Wholly Owned Subsidiary in India for a Foreign Company

A foreign company can own 100% of an Indian Private Limited Company in most sectors without prior approval. Because a private company needs at least two shareholders, the parent holds all but one share and a nominee holds the last one on its behalf. The board needs two directors, one of whom stays in India for 182 days a year. The parent's documents are apostilled or consularised abroad, the capital comes in through banking channels, and the allotment is reported to the RBI in Form FC-GPR within 30 days.

When a subsidiary is the right vehicle

Foreign companies coming to India usually choose between three structures. A subsidiary is the only one that can do almost any business the parent can, without RBI approval in most sectors, and with its own limited liability.

If an Indian founder and an overseas co-founder are setting up together, rather than a foreign company setting up alone, our Pvt Ltd incorporation with a foreign director or shareholder page is the closer fit.

Automatic route or approval route

The first question is whether the Indian company's activity can take 100% foreign investment without approval. Under the Foreign Exchange Management (Non-debt Instruments) Rules, 2019 and the consolidated FDI policy, the answer for most businesses is yes.

• Automatic route, up to 100%. IT and software services, SaaS, consulting, engineering and design services, most manufacturing, e-commerce marketplaces, back-office and captive service centres. No approval is needed before the money comes in; the investment is reported after the event.
• Caps or approval. A short list of sectors either caps foreign holding or needs government approval through the Foreign Investment Facilitation Portal, for example print media, multi-brand retail trading and defence above the automatic limit. A wholly owned subsidiary in these sectors is either not possible or needs approval first.
• Prohibited. Lottery, gambling and betting, chit funds, Nidhi companies, real estate business and trading in transferable development rights, and manufacture of tobacco cigars and cigarettes, among others.

Two shareholders: the parent and a nominee

Section 3(1)(b) of the Companies Act, 2013 requires a private company to have at least two members. A foreign parent therefore cannot hold every share in its own name. The usual structure is:

• The parent subscribes to the memorandum for all shares but one, acting through an authorised signatory named in its board resolution.
• A nominee subscribes for one share and holds it on the parent's behalf. The nominee is usually a director or officer of the parent, or a second company in the same group. A group company holding the share in its own right, rather than as nominee, is also common and avoids the declarations below.
• Beneficial interest declarations under section 89. The nominee declares in Form MGT-4 that the share is held for the parent, the parent declares its beneficial interest in MGT-5, and the company files MGT-6 with the Registrar within 30 days of receiving the declarations.

Because both shares are held by or for a non-resident, both are foreign investment reported in FC-GPR. Where the nominee is an Indian resident holding for the parent, we confirm the reporting treatment with the AD bank before allotment so that the RBI's record and the register of members agree.

The board and the resident-director rule

A private company needs at least two directors, and section 149(3) requires at least one of them to stay in India for 182 days or more in each financial year, applied proportionately in the year of incorporation. Directors appointed from the parent's head office do not meet that test while they live abroad. The resident director is usually the Indian country manager, a senior local hire who joins before incorporation, or a professional resident director appointed with an indemnity and D&O cover. The default is a continuing one under section 172. We explain the options in our post on the resident director rule and foreign directors' obligations, and the tax position of the parent's nominee directors in NRI and foreign directors: tax and compliance.

Documents from the parent and its signatories

From the parent company

• Certificate of incorporation or registration, with a certified English translation if it is in another language
• Constitutional documents (articles, bylaws or charter) and proof of the registered office address
• Board resolution of the parent approving the Indian subsidiary, the proposed capital and the subscription, and authorising a named signatory to sign the memorandum, articles and incorporation forms
• Details of the parent's ultimate beneficial owners, for the land-border check and for the significant beneficial owner filing in BEN-2 after incorporation

From each foreign director and the authorised signatory

• Passport, all pages with personal details, valid for at least six months
• Residential address proof not older than two months, such as a utility bill or bank statement
• Photograph, specimen signature, and a personal email and mobile number for the DSC and DIN

Every foreign document is notarised in the country where it is signed and then apostilled where that country is a party to the Hague Apostille Convention (the USA, the UK, Singapore, Japan, Germany and, since 2023 and 2024, China and Canada), or authenticated by the Indian embassy or consulate where it is not (the UAE, Qatar and Kuwait, for example, are not parties). Documents signed in a Commonwealth country can be notarised only, but we ask for the apostille because banks and certifying authorities accept it without question. The country-by-country detail is on our foreign director incorporation page.

How we run the engagement

1. Structure and FDI checkWeek 1
   Sector, entry route and cap; land-border and beneficial-owner check up the parent's chain; capital, nominee and board composition; who will be the resident director.
2. Parent and director document packWeeks 1 to 3, abroad
   We send a country-specific checklist and the draft board resolution. Documents are signed before a notary and apostilled or consularised. We review scans before they are couriered.
3. Digital signatures and nameWeeks 2 to 3
   Class 3 DSCs for the foreign directors and the parent's authorised signatory, with video verification. SPICe+ Part A name reservation runs in parallel.
4. SPICe+ Part B, MoA and AoAWeeks 3 to 5
   Articles drafted for a subsidiary: parent's rights to appoint directors, transfer restrictions, and the nominee arrangement. DINs, PAN, TAN, EPFO, ESIC, Maharashtra professional tax and the bank account are applied for in the same filing.
5. Certificate of incorporation and bank accountAround week 5
   First board meeting, auditor appointment, and the current account with an AD bank that will handle the FEMA reporting.
6. Capital remittance and FIRCWithin 60 days of receipt
   The parent remits the subscription money from its own bank account. The AD bank issues the FIRC and the KYC report. Shares are allotted within 60 days of receipt. Subscriber shares are issued at face value; any later issue to the parent needs a fair-value certificate from our valuation practice.
7. FC-GPRWithin 30 days of allotment
   FIRMS Entity User and Business User registration, Entity Master, and the FC-GPR with the CS certificate, followed until the AD bank approves it. The step-by-step version is in our FC-GPR filing guide.
8. Commencement and beneficial-owner filingsWithin 180 days
   INC-20A once the capital is in, share certificates, MGT-6 for the nominee declaration, and BEN-2 for the significant beneficial owners identified up the parent's chain.
9. First-year FEMA, ROC and tax calendarOngoing
   FLA return by 15 July, four board meetings, AOC-4 and MGT-7A, statutory audit, and the transfer pricing report for the parent transactions. The full list is on our FEMA annual compliance checklist.

After incorporation: what the subsidiary owes every year

FEMA. Every further issue of shares to the parent is another FC-GPR within 30 days. The FLA return is due by 15 July each year while foreign investment is outstanding. If the parent lends money to the subsidiary, that is an external commercial borrowing with its own registration and reporting. And because the subsidiary is foreign owned and controlled, any investment it makes in another Indian company is indirect foreign investment, reported in Form DI within 30 days.

Transfer pricing. Almost every subsidiary transacts with its parent: development or support services billed to the parent, management fees or royalty paid to it, cost recharges, secondments, loans and guarantees. These are international transactions between associated enterprises, which section 161 of the Income-tax Act, 2025 requires to be priced at arm's length. The subsidiary keeps transfer pricing documentation under section 171 and files an accountant's report under section 172 by the specified date each year. A captive service centre is commonly remunerated on a cost-plus basis; the mark-up, the intercompany agreement and the benchmarking need to be in place before the first invoice, not reconstructed at year end.

Companies Act and tax. Statutory audit from the first year, four board meetings a year, the annual return and financial statements, director KYC, TDS on payments to the parent under the non-resident provisions, and the corporate tax return. We usually run these together under an annual retainer with outsourced accounting.

Scope and fees

We quote a fixed professional fee against a written scope. Government charges and third-party costs (notary and apostille abroad, MCA fees, stamp duty, courier) are passed through at cost.

Indicative professional fees for typical engagements, excluding GST, government and ROC fees and stamp duty. The final fee depends on scope and volume and is confirmed in writing before work starts. Fees are subject to change without notice. Transfer pricing documentation and the statutory audit are quoted separately.

Frequently Asked Questions