Another useful term is really very important in the world of shares. This important term is A “Wholly Owned Subsidiary Company”
Before moving further, it is necessary to know about its definition. Basically, if there is an entity of which 100 percent shares are held by another company. for example, if there is ‘A’ Pvt. Ltd. The company having shares that hold 100 shares of another Pvt. Ltd. that is ‘B’, then in this case, ‘B’ Pvt. Ltd. becomes a wholly-owned subsidiary company of ‘A’ Pvt. Ltd.
If we talk about the relation between India and the foreign company, then another term comes into play, that is Foreign Company.
Well, It can be defined as a company that is incorporated outside India (that is in a foreign country) is called Foreign Company. For eg, in the above example, ‘A’ Pvt. Ltd. In the U.S.A. is a foreign company.
When an entity that is incorporated outside India (that is a foreign country), makes 100% FDI in India, the Indian company incorporated for this purpose is said to be a wholly-owned subsidiary of that foreign entity.
There are more exemptions that can be claimed by a private limited company under the Indian Companies Act,1956 previously an now the companies act, 2013, hence most companies prefer to form a wholly-owned subsidiary private limited company.
Read: Exemptions Private Limited Companies
Some Key Features of WOS: –
1:) WOS is regulated by Indian Law that is, Companies Act,1956.
2:) All types of business activities are permitted such as manufacturing, marketing, and servicing industry.
3:) It is treated as a domestic company under Indian Tax Laws and is eligible for all exemptions, deductions benefits as are applicable to any other Indian Company.
Step-by-Step formation of a Wholly Owned Subsidiary Company in India:-
Step 1-) Director Identification Number (DIN):
a:) 2 Passport size photograph and passport.
b:) Address Proof-driving license, electricity bill, telephone bill, or bank account statement.
c:) Affidavit (A specimen of such Affidavit is given).
d:) Educational Qualification.
e:) Present Occupation.
f:) If the proposed director is in a foreign country then all documents must be posted by the home country.
g:) The form DIN-1 will be filed and should be attested by a Chartered Accountant or a Company Secretary.
Step 2-) Digital Signature:
a:) The Digital Signature of any one director is needed.
b:) The form of the digital signature should be attested by a CA or a CS.
a:) The applicant needs to apply in form 1A with the registrar of companies in which the company is to be incorporated.
b:) Either CA or CS can attest to the new approval for which they charge a fee of Rs 1000/-.
c:) After the approval of the name, we move on to the next step in which registration of the company is done.
Step 4-) Registration of the Company:
a:) Time to submit the required documents with the memorandum and articles of associations of the proposed company.
b:) Now, Memorandum is to be stamped and-and the stamping fee of the memorandum is 15% of the authorized capital of the company which is to be registered.
c:) After the payment of ROC fees and stamp duty, ROC verifies the documents filed. Form INC-22 and DIR-12 are approved through the straightforward process, (STP) and verify from INC-7 in detail.
In case, any changes are suggested by ROC will have to be made accordingly.
d:) Once ROC is satisfied, the Certificate of Incorporation is sent through email.
Well, a wholly-owned subsidiary company in India by a foreign company is only possible where 100%FDI is permitted and no prior approval of the Reserve Bank of India is registered.
Under the Automatic Route, FDI is allowed without the prior approval of Govt. And Reserve Bank of India.
It has the following minimum requirements: –
1:) Minimum two directors.
2:) Minimum two stakeholders.
3:) Minimum paid up to the capital of Rs 1 lakh.