For UK and European companies planning global expansion, establishing a wholly owned subsidiary in India is one of the most strategic and secure entry routes. With its large consumer base, skilled workforce, and growing digital economy, India presents unmatched opportunities for foreign investors.
At Stratrich, we work closely with founders, investors, and corporate decision-makers from the UK and Europe who want structured, compliant, and growth-oriented expansion into India. This guide explains everything you need to know about setting up a wholly owned subsidiary, the legal framework, benefits, process, and strategic considerations.
What is a Wholly Owned Subsidiary?
A wholly owned subsidiary is a company whose entire share capital is held by a foreign parent company. In the Indian context, this means a UK or European entity owns 100% of the shares of an Indian-registered company.
Under Indian corporate law, such entities are typically registered as a Private Limited Company governed by the Ministry of Corporate Affairs and regulated under the Companies Act 2013.
Unlike joint ventures, a wholly owned subsidiary provides full operational control, independent decision-making authority, and protection of intellectual property.
Why Choose a Wholly Owned Subsidiary in India?
1. 100% Ownership & Control
Foreign companies retain complete authority over management, operations, and profits. There is no need to share equity or strategic control with local partners.
2. Limited Liability Protection
The parent company’s liability is limited to its shareholding. This protects the foreign entity from operational risks within India.
3. Strong Legal Recognition
A wholly owned subsidiary is treated as a separate legal entity in India, which increases credibility with banks, vendors, and government authorities.
4. FDI-Friendly Environment
India permits 100% Foreign Direct Investment (FDI) in most sectors under the automatic route regulated by the Reserve Bank of India and governed by FEMA regulations.
5. Tax & Treaty Advantages
The Double Taxation Avoidance Agreement (DTAA) between India and several European countries, including the UK, helps avoid double taxation and improves profit repatriation efficiency.
Key Legal Framework for Foreign Investors
When setting up a wholly owned subsidiary in India, compliance typically involves:
- Companies Act 2013
- Foreign Exchange Management Act (FEMA)
- FDI Policy issued by the Government of India
- RBI reporting requirements
Foreign investors must ensure adherence to sector-specific caps and regulatory approvals, where applicable.
Step-by-Step Process to Set Up a Wholly Owned Subsidiary in India
Below is a simplified roadmap for UK and European companies:
Step 1: Define Business Structure
Most foreign investors opt for a Private Limited Company due to flexibility, credibility, and compliance simplicity.
Step 2: Digital Signatures & Director Identification
At least one director must be an Indian resident (as per legal requirement). Directors need:
- Digital Signature Certificate (DSC)
- Director Identification Number (DIN)
Step 3: Name Approval
Apply for company name approval through the MCA portal.
Step 4: Company Incorporation Filing
Submit incorporation documents including:
- Memorandum of Association (MOA)
- Articles of Association (AOA)
- Parent company documents (notarised & apostilled)
Step 5: PAN, TAN & Bank Account
After incorporation, apply for tax registrations and open an Indian bank account to receive foreign capital.
Step 6: FDI Reporting
Report foreign capital inflow to the RBI within prescribed timelines through the FIRMS portal.
At Stratrich, we streamline this entire process with documentation support, compliance management, and regulatory coordination.
Compliance Requirements After Incorporation
Setting up a wholly owned subsidiary is only the beginning. Ongoing compliance includes:
- Annual ROC filings
- Statutory audit
- Income tax returns
- GST registration (if applicable)
- Transfer pricing compliance (if transactions occur between parent and subsidiary)
UK and European companies must also structure intercompany agreements properly to avoid regulatory complications.
Wholly Owned Subsidiary vs Branch Office
Many businesses ask whether they should open a branch office instead. Here's a quick comparison:
Criteria | Wholly Owned Subsidiary | Branch Office |
Legal Status | Separate legal entity | Extension of foreign company |
Liability | Limited | Parent company liable |
Activities | Broad business scope | Restricted activities |
Taxation | Corporate tax | Higher tax exposure in some cases |
Credibility | Higher in local market | Moderate |
For long-term growth and operational flexibility, a wholly owned subsidiary is usually the preferred option.
Capital Requirements
India does not prescribe a high minimum capital requirement for private limited companies. However, sufficient capital should be introduced to:
- Cover operational expenses
- Lease office space
- Hire staff
- Manage compliance costs
The capital must align with business objectives and sector regulations.
Sector-Specific Considerations
While many sectors allow 100% FDI under the automatic route, some industries require government approval. These include:
- Defence manufacturing
- Multi-brand retail
- Print media
- Certain financial services
Due diligence is essential before proceeding.
Taxation Overview for UK & European Companies
A wholly owned subsidiary in India is taxed as a domestic company. Key aspects include:
- Corporate tax rates applicable to Indian companies
- Dividend repatriation rules
- Transfer pricing regulations
- Withholding tax obligations
Careful tax structuring ensures maximum efficiency while maintaining compliance.
Strategic Advantages for UK & European Businesses
India offers significant strategic benefits:
- Access to a fast-growing consumer base
- Skilled English-speaking workforce
- Competitive operational costs
- Strong IT & manufacturing ecosystem
- Expanding digital infrastructure
For European companies facing market saturation at home, India provides scalability and long-term growth potential.
Common Mistakes to Avoid
When establishing a wholly owned subsidiary, foreign investors often face challenges such as:
- Incorrect FDI reporting timelines
- Poorly structured intercompany agreements
- Inadequate compliance tracking
- Underestimating local regulatory complexity
Working with an experienced business consultant like Stratrich reduces these risks significantly.
How Stratrich Supports Your Expansion
As a dedicated business consultancy working with UK and European founders, Stratrich offers:
- End-to-end subsidiary incorporation
- FEMA & RBI compliance support
- Tax and regulatory advisory
- Ongoing corporate compliance management
- Strategic market entry planning
We focus not just on registration, but on building a compliant and scalable presence in India.
Final Thoughts
A wholly owned subsidiary is one of the most effective vehicles for UK and European companies to establish a secure, independent, and growth-driven presence in India. It combines full ownership, limited liability, operational flexibility, and strong legal standing.
However, success depends on structured planning, regulatory compliance, and strategic execution.
If your business is considering Indian expansion, a professionally structured wholly owned subsidiary can unlock long-term growth while safeguarding your global interests. With the right advisory partner and compliance framework, India can become your next major growth destination.
