Wholly Owned Subsidiary (WOS) Formation in India

A Wholly Owned Subsidiary (WOS) is a legally distinct company fully owned by a parent company, incorporated under the Companies Act, 2013.

Understanding Wholly Owned Subsidiary (WOS) Formation in India

A Wholly Owned Subsidiary (WOS) operates as a legally distinct entity under the Companies Act, 2013, separate from its shareholders. A subsidiary is defined under the Act as a company where the holding company:

Controls the composition of the Board of Directors, or
Holds or controls more than 50% of the share capital.

A WOS can be structured as a private or public limited company, with the holding company owning 100% of its shares, ensuring full control over its management and decision-making.

Setting Up a Wholly Owned Subsidiary (WOS) in India

The following requirements apply for establishing a Wholly Owned Subsidiary (WOS) in India:

A private company must be incorporated with the minimum authorized and paid-up capital, capitalized within 2 months of incorporation.
At least two subscribers are required for the share capital.
The company’s Charter Documents (Memorandum and Articles of Association) must include:
  • Limitation on share transfer.
  • A maximum of 200 shareholders.
  • Prohibition on public subscription of its securities.

The WOS is not permitted to accept deposits from the public, with stringent norms for accepting deposits from its members.

Structure of a Wholly Owned Subsidiary

In a WOS, 100% of the shares must be held by the foreign parent company. For statutory purposes, two shareholders are required:

The primary shareholder (foreign parent company) holds 9,999 shares as both the registered and beneficial owner.
The second shareholder holds one share as the registered owner, with beneficial ownership remaining with the foreign company.

Approvals and Setting Up Formalities for Wholly Owned Subsidiary (WOS) in India

Key requirements for setting up a WOS include:

1. Foreign Direct Investment (FDI)

  • Up to 100% FDI is permitted in most sectors under the automatic route, requiring no prior government approval.
  • Post-incorporation filings must be made with the Reserve Bank of India (RBI).
  • Investments are routed through RBI-authorized banking channels, complying with share issuance pricing guidelines set by the RBI.

2. Incorporation with the Company Registration Center (CRC)

  • Prescribed details must be submitted to the CRC for private limited company incorporation.
  • All required documents and information are filed with the Registrar of Companies (RoC) via the CRC.

Once incorporated, the foreign holding company has a legally recognized Wholly Owned Subsidiary in India.