The Indian Economy has proven to be one of the most attractive investment arena for the Foreign countries. Amongst the various forms of entry routes available for the Foreign Nationals/Foreign Companies to enter into India, one of the most common type of entity is by way of incorporating a subsidiary for their multinational companies to establish a presence in India.
A foreign Company can enter in India by establishing a Wholly Owned Subsidiary under the provisions of the Companies Act, 2013 subject to the Reserve Bank of India Guidelines under Foreign Exchange Management Act (FEMA) Act, 1999.
A Wholly Owned Subsidiary company (WOS) is an entity of which 100 per cent shares are held by another company. When a foreign company makes 100 per cent FDI (Foreign Direct Investment) in India through an automatic route, the Indian company becomes the Wholly Owned Subsidiary Company of that Foreign Company. This is possible where 100 per cent FDI is permitted and no prior approval of Reserve Bank of India is required.
A WOS can be defined as an entity whose entire share capital is held by foreign corporate bodies. It is always preferred that a WOS be established as a private company under the provisions of the Companies Act, 2013.
An Indian Subsidiary of a Foreign Company is generally registered as a Private Limited Company. A Private Limited Company is registered under the provisions of the Companies Act, 2013 through the procedure prescribed under the Act and Rules and Regulations made there under.
Once the Company gets incorporated, Bank Account is opened to receive the Subscription Money. Once the Subscription Money is received from the Foreign Subscribers, the Bank will issue a Foreign Inward Remittance Certificate (FIRC) to receive the proceeds in Foreign Currency and convert the same in Indian Currency as per the RBI Guidelines.
Wherever case falls under Automatic Route, prior RBI approval is not required for investing in the Indian Company.
However, once the proceeds are received in the Indian Bank Account by the Indian subsidiary Company, reporting of the same shall be given to the Reserve Bank India within 30 days of receiving the Subscription Money by filling Form FC-GPR with RBI.