(42) of Companies Act 2013, foreign company means any company or body corporate incorporated outside India which a ) has a place of business in India whether by itself or through an agent, physically or through electronic mode and b) conducts any business activity in India in any other manner.
In your case foreign entity is foreign company.
I have a query. A private company in India is having 3 shareholders. The parent company is a foreign company and holding 50% shares in the Indian entity. The other 2 shareholders are holding shares as nominee shareholders. Each having 25% shareholding.
The shares are to be transferred in such a way that the parent company holds 99.99% shares and remaining 0.01% shares will be with some other nominee.
Please let me know whether any transfer deed would be required in such a case? Will transfer of shares from nominee to the parent company constitute transfer and a requisite transfer deed be required in such a case?
The existing nominee shall transfer the shares to parent company by giving consent of transfer, passing board resolution by company and signing SH-4 ( share transfer form) . Now since the transfer it between nominee ( resident Indian) to Parent company, as per FEMA Guidelines, the transfer by way of filing FCTRS is to be reported to Reserve Bank of India within 60 days of receipt of consideration.
hi mam, I appreciate your patience for giving good response to all queries. am having following queries, request you to send your valuable suggestions.
Our company got incorporated in the month of june-15 & it is WOS. Now, the foreign company wants to transfer the share to WOS. Could you please forward procedures for the same.
Regards.
Richard
Thanks for your comment. Please read my article on Reporting of FDI to RBI. Now after February 2016, the reporting of advance remittance of funds towards equity capital and FCGPR become online. Please create company’s user name and password on http://www.ebiz.gov.in. and upload e-forms to RBI.
Hello Mam,
How can a company holding 58% in the subsidiary transfer the entire holding to its directors. please tell the procedure.
Waiting for your reply
Hold Board meeting, consider and accept consent letter of transfer of equity shares between buyer and seller. Execute share transfer form SH-4 , get it signed by both with valid stamp duty. Enter the same details in Register of transfer and Register of Directors shareholding.
Can a holding company holding 99% of share holding in its subsidiary company give a LOAN to the same subsidiary company?
As per Section 186(2) [Loan and investment by company], no company shall directly or indirectly give any loan to any person or other body corporate.
Body corporate as per Section 2(11), the company incorporated outside India.
Under this section it does not specify about holding and subsidiary companies. Hence this section will not apply.
Hence this section will not apply and therefore holding (parent company situated outside India) cannot give loan to same subsidiary company situated in India.
Hiii Meenal..my query is..can a company transfer its one business out of two business to its wholly owned subsidiary…Thanks
Please refer Section 180(1)(a) of Companies Act – Restrictions on powers of Board. Please see the definition of “Undertaking” and the limit of net worth and total income of the company. Then you can decide whether a company can transfer its one business out of two business to its wholly owned subsidiary.
Can an Indian Private Limited company have an Indian wholly owned private subsidiary owning 100% of the subsidiary or is the private subsidiary required to have 2 shareholders (the 99.999% and .0001% convention). Thanks
To comply the requirement of having minimum 2 members in case of private limited, the arrangement shall be made like 99.99% and 0.01%
In case of 100% wholly owned subsidiary of a Foreign Company how do we meet requirement of two members? Do we have have one shareholder holding a one share as a nominee of holding parent Company?
Yes
Hi Meenal. In relation to your above explanation, which provision of the Companies Act, 2013 talks of a wholly owned subsidiary ? Also, which section / rule allows such an arrangement wherein we can nominate an Indian shareholder to own .01% as a nominee to fulfill requirements of a WOS ?
There shall be minimum two members in case of Indian company as per Companies Act,2013 and therefore parent company shall hold 99.99% and 0.01 % by Individual to comply the provisions of Companies Act, 2013.
Hi meenal, your blogs are really really impressive and quite knowledgeable also,
one query can a private company acquire 100% share capital of public limited company and make it as a wholly owned subsidiary
Thank you for comment. Yes Pvt. ltd can do so provided there must be minimum 7 members of Public company because this is minimum requirement of Public company.
Dear Ma’am,
Hope you are fine and in the best of health and spirit both. Heartily Wish you a Happy Diwali and New year.
Ma’am, last year in Sept 2014 we had registered private limited company. These year, we are trying to upload Annual Return ( MCA) but AOC4 and MGT9 is not getting uploaded for the reason not known to us. Thankfully, the last date of filing return is extended to 30th Nov., 2015. How it is unpredictable why it is so occuring. Is it a technical fault or any other reason.
Can you please enlighten us on this score ? We value your advise the most
Thanks and regards,
Janak Soni.
Thank you for your wishes. While uploading annual filing forms, if there is any technical error, you can raise ticket on MCA portal. MCA helpdesk will resolve the problem and provide you solution.
A Australian Company hold 99.99% shares in an Indian Private Company, my query is – in how much time subscription money shall be received from both directors; under which section or provisions of any act and on which date we can issue share certificate?
Pursuant to section 56(4)(a), every company shall, deliver the certificates of all securities allotted, transferred or transmitted within a period of two months from the date of incorporation , in the case of subscribers to the memorandum.
Dear Ma’am,
i Would like to transfer the share of indian private company into foreign based company what is the procedure and forms is required to be file after taking RBI permission
please help…
After taking RBI permission, please file SH-4 (share transfer form) as per Companies Act 2013, make entry of transfer in register of members, register of transfer. Give effect of transfer on share certificate.
Hi ,,
we are company based in uk and wants to forma WOS and i have few question around it
1. if the share has to split lets say 90% to company bases in UK and 10% to a individual in india to faciltate the formalities where physical presence is required, then would there be any implication in terms for taxation or categorisation of company when compared to WOS
2. do We need get FCRN by filing form FC1
4. Supporting document required for FCRN
If you are forming WOS in India then FCRN is not required to be filed. Formation of WOS is normal process of incorporation, File form INC-1, INC-7, DIR-12, INC-22.
Can authorised rep of the parent co. holding 99.99% shares and nominee holder holding 0.01 % shares be two different persons??
Authorised representative of parent company can be different person from nominee or can be same person.
Hi Meena,
I am a US citizen, looking to create a WOS in India.
This company will work as service company for my US Technology Company.
Can I buy an already existing Pvt. limited company and make it my wholly owned subsidiary?
Yes you can buy existing Private Limited company and make it WOS of your parent company.
A parent co. X, a public ltd. co owns 99.9 percent share of subsidiary co. Y, and the rest 0.1 percent is held by one nominee member of the subsidiary company Y while there are other five nominee members who are beneficial holders of the parent co.. The query is this: whether subsidiary co. Y qualify as 100 percent wholly owned subsidiary of parent co. X( a public ltd co.).
Your blog is higly informative. Enjoyed reading it.Clarifies many doubts and is particularly useful to professionals.
Keep it up. Doing a great job.
Thank you for your comment. only one nominee can hold 1 share on behalf of parent company.
If the Parent Co. holds 99.99% and 1 share is held by another director, who is NOT the Parent co.s nominee, is it still a wholly owned subsidairy?
Yes
What is the procedure for selling 100% shares of an existing Pvt Ltd Co to a US based company??
After this share sale is done what is the procedure to register this as a WOS?
Thanks
It is transfer of shares from Indian company to US company. Pass board resolution in meeting for transfer of shares, get consent of transfer from buyer to make payment to Indian company. File form FCTRS with RBI within 60 days of receipt of funds towards transfer. After this transfer the US company will be holding company and Indian company will become its wholly owned subsidiary.
Have one query. A , the foreign company helds 49% share in B co and it wants to sell full share to other foreign co I.e, C. C has decided Mr.D to held the 49% share as nominee for C co. D is also the foreigner. Can this be done ? Wont D be considered as beneficial interest in B co ?? Can you plz help with this
Yes it is possible.
Dear Mam,
Require your valuable advice on the below mentioned query faced by us.
In 1 of the Pvt ltd Companies which is a wholly owned subsidiary of a foreign company, as per the requirement of having min. 2 members, an nominee jointly with the holding company was elected to represent the holding company with 100 shares and remaining was wholly held by the foreign company.
Now the nominee elected is not with the Company and the Company has to undergo transfer of shares procedure.
SH4 has to be executed but the nominee is not available for signature and thus we are facing this problem.
what can be done if transferor’s signature i.e. the nominee signature is not possible.
Signature of nominee is necessary for transfer of shares
An Indian Pvt Ltd company has formed 100% subsidiary in Germany. The initial expenses of the consulting firm in foreign country, and their fees and reimbursement to the consultant, the registration fees of the concerned govt deptt. All these under A2 form thru Authorised dealer. The foreign company’s account has not been funded for Capital as yet due to formalities of ODI.
Querry: The expenses incurred by the Indian company can be w/off as it’s expenses or need to be shown as Advance to the Foreign company?
I think it would be advance to Foreign company
Hello Ms. Meenal.
My query is with regard to the definition of WOS. Is the term Wholly owned subsidiary(WOS) defined anywhere in the Companies Act 2013? If 99.999% of shares of the subsidiary company are held by Holding company and only 0.001% shares are held by the directors of the company as the beneficial owners, will the subsidiary company be treated as WOS?
Kindly clarify
Regards
Your assumption is correct. Wholly owned subsidiary means company of which 100% shares are held by Holding company. But for the sake of Private Limited company, the condition of having minimum two directors, the shareholding is divided into 99.99% to be held by parent company and 0.01% to be held by nominee of parent company.
My client wants to form a WOS of a foreign company in Korea.
As per the procedure 99.99 % of shares will be held by foreign co. and 0.01 % by a nominee.
My query is do we have to file Form MGT -6 under section 89 of Companies Act 2013 in this case?
When is it filed??
I think your question is ” my client wants to form a WOS of foreign company (which is situated in Korea) in India. The subsidiary company shall file e-form MGT-6 under section 89 of Companies Act along with MGT-4, MGT-5.
Thanks Meenalji
When is MGT – 6 filed?? within 30 days of incorporation
MGT-6 is to be filed within 30 days from the date of entry of beneficial holder as member in the Register of Member.
Dear Mam,
I have a consultancy agreement with a German Company. I provide services under this agreement. I invoice every month for this service and get paid.
My question is, Is there any legal formality I have to complete with RBI?
Thanks for your reply in advance!
There is no legal formality to complete with RBI.
I want to form LLP company in India so please advise on below three queries:
1) What are the documents required for formation of LLP company in India for two partners ( One is Indian national and another is NRI).
2) What is normal duration ( Time) require to form LLP company in India.
3) What is the approx. cost for formation of LLP company in India.
Please visit my blog- link- Registration of LLP in India to know the list of documents and process of incorporation. It would take at least 30 days to form LLP depending upon the time required for notary, query if any raised from Registrar of Companies
Hi Madam,
I need to transfer 100% shares of my company, which is an Indian company registered under companies Act, 2013, to a company registered outside India.
May i please know what are the procedures?
May i also know what are the compliance requirements under Companies Act, FEMA and income Tax Act, after transferring shares to foreign company?.
AS far as FEMA is concerned, Company shall file form FCTRS with RBI within 60 days of receipt of funds from company registered outside India.
As per Company law, obtain signature of transferee and transferor on form SH-4
I am employed by a Foreign company in UK as a consultant to provide services not only in India, but outside India also. I am an Indian and I have an ongoing contract with the UK based company
An Indian subsidiary has now been formed of the above UK company in India, with 99 per cent ownership of UK company to pursue business in India.
Can I continue my contract with the UK company for providing services in India and
outside, as before.
Yes you can continue your contract with UK company for providing services in India and outside.
Dear M’am,
what is the procedure to establish an WOS abroad
Again most importantly, is it possible for that WOS ( incorporated abroad by an Indian resident entrepreneur ) to establish / incorporate a WOS in India.
yes. Please refer my blog for knowing the procedure of incorporation of Private limited. In WOS, only shareholding pattern will be different. DIN, DSC and name process is same.
We are an indian company currently supporting US clients and wish to form a 100% foreign subsidiary company in the USA. Could you tell me if there are any specific procedures and reporting that we need to follow in india before the formation?
Any advise would be appreciated.
As far as formation of subsidiary outside India is concerned there is no specific procedure and reporting to follow in India before the formation.
Dear Madam,
Pls clarify that in case a listed company has acquired 100% shares of a pvt company, Now wants to transfer one share to its nominee shareholder for sake of minimum members criteria. What will be the procedure? And wat about stamp duty on suh transfer?
For transfer of shares, after payment of share application money towards transfer of shares, pass board resolution, get signature of transferee and transferor on SH-4 form and pay stamp duty on transfer of shares. it is 0.25% of consideration.
Dear Madam
Your blog is quite impressive and informative. I have two quick questions. To form a private limited company by a foreign company (HK), is it a requirement that one of directors must be Indian local resident? Second, is the PAN of director required for the purpose of incorporation? Thanks a lot!
Regards
Catherine
Yes. one director must be an individual who is resident in India for more than 182 days in previous calendar year. Yes PAN is mandatory in case of Indian national or otherwise an undertaking from Foreign national at the time of incorporation shall be required.
HI Ms.Meenal,
2 questions:
1)Can a US LLC open a wholly owned subsidiary in India as LLC/LLP.
2)Can US citizens who are residents of India for past 5 years be the Directors of this Indian subsidiary?
Thank you for your wonderful article. Appreciate your response on the above questions. Look forward!.
1) Yes, US LLC can open WOS in India as LLP
2) US citizen can be director of WOS.
Thanks for providing such a informative blog, I have one doubt : Whether a wholly Owned subsidiary company can incur expenses on behalf of its parent company in India and thereafter gets reimbursement from its parent company ? Is there any restriction in FEMA Act and RBI regulation for this type of transaction.
As per my view it is not possible.
Hi Mam,
I have a querry related to incorporation of WOS in india for USA Based Company.
One of the director (Mr. X)is residing in India who doesnot have any link with the parent company and the other director is residing outside india.(Mr.Y) who is the director and owner of the foreign company.
My question is whether the representative of the foreign company should be residing in india?Can we appoint Mr Y as representative?
2nd Question is whether we can appoint same person Mr. Y as the nominee holding 1% share also?? or whether we can appoint Mr. X (who don’t have any link with the USA Based company)?
Whether nominee holding 1 % share and representative can be the same person?
You can appoint Mr.Y as authorised representative.
yes . Mr. Y can be nominee and authorised representative.
Hi Mam,
Thank you for such a knowledgeable blog!
It is an established rule that if a foreign company remitts to invests in the equity of its WOS in India, FDI guidelines would be followed.
My question is – Can a WOS of that foreign company while investing in another India Private Limited Company, under value the shares of that company?
Is there any provision/ guidelines which says that the shares can not be undervalued in this scenario?
Thank you!
Regards,
Chetan
Can you please clarify your query in detail?
Dear Mam,
My question is-
What are the regulations or norms for valuation of shares of an Indian company which is directly being purchased by a foreign company or is purchased through its WOS incorporated in India.
Regards,
Chetan
Please refer this Master Circular on Foreign Investment in India- 15/2014-15 ( Amended upto Feb 09, 2015) for valuation of shares and RBI/2014-15/129 -A. P. (DIR Series) Circular No. 4 July 15, 2014
Dear mam,
I would like to ask you about the no. of shareholders that are to be mentioned in the annual return that is to be sent to ROC and what will be the disclosure regarding beneficial interest and who will give in such disclosure.
The number of members of the company as on date of AGM shall be mentioned in the Annual return form. Disclosure regarding beneficial interest shall be filed with the Registrar by Indian company by way of filing e-form MGT-6.
Hello Mam,
I Need Your Help.
If an Indian Pvt. company which is unlisted turns into 100% foreign company then what is the implication as per the companies act.
I am thankful if you give reply as soon as possible.
It will be just Private Limited company.
if a private company has two directors does it mean they are the owners or can an owner be another person who is not the director?
Second if a private company has the same logo as a listed company are they sister companies esp if the promoter of the listed company is the owner of the unlisted company with the same logo.
Then the unlisted company bought shares of the listed company. Is this allowed. And if yes how will they show it in their balance sheet. If it is shown as asset will that make it subsidiary or relation of the listed company.
If the company has two directors it does not mean that they are the owners. Owner can be other person.
yes they can be sister companies.
what is difference between authorized capital and paid up capital.
from which capital shares will be issued to investor or share holder
what are the liabilities for both type of capital towards government or share holder.
Authorised capital is nominal capital required to register company. Paid up capital is shareholders capital which is paid by shareholders of company after incorporation. The stamp duty is based upon authorised capital.
I believe the nominal is Rs.1.00.000, what is the benefit for a company to pay a larger nominal. Example Rs.5.00.000
Great blog 🙂
If authorised capital is more than Rs. 1 lakh, the benefit will be that there will no need to increase the capital again if required.
Can Wholly Owned Subsidiary not be treated as third party with respect to parent company?
WOS cannot be treated as third party with respect to parent co.
Dear Madam,
company incorporated outside India wants to establish a WOS or subsidary in india. Host company needs to comply with the provisions of foreign company ? & What are Legal Provision WOS needs to comply ? Please give sec number acc. to new companies act,2013
Thanks & Regards
Bhavna
Please refer Section 3 (1) Chapter II of Companies Act, 2013 and Companies (Incorporation) Rules 2014
Hello Mam,
I posted a question yesterday regarding convertion of an existing Pvt Ltd company to a WOS of a foreign company.
Yesterday the status was ‘ Your question is under moderation’ but today I cant see my question.
Please advise
For conversion of Private ltd into WOS of foreign company, the shareholders shall transfer 100% shares to foreign company so that Indian company shall become 100% subsidiary of foreign company.
Hello Mam,
I have a question here, that if we already have a private limited company in India where ‘A ‘(non resident) is having 9999 shares and indian resident having 1 share. There is another company in UK where A is having 71.06% shareholding. Now if the Indian company is to be converted into a WOS of the foreign company, how can we do this?
what approvals are required from RBI? what are the requirements of ROC and FEMA.
To convert the existing shareholding pattern into WOS of foreign company, A will transfer all his shares to Foreign company, the Indian company shall file form FC-TRA with RBI within 60 days from the date of receipt of funds from Foreign company towards transfer of shares as per FEMA. The company shall also pass board resolution for such transfer in board meeting.
Dear Mam,
Thank you for the informative post. My question is: Does one of the Directors of WOS have to be Indian national or can they both have foreign passports?
Thanks.
Meera
As per Section 149 (3) of the Companies Act, 2013 every company shall have at least one director on its board of directors, who has stayed in India for a total period of not less than one hundred and eighty two days in the previous calendar year, if the company is having two non resident directors. The compliance shall be followed by the company every year at the time of incorporation and every year there after.
Dear Mam,
Can you pls. clarify. If a Company incorporated under Companies Act, 1956 is wholly acquired by a Foreign company, what are the compliances requirement under FEMA & Companies Act, 2013.
As per my understanding under FEMA – We need to file FC-TRS.
Kindly eludicate.
Under Company law, share certificates shall be issued within 2 months from the date of incorporation and under FEMA,after share allotment, form FC-GPR shall be filed with the RBI within 30 days.
I’m indian citizen and would like to register INC company in US. PLease hlep me with the procedure, documentation, cost & time required
I would help you to register company in India. Do you mean to form it in India. if yes please call me
Hi, Need a small clarification, you mentioned the 2 directors shall be required to apply for DIN, but as the MOCA (www.mca.gov.in/MCA21/RegisterNewComp.html) there is no need to apply and obtain DIN for Director of a foreign company but the DSC is mandatory. Can you pl clarify?
Thanks,
–Sri
if foreign director would like to be director of new company, then he has to apply for DIN and also DSC.
Dear Mam,
The shareholding pattern of our company, which is a private limited company is as follows:-
1. One Foreign Public Company, holding 53.5916% shares
2. One Foreign Private Company, holding 46.3996% shares
3. 6 individuals, residents in India holding 0.001% of shares
In such a case, kindly let me know whether our company would be considered as a private company, subsidiary of public company as per section 4(7) of the Companies Act, 1956 and as per section 2(71) of the Companies Act, 2013 or not.
Thanks.
No.
Dear Madam,
We have registered wholly owned subsidiary company of a foreign company in India recently.
New company incorporated in India has two foreign directors and one Indian director. Both foreign directors are also directors in holding ( principal) company abroad. All three directors have subscribed MOA/AOA. Majority Shares will be allotted to a Holding Company who has subscribed MOA/AOA through its local authorised person.
Now question confuses how to hold a first board meeting ! Can two foreign directors hold meeting abroad ? If they can, they will have Quorum. If meeting is convened in India, quorum does not form. In this case, if authorized signatory of MOA/AOA on behalf of holding company can attend meeting in India, Quorum can be formed. Can we do so ?
Or we must hold video conferencing meeting ?
Opening Bank Account is urgent. Can we pass necessary resolution by Circular via Email ?
Please guide.
Thanks and warm regards,
Janak Soni
The company can hold first board meeting in abroad provided the company comply the provision of quorum. In India, authorised representative cannot attend board meeting on behalf of foreign companies, because foreign company is not director. In that case, meeting can be held through audio and visual conferencing. yes you can pass board resolution by circular.
Dear Meenal,
A foreign owned professional engineering and environmental consulting firm (far east based) is planning to set up a branch in India. Based on RBI FDI policy and guidelines, would it come under an atomatic approval or require an approval. What process is involved in setting up a branch office in India?
Appreciate your advice!
Best,
Vageesh
Whether the RBI approval is required or the said business will come under automatic route, all will depend upon the nature of business. But as per my opinion, RBI prior approval is required for setting up branch office in India.
A private limited company in India is a 100% shareholder of a foreign company. but the payment for such shares has been made by the MD of Indian company through his personal account. My queries are-
1) what are the legal compliances to be followed ?
2) How to fill up ROC forms 23ac/aca
3) Consolidation requirements, if any
Thanks & Regards
Bhavya Khanna
If the Private Limited company in India is 100% shareholder of a foreign company, the Private limited will be required to disclose the shareholding pattern in Foreign company while submitting annual forms with the Registrar. No consolidation is required.
Dear Ma’am,
Could you please enlighten me about the criteria which the ROC normally takes into consideration before approving the application for the Registration of Wholly owned subsidiary Private Limited company ( of a foreign company ) in India ?
The ROC will see the articles of association, certificate of registration of parent company and no objection from parent company, board resolution for holding of equity shares in Indian company.
Hi Madam,
Thanks fr such informative blog.
My Question: Can Multistate credit co-operative Society ltd. incorporate WOS private limited or public limited company ?
No
Hello ma’am,
I have one question. lease help me in that.
I have registered my company in USA, But I am operating from India. Now, I am thinking to register the subsidary of my USA company in India.
Now, the question is that If I will register subsidiary in India then in that case I will have to pay tax in both the country or any one country ? If in one only one country I have to pay tax then in which country ? As I told all the transaction and operation is done in India only. Please help me in this.
The Indian subsidiary company will pay tax on income generated in India.
How can we declare that Indian co. is subsidiary of US Corp? Is it just director’s declaration? Or any filing required? Otherwise both are separate legal entities by itself.
now as per new Companies Act 2013, if the company is foreign company or body corporate, and formed one Indian company in which foreign company is shareholder, it will not be treated as Holding and subsidiary company, because there will be relation of holding and subsidiary if the the company is registered in India.
I want to open private limited subsidiary company of forien company. then what is procedure of opening private company ?
If you are opening private limited company (subsidiary) of Foreign company, you need to follow the same procedure as incorporation of Private limited company. You shall be required to submit the copy of board resolution giving the details of purpose of forming subsidiary in India, shareholding pattern, name of director to sign name application and incorporation form on behalf of company. If you have further questions please call me.
is there any approval from RBI is required to
start a private finance co ltd which is wholly owned subsidaries .pl suggest sir
The Company shall be treated as Non Banking Financial Company, you will have to seek prior permission of RBI and then proceed for registration of Private limited company.
The Company shall be treated as Non Banking Financial Company, you will have to seek prior permission of RBI and then proceed for registration of Private limited company.
Hi,
Wanted a bit of clarification on 100% WOS of a Japanese company. Can this WOS invest in any other company in India? Would the FDI sectoral limits be applicable to this WOS?
Warm Regards
Navneet
It needs to check whether 100 % WOS of Japanese Company is Private Limited /Public Limited company incorporated as per Companies act 1956/2013? If yes, then it will be holding company and the company in which WOS wants to invest shares in India, that company shall be subsidiary. The subsidiary company shall be required to check the FDI sectoral limits .
In case i have to incorporate a WOS i will have to mention the foreign company as the subscriber to MOA and mention it in INC – 1 along with nominee share holder as promoter.
My query is while filling the form what should i mention for ‘DIN or PAN or CIN or FCRN’ under the details of promoter..??
DIN of director of the proposed Indian company.
MADAM,
Joint venture technical agreement between an indian public ltd.co. and wholly owned subsidiary co. in india of a foreign co. is as good as JVTA (joint venture agreement with its foreign(parental foreign co.) so far as law is concerned. pl. clarify .
Yes.
I want to set up subsidiary of UK based company. Please tell me procedure for formation of the subsidiary..
Please visit formation of wholly owned subsidiary Company in India and if you need any guidance please contact me on email.
Dear Madam,
A WOS with 100% FDI can have one Director who is not Indian Citizen?
Regards
Partha
In WOS, one director can be person resident out side India or citizen of any country, but as per new Companies Act, 2013, one director should be resident of India who has stayed for more than 182 days in previous calender year.
Respected Madam,
I’ve a situation where in I am not able to get answer from Google or MCA. I read through your blog and found answers for half of it, but still I have few questions. Could you please help ?
1) Do all the share holders need to sign MOA/AOA especially the last page ? in my case I have 4 foreign share holders and 2 Indian. Can’t we just put sd/- like some companies do ?
2) We’re going to appoint 2 Indian Directors only. Do we need any documents from the foreign share holders for incorporating the company, other than the name and address ?
3) If a foreign company wants to open a indian company with 90% share capital, can a resident sign on behalf of them? Do we need to get a board resolution from the foreign company ? If so does it needs to be filed with ROC separately ?
4) If point # 3 happens, In Form 1 and Form 1A, should we mention the promoter name as the foreign company name or the individual who is representing it ?
5) Can the person representing the foreign company hold the remaining 10% ?
6) On the MOA last page, when we declare the total number of shares, should it be based on authorised share capital or paidup share capital ?
Thanks in Advance !
Sorry for the delayed reply. Please find answers to your questions one by one
1) Yes all shareholders have to sign subscription i.e. last page of MOA AOA
2) declaration cum affidavit from foreign shareholders will be required
3) Resident Indian can sign on behalf of foreign company, but he must be director or employee of foreign company
4) if promoter is foreign company, you need to mention it’s name
5) yes
6) total number of shares shall be based upon authorised capital and on subscription page, paid up capital.
Dear Mam,
Can a foreign company give advance to an Indian Pvt. Ltd. company (no relation between the 2 companies except a common director/managing partner) for preparation of a software which will be used by that foreign company?
Yes Foreign company can give advance to an Indian Pvt. ltd company. This will be related party transaction because the directors are common.
Dear Mam,
Your blog is really informative. Thanks for sharing all these great information!
I have below questions in regards to forming a wholly owned subsidiary of US company in India.
1. Can newly established US company (less than 1 year old in US) set up WOS in India?
2. If one director is Indian and other is foreign national and both wants to have some percentage stake in US Co and India Co both. Is it doable in WOS case for India? If so, how?
3. US Co just want to do technology/software development work from India’s WOS and will pay all the expenses related to salary, maintenance, rent etc from US Co. In that case, there will be no revenue from India’s Co then what kind of taxes needs to pay?
Your generous reply will be highly appreciated.
Thanks,
Rajesh
Sorry for the delayed reply. Answers to your questions 1) yes a newly US company can set up WOS in India. 2) Yes it is possible. 3) profession tax on employees to be born by Indian company
Can an existing private company recently incorporated by two indian promoters transfer their entire shares to foreign company (99.99%) and its nominee (0.01%) to make the company wholly owned subsidiary of a foreign company, if automatic route is available to it? If yes, What are the formalities to be complied with?
Yes existing company can transfer entire shares to foreign company and its nominee to make the WOS of foreign company. Sorry for the delayed reply. The foreign company needs to remit amount for buying the shares and Indian company will comply company law .i.e. sign share transfer form and as per FEMA, the Indian company shall file form FC-TRS to RBI if the nature of business falls under automatic route. The form FC-TRS to be filed to RBI within 60 days from the date of receipt of consideration.
Can a parent company own 100% of a subsidiary? considering that a company needs minimum 2 shareholders, how do we proceed with the proposed transaction with the MCA? what forms have to be filled as per the New Companies Act 2013?
Thanks for sharing your knowledge on this blog. It is extremely helpful!
Yes the Parent company can own 100% shares of a Subsidiary. Considering the requirement of minimum 2 shareholders, the Parent company shall hold 99.99% and individual shall hold 0.01% as nominee of Parent company on behalf of Parent company to satisfy the requirement.
Since the New Companies Act 2013 has been implemented on 01.04.2013, Ministry is still in process of implementation of new forms. The new forms shall be made available on 28.04.2014.
Can we have a director from US (Parent company) and another one from India for registering the subsidiary company in India?
Yes minimum two directors shall be required for Private Limited company. Yes you can have a director from US (Parent company) and another from India for registering the subsidiary company in India.
Is it mandatory to have atleast one Indian director in Subsidiary company of Foreign Company?
Thanks in advance
Yes, every company shall have one person who is Indian resident
Hi your bolg is quiet informative. I would appreciate if you can answer my following query:
Support 99.99% shares of indian pvt. co. are held by foreign company ABC and reamining 0.01% shares are held by another WOS of ABC which is XYZ. it means ABC is directly and indirectly owning 100% shares of Indian Company. In such case, whether Indian Co. will be treated as WOS of foreign holding company ABC or not. Please note that no declaration of Nominee u/s 187C is filed with ROC
99.99% are held by ABC (Foreign company) and 0.01% held by XYZ(WOS of ABC) of Indian company. The Indian Company will be treated as WOS of ABC foreign company. The declaration under section 187C(old section) is not necessary to file with ROC because both the companies are body corporates.
In case 99.99% is held by ABC(Foreign Company) and 0.01% held by XYZ( not associated with ABC) of Indian Company. Will the Indian company be treated as WOS of ABC foreign company or not.
If yes, Whether MGT-6 under Section 89 is required to be filed.
What instrument (ie contract etc.) is required to transfer the beneficial interest of XYZ to ABC, and whether board resolutions of ABC & XYZ are also required to support MGT 4 &5.
1) No. Because the whole shares are not held by one foreign company.
2) Hence filing of MGT-6 for disclosure of beneficial interest in shares is not applicable.
We are Pvt Company and wholly owned subsidiary of the Japanese Co. which is listed over Tokyo stock exchange.
Before the implementation of the New Companies Act we were enjoying the status of the Pvt. Ltd. under section 4(7) of the Co. Act 1956.
However , new Companies act is silent about said exemption .
Please let me know can we still continue to operate as Pvt. Ltd. Co. or for all practicle purposes we need to treat ourselves as a Public Ltd. Co.
Thanks in advance.
Regards,
Gargi
It will be treated as same private limited company after implementation of new Companies Act 2013
Dear Madam, we are Pvt. Ltd. Co. & 100% subsidiary of the Japanese Public Company.
Earlier we were enjoying all the exemptions given to Pvt. Co. Under section 4(7) .
However , I understand that Co. Act 2013 is silent about the earlier exemption given under Section 4(7) ,
What will be our status under new Companies Act 2013, can we still continue as Pvt. Ltd.?
Thanks in advance , your reply will hep us in great way
If the existing company is Private limited company, the status of the company will remain as private limited company after implementation of Companies Act 2013.
Dear Madam,
First of all , thank you for your informative blog.
I have some queries ,
We are Pvt . Ltd. company and 100% subsidiary of Japanese Company . As per Companies act we were treated as Pvt. Ltd. Co. under section 4(7) of the Comapneis Act 1956.
Kindly enlight us upon our status under Companies Act 2013 I.e Public or Private ?
Please check the number of members of your company. If there are two members (Japanese company holding 99.99% and individual as nominees shareholder holding only 1 % then it will be treated as Private Limited company. The number of members for private limited company is two and it is seven for public company as per Companies Act 2013. If there are 7 members of existing company, then it will be treated as public company.
Dear Mam,
I need your help.
Kindly let me know what are the changes in case of incorporating a private limited company (wholly owned subsidiary) its parent company incorporated in Germany.
So what would be the major points to be kept in mind as per companies Act 2013.
Waiting for your reply..
Thanks in advance
Best Regards
Pooja
I will be posting these changes and procedure once the new forms will be made available online on MCA portal.
Hi, I found your blog very helpful!
Wanted to see if you could help me:
My brother is director in both Indian and US company, In India, we are three directors, Me, my brother and my father, wherein, The US company was formed between my brother with 80% stake and one another US partner with 20% stake, I wanted to know how can we make this US corporation a subsidiary of our Indian company, do we need to take over rest of the 20% stocks from our US partner? also any role of RBI?
Many Thanks In Advance!
My Article “Formation of Wholly Owned Subsidiary in India” talks about the FEMA compliance and not about the case where Parent company is subsidiary of Indian company. Can you please clarify me do you meant to say that USA company will be Parent and Indian company will be subsidiary of USA company ?
Dear Ma’am,
My name is gopi. I’m A CA final student .I’ve a query. I’m asking with curiosity .I hope you can help me out with this.
Currently I’m Doing a 100% foreign subsidiary incorporation.so Initially we passed a board resolution by foreign company for appointing two Indians as promoters of the company. then we filed we filed form 1A with by mentioning those two persons as promoters along with the passed board resolution .
But when I’m filing form 1, I came to know that we need to include the foreign company as a promoter in form 1A ,and then as a promoter with 9999 subscribed share in form 1. So finally I came to know that I made a mistake in form 1A without mentioning foreign parent company as promoter. Now I would like to know your suggestions in dealing with this situation.
Could you please give me your views on this situation and how I can proceed further ?
Thanks in advance
Gopi
Once Form 1A filed with Registrar of Companies, you cannot make any changes such as amount of authorised capital, proposed names or names of promoters, office of ROC etc later on. The names of promoters mentioned on Form 1 should match as per Form 1A which is already filed with ROC. Since you are incorporating Wholly Owned Subsidiary of Parent company, the subscribers should be Foreign company and one nominee sharholder You have mentioned names of two individuals in board resolution, then it will not fulfill the condition of registration of Wholly Owned subsidiary. Hence first of all you need to correct Board resolution and make fresh name application.
is it not possible to appoint the foreign company as one of promoter and subscriber by getting NOC from current promoters ?
It will be transfer of shares from promoter to foreign company. You will have to comply provisions of FEMA and NOC is not required.
Will we get any specific certificate from the RBI to show the relation between parent company and subsidiary company? OR only the share details show this information?
You will not get specific certificate from RBI to show the relation between parent and subsidiary company. It will be decided on the basis of shares, common directors.
Thank you. Is there any link to check the number of shares owned by the parent company ONLINE? and the registration details for both the companies.
this is internal information which can not be checked on MCA portal.
Dear Mam
Your post is very helpful for us. Thanx for your suggestion.
Mam I have a query you told the procedure for WOS of private company. I want to know the Procedure for WOS of public company.
Please reply its Urgent
Do you mean that WOS of public company or WOS as public company?
Parent company is in US and the subsidiary company in India. Parent company pays the office expenses and salary for all the employees to the subsidiary company. So how will the subsidiary company pay for tax?
If the Parent company is paying office expenses and salary for all employees of the Subsidiary company, then it will be an administrative expenditure of Subsidiary company and it will pay advance tax to the Government and also deduct tax at source from the gross salary to be paid to employees
Thanks for all the answers. Can we see the share details on the MCA portal or any where?
You also mentioned that subsidiary company can pay advance tax and deduct at a source from the gross salary to be paid for the employees. If that is the case, subsidiary company doesn’t need to pay any tax?
Subsidiary will pay tax in India.
Maam
I chanced to browse your blog which I found very useful to know about WOS. Pl clarify why certain companies go in for 99.27% as foreign co shares and 0.73% as shares by its indian MD? They could have gone straight for 100% foreign co shares. Do they have any benefit if they keep 99.27% share?
This is for my general awareness pl. expcting your reply
To form Private limited company, minimum two members are required. As requirement while forming WOS in India, the parent company holds 99.27 % and individual holds 0.73 % share of Indian entity. The individual holds 0.73% as nominee of parent company.
If the foreign company has 90% shares, how/where to check the relations between subsidiary and wholy owned parent company?
In Wholly Owned Subsidiary company, 100% shares of WOS are held by the Parent company. Thus in WOS there is common shareholder and directors of Parent company. For the sake of Private limited company, there should be minimum two shareholders, hence if the Parent company holds 99.99 % shares of WOS then, the 1 % will be held by a nominee on behalf of Parent Company.
Since there should be 2 share holders 1 share is held by nominee of the parent company. What is the procedure to change the nominee with respect to Companies Act & FEMA Act?
The company has to pass board resolution and obtain declaration from the nominee who shall continue in place of previous nominee and the company has to file declaration to the Registrar of Companies for change of nominee within 30 days from the date of receipt of declaration.
Dear Mam,
Thanks for the informations available here. One answer as per you is that if parent holding company intends to help its 100% WOS in India by way of funding for initial marketing and salary expeses by way of “Reimbursement of Expense”, it will be case of ECB and reporting requirement falls according to that. I have a doubt that this is general phenomena that in initial stage company needs financial support for meeting expenses and the same will be repaid as and when arrangement of cash flows is made and if it is not allowed without ECB, it will affect smooth functioning of business. Is there any way around apart from FDI and ECB? Thanks
It is a very interesting question. It is very important to check the purpose of funding. If remittance by Parent company is towards equity, the company will follow the compliance as per FDI policy and if the purpose is providing loan, then ECB Guidelines to be checked.
But if the purpose is to remit amount just for operation and payment of salary, it will be only advance and not funding in equity and loan.
Dear Mam,
Thank you very much for your quick response and perfect answer. Though the purpose is purely advance and not a loan but will RBI accept the same? I mean any simillar case law or related circular that specifically allows us to inward money without RBI approval? Also the related practical question would be what message should be entered by AD bank and Swift message and also what reason is required to be submitted to the AD bank while we remit back the advance borrowed to holding company? Thanks
I think the RBI will accept it if you can write letter. What the AD should mention will all depend upon the nature of transaction.
Dear Mam,
Could you please help me in letting me know about the procedure, time line and compliance of acquiring an Indian company by a Foreign company.
Thanks a lot
The procedure for incorporation of an Indian company by foreign company. i.e. Subsidiary company will be the same as incorporation of Private limited company. You will have to submit board resolution and no objection letter to the concerned Registrar of companies for holding equity shares by Parent company and provide power of attorney to the person who will file name application, memorandum and articles of association with ROC on behalf of parent company.
I found your blog on Formation of WOS in India very informative and helping. However, I have a query in my mind regarding the procedure or method of financing the pre-incorporation expenses which may have to be incurred by Foreign Company for incorporating a Pvt Ltd Co. in India. Please through some light on this.
Further, whether pre-incorporation expenses can be adjusted against subscription amount of shares. If yes, when to submit ‘Advance Reporting’ regarding receipt of such money to RBI.
As per my opinion, pre incorporation expenses cannot be considered as subscription money. The Advance reporting should be made to RBI within 30 days from the date of receipt of remittance.
Please help in this query , There is a Indian Subsidiary which has been incorporated on 17/04/2012 there after nothing has been carried out in relation to compliances as per Companies Act 1956,???????? Please help I need to regularise this company ?????
1) First of all the company shall be required to comply the provision of fulfilling paid up capital.Please check whether company has brought paid up capital towards equity capital ? please refer Section 187 C of the Companies Act 1956 and comply the provisions as mentioned under that section.
2) Appointment of auditor :- the company shall be required to appoint statutory auditor. Please refer Section 224(5) of Companies Act 1956
3) To submit annual filing forms with the concerned Registrar of Companies. Please comply provisions as per Section 166, 210, 211, 212,213,214,215,216,217,220 of Companies Act 1956.
if you need any assistance or help please call me.
There is a Indian Subsidiary which has been incorporated on 17/04/2012
there after nothing has been carried out in relation to compliances as per Companies Act 1956,????????
Please help I need to regularise this company ?????
As per Companys Act
Check whether RBI compliances are done in order,
Appointment of auditor 23-B
Annual filings for the last year
reappointment of auditor
Please help me out with rbi compliances and fema ????
Please call me.
Facts: 100% shareholding held by company outside India.Wants to incorporate company in India.
1. Whether Indian director is mandatory to appoint for that wholly owned subsidiary?
2.Directors to be appointed, whether that director should be a Indian citizen or Indian resident?
As far as Companies Act 1956, a proposed subsidiary company can have two Indian or two foreign directors while registration of Wholly Owned Subsidiary company in India. But as per Companies Act 2013, there is new provision that the company should have one director resident in India if company exists two foreign directors.
Directors can be Indian citizen or Indian resident.
A foreign company creates an Indian subsidiary in which it holds 90% shares. The Remaining 10% shares are held by an individual Indian. The sector allows 100% FDI so I believe no approval from RBI will be needed. Right?
After creation of the subsidiary, the parent company wants to capitalize the subsidiary for carrying out its operations but it does not want to have more shares. In this case, can the money can be transferred to the Indian subsidiary in the form of a loan? Is any approval needed before or after receiving the money in the bank account?
Regarding your first question, whether 100% FDI will be allowed under automatic route will depend upon the nature of business.
Regarding you second question, if the parent company which is foreign company, providing loan to its subsidiary then it will be treated as External Commercial Borrowings and prior approval of Reserve Bank of India shall be required.
If a WOS company invests 100% through FDI, will it be named as xyz(INDIA) PVT LTD
Can you please clarify your question in detail?
Hi,
In case of a WOS(private), is it necessary to have any director of the parent company (listed) on the board of the WOS company (the company is not a material non-listed indian subsidiary, as mentioned in Clause 49 of listing agreement)?
It is not necessary that the director of parent company should be in board of WOS company.
Indian co is a joint venture with foreign company. Now the indian co wants to set up its 100% subsidiary co in Sri Lanka. What are the formalities that are required to be consider for setting of 100% subsidiary in Sri Lanka.
How much time it will take to set up.
And what are the formalities that are required to take in Sri lanka for such
Please call me.
THERE IS A 99% HELD INDIAN SUBSIDIARY OF A SWISS COMPANY. TWO INDIVIDUAL SHARE HOLDERS WANT TO TRANSFER THEIR SHARES TO A NEW FOREIGN BODY CORPORATE
PLEASE ADVISE ON THE PROCEDURE
ALSO NOTE THAT NOW THERE WONT BE ANY INDIVIDUAL SHARE HOLDERS
VERY KIND OF MEENAL TO SERVE OUR INTEREST
I am not clear about the question. Please call me. Thanks.
Hi, please let me know whether a private limited company can be formed to acquire a partnership
Yes, private limited company can be formed for acquiring partnership firm.
Yes Private limited company can be formed by acquiring partnership firm.
Dear Mam,
Please advise if a foreign company(Singapore) want to open subsidiary company in India, than it will be possible for Subsidiary company( India ) to import the goods from their parent company & distribute in Indian market & also some time can export products to their foreign company, Kindly please advise me on this.
Thanks,
Pankaj
Yes it is possible for Indian Subsidiary to import goods from their parent company which is located in Singapore and some time can export products to their foreign company.
Dear Madam ,
Pls kindly clarify the following:
1) If a foreign subsidiary to be incorporated in India with 70:30 partnership , should I need to get RBI clearance. (for eg : consultancy for Green Energy )
2) If I need to incorporate XYZ (INDIA) Private Limited , what will be the minimum authorized capital required as the word INDIA is to be used .
Expecting your valuable reply .
Thanks !
Your question is not clear to me. Whether to seek prior permission of RBI or not, will depend upon the main activity of the business. I cannot answer the question on any assumption or example. There will be consultancy fees for providing you guidance.
Dear Ma’am,
What documents required to form a indian subsidiary company?
Is there any declaration has to provide by director of holding company to ROC?
Who will give declaration since company holding certain % of share in other company? (I mean to say whether director has to give any declaration on behalf of company?)
The declaration has to be provided by first subscribers and first directors of the company. If the subscriber is Holding company, the person authorised by Holding company will sign declaration on behalf of Holding company.
Dear mam,
If any foreign company engaged in diamond trading business,whether he can setup business in India ? and related formalities
Yes foreign company can engaged in diamond trading business in India.
Besides loan and equity, can a foreign company give financial aid (without adding to equity and/or loan) to its indian Wholly owned subsidiary?
Do you mean to say Financial aid in the form of advance ?
Dear Madam,
I really appreciate this blog, providing very useful information.
I have a doubt :
One foreign company engaged in manufacturing of Inverter systems in Germany and it wants to sell its products in India.
whether this covers under 100% FDI or Single Brand Retail Trading?
Thanks in anticipation.
Regards,
Kirran Kumar.R
Please call me.
If a UK Based Public Company wants to incorporate a new JV company in India with another share holder who is Indian Resident giving him stake of 30%, and keeping balance 70% shares to be owned by Foreign Company only, will the procedure for incorporation be same as of incorporating WOS? The business is falling under the 100% Automatic Route of Investment.
IF parent company holds 70 % and Indian Resident holds 30%, the Indian company cannot be treated as WOS. It will be treated as Subsidiary company of UK company. WOS means where the parent company holds 100% shares of proposed Indian company.
is nominee share holder, to comply with 2 minimum shareholders concept.. is under obligation to give declaration under section 187C???
Yes nominee shareholder is required to give declaration about the number of shares he/ she is holding on behalf of parent company ( whether he/she is having beneficial interest or not). It is mandatory to inform Registrar of Companies as per Section 187C of the Companies Act, 1956.
what is the cost involved in registering the WOS company , and can it be done online
As far as cost involved in registration of a WOS concerned, it is beyond the scope of this blog, please call me for further discussion.
A new company is to formed where one of the director shall be NRI.
The same NRI director is also Promoter of a company incorporated in U.S. The director is a foreign citizen.
The company to be incorporated in India shall be subsidiary of the foreign Company
Now the question is
1.whether incorporation of Company requires any permission or intimation to be given.
2. If the name of the company shall be similar to its counter part in US, does it require any paper from foreign co.
3. Whether New Companies bill has made any changes in respect of the above procedure.
See my answers as below:-
1) Please check the nature of business and then decide whether any prior approval of Reserve Bank of India will be needed for investment to be made by Parent (foreign) company in new company. Refer FDI Policy.
2) If the name of company shall be similar to its counter part in US, then board resolution and No Objection to use the same name shall be submitted with Form 1A ( Name application) with the Registrar of Companies.
3) The definition of holding and subsidiary company has not yet changed as per Companies Act, 2013.
Hi,
We are four partners and want to register a new pvt ltd firm for sale and services in IT related feild. We want to work in Delhi NCR to start with, just wanted to check what all tax registeration we would have to make.
Rgds
Deepak Grover
Please call me.
Dear Sir/Madam:
A company registered in USA – BBB LLC (promoted by a person called Y).
The same promoter Y, opened a CCC Pvt. Ltd. in India. There are two share holders in Pvt. Ltd., India (Y -50% shares and his wife Z – 50% shares).
Y is the CEO for Both the companies.
Since there is One Common Promoter for the BBB LLC, USA and CCC Pvt. Ltd., India,
can we call CCC Pvt. Ltd. as a subsidiary of BBB LLC, USA.
Thank you for you help.
Regards
Rakesh
Yes by virtue of common director, CCC Pvt ltd will be treated as subsidiary of BBC LLC USA. The note is based upon the information provided by you.
Thank you for your information.
Regards
Rakesh
Dear Madam,
I am approaching you for getting a clarification, which I could not even get from the MCA in relation to filling up of Form 1A by an authorized person (being a resident in India) of a foreign promoter (a company incorporated outside India) who wish to incorporate a subsidiary. I would like to know
(i) the details to be provided in Item Nos. 2(a) and 2(b) of the Form 1A i.e., DIN / PAN and Name of the Applicant (whether the name of the authorized person who has DSC) or name of the foreign promoter (who do not have PAN)?
(ii) Verification clause – Box No. 1 – Is it correct to state I am a promoter?
Thank you very much in advance for your kind clarification.
Regards,
N. Suresh
In Item No. 2(a) an 2(b) of e-form 1A you can mention the name of a person being an applicant(who is resident in India) of a foreign promoter by filling his DIN or PAN.
If the applicant is foreign promoter, the passport number of foreign promoter.
In both the cases, the promoter shall have DSC.
In verification Box No. 1 is mandatory field , you have to select it.
Dear Madam,
Thanks for sharing the information and I found the same very useful.
You said you need minimum of two shareholders. If there are 2 shareholders, how can the company be wholly or 100% owned?
Let us say a company is acquiring another private limited company. Can it acquire all 100% shares and become the only shareholder?
An individual or company or body corporate become shareholder of the Private Limited company. For registration of private Limited company, minimum two share holders would require. The wholly owned subsidiary company is company of which 100% shares are held by other company or entity. But for the sake of Company Act or as per the provisions of Company law, there should be two shareholders. Hence in case of Wholly owned subsidiary company, the other existing company shall hold 99.99% of subscribed capital of new proposed company and other (either individual or company) can hold 1 % of subscriber capital.
mam, are these provisions of 99.99% and .01% shareholding structure same for a WOS of a government company under companies act and which section of companies act has this reference??
Yes, WOS (wholly Owned Subsidiary) means an entity which holds 100% shares of proposed other company. But to comply the provisions of Private limited to have minimum 2 members, Holding company will hold 99.99% of proposed new company and one individual / company will hold 1% of proposed company as nominee of authorised representative of Parent company
In case of WOS, the authorised representative of holding co, who will be signing the subscriber sheet on behalf of the company & the nominee cant be the same person. Please confirm.
Yes one person can be nominee as well as act as authorised representative of holding company to sign the subscriber sheet on behalf of the company.
Whether the the authorised person as Nominee for Foreign Company will subcribe Memorandum for .01% in his name as first holder or joint holder.
Yes, person can be subscriber if he is already an authorized representative of Foreign company.
Respected Madam,
Wheather the procedure of formation of foreign company’s 100% subsidiary company remains same as in the case of formatiom of Pvt ltd company by Indian Resident.
Wat all documents we shall require from the Holding company?
Thank & Regards
CS Sourabh Gupta
Yes the procedure of formation of foreign company 100% subsidiary would remain the same as in case of formation of Private ltd company to the extent of e-forms but more information and documents require from Parent company i.e. Holding company while submitting e-forms. For more details please call me.
Hi Madam,
Thank you for this blog. It was very informative.
1. Is there any restriction if the holding company is a Sri Lankan company?
2. Is Architecture service a sector where 100% FDI is allowed?
Thanks and Regards
There is no restriction if the holding company is Sri Lankan Company. If Architecture service belongs to construction business then 100% FDI is allowed under Automatic route and if architecture service belongs to Software/Information Technology, then also 100% FDI is allowed under Automatic route. Please check it accordingly.
Hi
1. What are the advantages for setting up a WOS compared to branch office in India of a company incorporated out side India.
2. Can u notify the step by step procedure for incorporating WOs of a foreign company.
Please visit my blog for step by step procedure of WOS. Regarding the first question please call me.
Hi Madam,
Your blog is very informative. Just one question arose in my mind is that if the parent foreign company provides support to its wholly owned subsidiary company in India by way of subsidy or sales discount instead of routing funds through equity issue then is there any restrictions under FEMA or any other relevant act? If any company does not want to route its support through equity issue then what are the options it should adopt so that FIPB approval is not required.
Please let me know.
regards
Piyali
Please call me to share more details.
Hi Mam,
1. My question is also same, please tell me the procedure/steps for making subsidiary co. in India by a foreign co. ???
2. What is the is amount of minimum paid up capital to be invested???
The procedure of formation of WOS in India is similar to formation of normal private or public company in India. For more details, please call me.
Hi,
The info. is useful.
Have a question for you..!
Whether before/after forming a WOS by a foreign entity/company, any RBI approval is needed for remittances from the Foreign parent co. to the WOS in India..?
The WOS is intended to be falling under the WT (Wholesale trading) category – falls under the Automatic route as per RBI.
Apart from the DIN applications where the details of the foreign directors are required to be certified by the Indian embassy/home land Notary, what are the other docs required before/during the course of company formation by the Foreign parent company..?
T&R.
The Wholly owned Subsidiary is falling under Wholesale trading as per information given by you, it falls under automatic route as per Foreign Direct Policy. Hence while remittance from foreign parent company to the WOS in India, no prior approval of Reserve Bank of India shall be required. The Indian Private Limited company means WOS shall be required to report to the Reserve Bank of India details of remittance and issue shares to Parent company within 180 days from the date of remittance. Indian Parent Company shall be required to comply advance reporting and issue of shares as laid down in FDI policy. Refer Circular No.- RBI/2012-13/223/A.P.(Dir Series)Ciruclar No. 36 dated 26th September, 2012, Notification No. FEMA 20 / 2000 -RB dated May 3, 2000.
Dear Sir/Madam,
The blog has providing good knowledge to me relating to LLP,WoS and any more.
Thanks for your updation through Blog and i am following your blog.
Thanks and Regards
Veerabhadra
Thanks, appreciate your comment!!
Dear Mam,
There are Foreign investors willing to invest in our construction (residential/commercial) business.
Should be create a new private limited company and allot all shares to the foreign investors or shall we issue them convertible debentures..?
can you through some light on this 2 issues
1) how shall we go with the entire procedure if we allot the all shares and become their subsidiary company
2) can we issue unsecured fully convertible debentures to them..?? Is there any limit in issuing such debentures? what can be the maximum period for debentures.?
Also that if we issue fully convertible debentures that certain portion of it will be treated as equity (as per IFRS) thus can we issue this debentures to a single foreign investor (FII)
is it correct that FII exceeding 10% becomes FDI??
Awaiting your guidance
The questions asked needs to be thoroughly analysed and discussed and would incur consultation fees. Please call me.