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If you have done enough research on the market and want to set up a permanent establishment in India then you can form a Wholly Owned Subsidiary company in India. It is one of the strategic modes of operating business in India.
Wholly owned subsidiaries are fully owned by the parent company. This means parent company owns 100% of the subsidiary's shares. Now, since the parent company holds all the shares of the subsidiary company, it gains 100% control over the subsidiary. It gains the right to appoint the subsidiary’s board of directors, who controls the subsidiary.
A wholly owned subsidiary can belong to the same industry as that of the parent company or it can belong to a different industry altogether.
What is a Wholly Owned Subsidiary?
A Wholly Owned Subsidiary company is an entity in which a foreign company has made 100% FDI (Foreign Direct Investment) by way of an automatic route. For example, if XYZ Inc. Canada owns 100% shares in ABC Pvt. Ltd., then ABC Pvt. Ltd. becomes the wholly owned subsidiary company of XYZ Inc. Canada.
A wholly owned subsidiary company is treated as Indian Company under the Income Tax Act. It is also eligible for all benefits, exemptions and deductions that are applicable to any other Indian Company.
Who can set up a Wholly Owned Subsidiary?
A foreign company can set up a wholly owned subsidiary company in India. This can be done by acquiring entire i.e. 100% shares of the subsidiary company. A foreign company can set up its operations in India only in areas where 100% FDI is permitted under the automatic route.
What are the prerequisites to open a wholly owned subsidiary in India?
Prerequisites to set up a wholly owned subsidiary in India are as follows:
What are the key features of the wholly owned subsidiary company in India?
Some of the key features of the wholly owned subsidiary company are: