Subsidiary Definition / Subsidiary Meaning
In India a company is treated as subsidiary of another company (parent company) if atleast 51% of voting rights is help by the parent company i.e. if a company hold directly of indirectly more than 51% voting rights (generally by holding equity shares) of the other company then such other company is called a subsidiary of that company.
There are two type of subsidiary i.e. fully owned / wholly owned or partial subsidiary.
Wholly Owned Subsidiary
A Wholly Owned Subsidiary or Fully Owned Subsidiary is the one where parent company directly of indirectly holds 100% voting rights in that company. For eg. If X Ltd. holds all the equity shares of Y Ltd. and there are no other kind of shares with voting rights then Y Ltd. is Wholly / Fully Owned Subsidiary of X Ltd.
Wholly Owned Subsidiary of Foreign Company
A foreign organisation can open office in India in various ways i.e. either as Foreign Branch Office, Liaison Office, Project Office or Wholly Owned Subsidiary.
The Foreign Parent Company owns the Indian Wholly Owned Subsidiary in full i.e. it subscribes to 100% share capital of the Indian Company. A Foreign Wholly Owned Subsidiary can only have the name “Foreign Company Name” India Pvt. Ltd. or “Foreign Company Name” India Ltd. as has been specified by the Guidelines for Name Approval by the Registrar of Companies.
Before, opening a Fully Owned Foreign Company it should be ensured that the main objects of the Indian Subsidiary is covered under 100% Automatic Route of the Foreign Direct Investment (FDI) Guidelines. If otherwise then prior permission of Indian Goverment is required through Foriegn Investment Promotion Board (FIPB) for opening a Subsidiary in India. Also, after setting up the Fully Owned Subsidiary the Reserve Bank of India (RBI) is required to be intimated within 30 days of setting it up.
E-Taxdial is a Experienced Provider of Foreign Business Setup Services in India and has helped various organisations from around the world setup Wholly Owned Subsidiary Companies in India.