What is Wholly owned Indian Subsidiary and Branch Office? Difference between Branch Office and Wholly Owned Indian Subsidiary
Introduction
A foreign corporation can set up a company in India through a variety of entrance methods. The final objectives to be accomplished completely determine the choice of corporate structure. A foreign corporation may conduct business in India in two different ways: by setting up a branch office there and by forming a limited liability company there. This article will include information such as “What is a Branch Office?”, “What is a Wholly Owned Indian Subsidiary?”, And Difference between Branch Office and Wholly Owned Indian Subsidiary.
What is Branch Office?
With the particular approval of the RBI, companies incorporated outside of India and involved in manufacturing or trading are permitted to set up Branch Offices. The Branch Office should typically be involved in the Parent Company’s business. It is possible to pay the branch office’s debts with the help of the parent company’s assets. The BO (Branch Office) complete expenditures in India shall be covered either by money received from Head Office through standard banking channels or by revenue produced there.
Advantages of Branch Office
- The main firm has more control thanks to the branch office. A branch office is a dependent type of business, which indicates that the parent company makes all of the decisions affecting its operations.
- As it will utilize the same name as the parent firm, the branch office in India upholds the parent company’s brand value.
What is a Wholly Owned Indian Subsidiary?
A subsidiary company is a business in which a holding company, or another organization, holds a controlling interest. A subsidiary in India is an organization that has been incorporated and registered under the 2013 Companies Act. Apart from its shareholders and Parent Company, it exists as a separate legal entity.
The parent company’s responsibility is constrained by the percentage of the subsidiary it owns that it owns. There are no attachments affecting the foreign company’s assets. all revenue generated by its commercial activity.
Advantages of Wholly Owned Indian Subsidiary
Below is the list of 5 key advantages of Wholly Owned Subsidiary:
- Indian subsidiary have a Management structure of its own, different from the parent company.
- Shareholders or the owners of a Company have a limited liability towards the company.
- In case of Indian Subsidiary, FDI is allowed 100% without any prior permission However it requires posts facto filing/intimation to the Reserve Bank of India.
- Parent Company (based in any part of the world) can retain a 100% effective ownership of its Indian Counter-part.
- The parent company can provide the monetary means and capability to jump start new companies and products.
Difference between Branch Office and Wholly Owned Indian Subsidiary
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Branch Office |
WOS (Wholly Owned Subsidiary |
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The Branch has unrestricted liability. It is possible to pay the BO’s debts with the help of the parent company’s assets. |
The parent company’s responsibility is constrained by the percentage of the subsidiary it owns. |
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The BO is permitted to do the same business as the Head office. |
On the other hand, the subsidiary firm might or might not conduct the same commercial activities as the owning company. |
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Branches may manage their accounts jointly or separately. |
While, WOS (Wholly Owned Subsidiaries) maintain their own separate account. |
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The BO’s complete expenditures in India shall be covered either by money received from Head Office through standard banking channels or by revenue produced there. |
In Wholly Owned Subsidiary all revenue generated by its commercial activity. |
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For its operations, a branch must submit a report to its head office. |
On the other hand, the holding company, which owns its majority ownership, is beneath the subsidiary business. |
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BO is administered by Authorized Representative, residing in India. |
At least two directors are needed (from which one director shall be an Indian National). |
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A Branch can be closed down if it makes continuous losses. |
On the other hand, if a WOS make continuous losses than parent company have an option to sale the business. |
Conclusion
Greater control over the parent firm may result from the establishment of a branch office in India. This implies that the parent firm is in charge of all operations at the branch company. Additionally, the parent corporation has complete decision-making authority over the branch. While the subsidiary company operates independently of the parent company and is a separate legal entity. Their taxes, responsibilities, and governance all reflect this.
Suggested Read :
RBI Rules for Foreign Subsidiary Companies
Branch Office and Indian Subsidiary
How to start a Subsidiary Company in India?
Foreign Subsidiary Company Compliance in India
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