Establishing a Foreign Company's Wholly Owned Subsidiary in India in 2022
Setting up a wholly owned foreign subsidiary in India is a common practice for many multinationals and international companies. It serves as a hub for all business of foreign companies in India and helps to manage all their activities effectively.
It also helps us open up new markets and recruit new cheap talent. For these reasons, startups from different countries are also setting up subsidiaries in India.
India is currently the fastest growing economy in the world, so there are other reasons why foreign companies are willing to set up subsidiaries in India. India is one of the most desirable destinations for investors, NRIs, foreign individuals and foreign companies due to its rich resources. Inbound investment in India hit an all-time high in 2021 and is expected to grow further in 2022 given various policy reforms, regulations and an investor-friendly environment.
This article is intended for NRI and foreign entrepreneurs or start-ups who have already registered a company outside India and wish to register and operate a wholly owned subsidiary in India.
Two ways for a foreign company to set up a wholly owned subsidiary in India
A foreign company wishing to do business in India can use one of the following methods:
Register a foreign subsidiary in India under the Companies Act, 2013.
This process can take up to 10-20 days. Acquiring an existing business in India:
This process can be completed quickly within his seven days and the company will be ready to begin operations within his ten days.
We will discuss both methods above, but first let us understand what a foreign subsidiary is under Indian law.
table of contents
What is a foreign subsidiary in India?
What is a wholly owned subsidiary in India?
various forming methods
Advantages of being a wholly owned subsidiary in India
Entry method of investment in India
A FOREIGN SUBSIDIARY COMPANY IN INDIA: WHAT IS IT?
A corporation that has more than 50% of its shares owned by a foreign company that is formed or based outside of India is considered a foreign subsidiary in India.
For instance, Apple Inc. is a registered American corporation (referred to as a foreign company), and Apple Private Limited is a registered Indian firm that Apple Inc. owns 51% of the shares of.
This indicates that Apple Private Limited is a division of Apple Inc.
WHOLELY OWNED FOREIGN SUBSIDIARY COMPANY IN INDIA: WHAT IS IT?
In India, a company whose 100% of the shares are owned by a single foreign entity is known as a completely owned foreign subsidiary.
Consider the previous illustration: If Apple Inc. controls 100% of the shares of Apple.
PROCESSES OF FORMATION
As was previously said, there are two ways.
Create a New Company in India: In accordance with the Companies Act of 2013, foreign corporations are permitted to establish a subsidiary company in India. There are specific procedures and paperwork that must be completed.
A foreign corporation may establish either a Public Limited Company or a Private Limited Company as its subsidiary.
The majority of large corporations with a presence in more than 20 countries choose public limited entities. The Reserve Bank of India (RBI) and other governmental organisations have severe regulations that public limited corporations must adhere to.
Contrarily, private limited corporations are subject to less rules and compliance requirements than public limited companies, which is why the majority of international investors use them.
The quickest way to launch any business operations in India is to buy an existing company. If you read the aforementioned post, you would be aware that there are a number of procedures that must be finished before you begin your Indian operations.
Opening a bank account after incorporation, completing the RBI Filings, obtaining the necessary permits, etc., all of which would delay the commencement of activities by at least a month.
However, after the share transfer process is complete, you can immediately begin operations if you buy an existing business.
It can be difficult to find a firm to buy, but India has a lot of dormant companies and people who created corporations to launch their businesses, but things didn't work out as planned.
You can purchase these businesses by transferring just a few shares from the company's founders.
You can begin operating as soon as the business is bought, and other procedures like appointing new directors, changing the company's name, or amending its MOA and AOA can be carried out concurrently.
The drawback of this method is that it can be expensive and difficult to locate a business that is inactive but operates in the same state and industry.
Please feel free to contact us by email at info@bbnc.in or by clicking here if you require assistance with either of the aforementioned steps.