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Foreign wholly owned subsidiary in india

Shridhi Jain (Company Secretary) (1678 Points)

30 March 2012

Members,

I have a query regarding Foreign Wholly Owned Subsidiary. I request your kind consideration.

An Egyptian Company want to open its wholly owned subsidiary (WOS) in India.

For this purpose an Indian company (pvt. ltd.) is to be incorporated, in directorship of the directors of that Egyptian company and they will be the shareholders also.

Pls let me know the initial formalities to be done in this regard by that Egyptian co. Is there any declaration to be given by the Egyptian co. before forming that WOS in India ?

Please help me. Its urgent.

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10 Replies

pramod yadav (Company Secretary) (150 Points)
Replied 30 March 2012

dear,

procedure regarding incorporate foreign subsdiary with other approval, permission or declaration etc.

Obtain DIN for proposed Directors of the new Company

Obtain DSC for proposed Directors of the Company

Filing the proposed name of company for approval to the Registrar of Companies (ROC); Get the Memorandum and Articles of Association vetted by the ROC and printed

Make an application to the Superintendent of Stamps or an authorized bank requesting for stamping of the Memorandum of Association and Articles of Association.

Present the required documents along with the registration fee to the Registrar of Companies to get the certificate of incorporation

Obtain a company seal

Apply for UTI Investors Services Limited/National Securities Depository Ltd. to obtain a Permanent Account Number (PAN) 7

Obtain a Tax Account Number (TAN) for income taxes deducted at source from the Assessing Office in the Income Tax Department

Register under Shops and Establishment Act

Register for value added tax (VAT) before the Sales Tax Officer of the ward in which the company is located

Register for Profession tax

Register with Employees' Provident Fund Organization

Register with ESIC (medical insurance)

Filing for Government Approval before RBI/FIPB for Foreigners and NRI's

regards,

pramod yadav

Back in the Game (a) (1273 Points)
Replied 30 March 2012

The Foreign Company will be investing in the indian company ie 100% of equity share capital.this will need compliance of FEMA and has to adhere to FDI policy.Tat is most likely limits set in automatic route...ill check this out and revert back..

people who abt this ,pls write.

Shridhi Jain (Company Secretary) (1678 Points)
Replied 30 March 2012

Thanks Pramod ji....

Pls tell me what are the FEMA compliances ?

What I know is for any inward remittance of foreign exchange, a reporting is to be done to RBI within 30 days of receipt. For allotment of share form FCGPR is to be filed with in 30 days. Is form FCGPR required in case of First subscripttion of shares also ?

Secondly, before or during incorporation, do we need to make application to FEMA/RBi that we are forming 'so n so' company which is 100 subsi of 'so n so' Egyptian company ??

And after incorporation, do the company require to inform any authority that it is a 100% WOS of 'so n so' company ??

Back in the Game (a) (1273 Points)
Replied 30 March 2012

Coincidentally even i ve a got a similar assignment to do,just a difference is tat there is allready an exsisting indian company but a Foreign Co has to be established which will be former company's fully owned holding co.All i got to knw after some time of searching,A NRI ie Foreign co which invests in indian co to 100% is a capital account transaction and also permissible by RBI,however its permissible to some limits prescribed by RbI...this is nt there in icai ca final syllabus ,thus i couldnt find it.

Back in the Game (a) (1273 Points)
Replied 30 March 2012

Wholly Owned Companies

A Company once incorporated in India shall be an Indian company. Foreign Direct Investment coming from abroad shall be regulated by the Foreign Exchange management Act, Reserve Bank of India and the policy of Foreign Direct Investment in India as formulated by Reserve Bank of India from time to time.

As per the current Foreign Direct investment policy the investment can be made in India through two routes being Automatic route or Approval route. Under the automatic route the investment can be made without prior approval of central government but in the case of approval route the prior approval of Central government is required. India has among the most liberal and transparent policies on FDI among the emerging economies.

Most of the sectors fall under the automatic route for FDI. In these sectors, investment could be made without approval of the central government. The sectors that are not in the automatic route, investment requires prior approval of the Central Government. The approval in granted by Foreign Investment Promotion Board (FIPB). In few sectors, FDI is not allowed.

After the grant of approval for FDI by FIPB or for the sectors falling under automatic route, FDI could take place after taking necessary regulatory approvals form the state governments and local authorities for construction of building, water, environmental clearance, etc.

The Act has given general power to the Reserve Bank of India under section 47 to make notifications to regulate various provisions of the Act. Also the specific power has been given under Section 6(3)(b) to make the regulations to regulate the transfer or issue of any security by a person resident outside India.

As mentioned above whole of the FEMA and all the regulations are applicable to any company incorporated in India.

jeets (CS ) (461 Points)
Replied 30 March 2012

As stated by Deepak, To begin with please check for the sector wherein your client would be making investment. Check whether it falls under automatic route or approval route and accordingly obtain permission. Compliance for WOS will only begin once the company is incorporated. Once you receive the share capital money the FEMA compliance part is triggered off:-

Reporting requirements under FDI scheme as per extant RBI guidelines

Indian companies are required to report the details of the amount of consideration received for issuance of FDI instruments. Advance reporting format along with KYC report on the Non-resident investor need to be reported through Authorised Dealer Category – I Bank (AD Bank) to RBI within 30 days from the date of receipt of consideration.
Indian Companies are also required to issue the FDI instruments / refund the advance consideration to the Non-resident investor within 180 days from the date of the receipt of consideration. In case of issue of FDI instrument the same is required to be reported in form FC-GPR through AD Bank to RBI within 30 days from date of issue of instruments.

Documentation for reporting of inward remittance received for issuance of FDI Instruments

Advance reporting form (Annexure II) duly filled & signed by the client
Certified copies of FIRC/s, evidencing receipt of remittance. Purpose of FIRC should be in line with the transaction.
KYC report on Non-resident investor from the overseas bank remitting the amount

Form FC-GPR (Annexure I) duly filled & signed by Managing Director/Director/Secretary.
Certificate from company secretary as per guidelines
Certificate from Category I Merchant Banker or Chartered accountant for valuation of FDI Instrument as per the RBI guidelines
Certified copies of FIRC’s
Unique Identification numbers allotted for all the remittances received as considerations for issuance of shares/debentures. In absence of the same, RBI acknowledged copy of the advance reporting submitted earlier is required.

Secondly, before or during incorporation, do we need to make application to FEMA/RBi that we are forming 'so n so' company which is 100 subsi of 'so n so' Egyptian company ??

Once the company is incorporated and it receives funds on account of share capital, FEMA compliance part is triggered off.

And after incorporation, do the company require to inform any authority that it is a 100% WOS of 'so n so' company ??

No separate intimation required, FC-GPR with RBI covers it all

2 Like

Shridhi Jain (Company Secretary) (1678 Points)
Replied 02 April 2012

Thanks Jeets....

Your explanation is of great help.

Shridhi Jain (Company Secretary) (1678 Points)
Replied 05 April 2012

Pls tell me, if a company is into manufacturing of electric meters, then what are the registrations that company needs to obtain, in general and in specific. ?

Pls tell me.

Gabel (36 Points)
Replied 09 June 2012

Is Sec. 187C gets attracted in the above case?

Uday Ahlawat (Legal Consultant) (21 Points)
Replied 16 June 2016

I think you should hire a legal expert in India to help you with setting a company in India.

Well, myself Uday Singh Ahlawat a partner at Ahlawat & Associates which is a leading law firm in India offering foreign direct investment services and help for setting up business in India. So, I would be really happy if I can be of any help to you. You can also call me or drop me an email of any kind of assistance.

Uday Ahlawat
Ph: +91 9810138903
Email: uday @ ahlawatassociates.in