The most popular option for international companies looking for complete control, limited liability, and a long-term presence in the major economy with the highest pace of growth in the world is to establish a Wholly Owned Subsidiary (WOS) in India as a Private Limited Company.

A totally owned subsidiary is a business in which a foreign parent firm owns all of its share capital. According to the Companies Act of 2013, these subsidiaries are commonly established in India as Private Limited Companies.

This method provides foreign investors total control over strategy, operations, and decision-making while doing away with the necessity for local partners.

Self-governing Legal Identity:

According to Indian law, a completely owned subsidiary is regarded as a distinct legal entity. This guarantee’s that the foreign parent company is not held personally responsible for any financial losses or liabilities of the subsidiary and that shareholder’s responsibility is restricted to their unpaid share capital.

Complete Operational Command:

The foreign parent company has total influence over the management choice, business plan, and financial operations of the Indian corporation because it owns 100% of the shares.

Procedure for Digital Incorporation:

There are few documentation needs and the registration process is completely online. Subject to timely submission and approvals, a wholly owned subsidiary can normally be formed in 12 to 15 working days.

Improved Recognition of the Brand

The subsidiary can get instant credibility in the Indian market by utilising the standing and goodwill of the multinational parent firm. Additionally, this improves the group's total market presence and brand value in Asia.

Diversification, Market Entry, and Expansion

India's sizable and vibrant consumer base offer rich prospect’s for long-term investment, product diversity, and corporate growth. One of the most effective ways to enter and expand operations in India is through a totally owned subsidiary.

Streamlined Exit Procedure

When there are no substantial assets or obligations, it is relatively easy to wind up a subsidiary in the event of cessation. Particularly in situations involving strategic reorganisation or force majeure, the framework facilitates a seamless exit.

Under the automatic path, 100% foreign ownership is allowed (in all most areas).

Shareholders' limited liability

Total command over operations in India

Able to repatriate dividends and profits in accordance with FEMA regulations

Being recognised as an Indian business and being qualified for tax breaks and incentives

Distinct legal personality from that of the parent business

Drawbacks

1. High Setup and Operational Costs: It can be costly to create and run a wholly owned subsidiary.

2.Cultural Barriers: Adapting to cultural differences may be necessary while managing subsidiaries in various locations.

3. Difficulties with Regulation.

Complying with local rules might be complicated when operating in overseas markets.

4. Redundancy Potential: Inefficiencies could result from parent and subsidiary functions overlapping.

Step 1: Get certified as a digital signature (DSC).

Step 2: Obtain the Director Identification Number (DIN).

Step 3: Incorporation Document Drafting

Step 4: Reservation of Names

Step 5: Submitting the SPICe+ Form for Incorporation

Step 6: Compliance After Incorporation

1. Documents that the foreign company must provide

When a foreign company opens a wholly-owned Indian subsidiary, it must meet certain documentation requirements. These criteria include those that must be met both during the subsidiary's creation and after the foreign corporation's Indian subsidiary is incorporated. These documents are listed below:

a. Incorporation Certificate

b. The Company's Memorandum and Articles of Association

c. Shareholder List

d. Director's List e. No Object Certificate (NOC) from the business's property owner

g. Provide proof of the company, such as the most recent bank statement, phone bill, electricity bill, or mobile bill (these invoices shouldn't be more than two months old).

2. Documents that require apostille and notarisation

a. The Directors' Declarations

a. PAN declarations from the instructions

b. The directors' and shareholders' affidavit

d. Company charts: articles of association (AOA) and memorandums of association (MOA)

Smaller businesses are acquired by large firms and converted into WOS. As a result, the parent firm can expand without having to worry about investing in a new environment from scratch. The staff, corporate processes, and revenue model are already established, making it considerably easier for the parent company to proceed with commercial development. 

The greatest way to expand your company internationally and connect with potential markets like India is through a subsidiary. There are advantages and disadvantages to establishing a completely owned subsidiary.

Foreign investors can have complete control, flexibility, and direct access to the Indian market by establishing a wholly owned subsidiary in India. To prevent legal issues, however, adherence to the Companies Act, FEMA, and RBI laws is essential.