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.

Prerequisites to set up a wholly owned subsidiary in India are as follows:

• (need to check)Minimum two shareholders are required in order to incorporate a company.
• Minimum two directors are required, one of whom must be an Indian resident. It is mandatory that all the directors must possess DIN (Director Identification Number).

All the directors must acquire DSC (Digital Signature Certificate).

Some of the key features of the wholly owned subsidiary company are:

• A wholly owned subsidiary company in India is regulated by the provisions of Companies Act.
• A wholly owned subsidiary company in India is permitted to undertake all sorts of business activities in India such as manufacturing, marketing, service industry, etc.
• A wholly owned subsidiary company does not need a prior approval of Reserve Bank of India if it is already approved of 100% Foreign Direct Investment (FDI).
• A wholly owned subsidiary company in India is treated as an Indian company under Income tax laws. Moreover, it is eligible for all the benefits, exemptions and deduction as applicable to any other Indian company.
• The funding of a wholly owned subsidiary company in India can be made in the form of loan and share capital.