Subsidiary Company

A subsidiary company is often referred to as a sister company, while the company that exercises control over it is known as the parent company or holding company. The parent company holds the authority to control the
subsidiary company, either in part or entirely.
The registration process for an Indian subsidiary company is governed by the Companies Act of 2013. According to the Companies Act of 2013, a subsidiary company can be defined as a company in which a foreign corporate
body or parent entity holds a minimum of 50% of the total share capital. In essence, the parent company exerts a significant influence and control over the subsidiary company.

Types of Subsidiaries in India

In India, there are two primary categories of subsidiaries:

Wholly-Owned Subsidiary
In a wholly-owned subsidiary, the parent company possesses 100% ownership of the subsidiary’s shares. However, it’s important to note that wholly-owned subsidiaries can only be established in sectors that permit
100% Foreign Direct Investment (FDI).

Subsidiary Company
In this category of subsidiary, the parent company owns 50% of the subsidiary’s shares.
Before proceeding with the establishment of a subsidiary in India, obtaining approval from the Reserve Bank of India is a crucial prerequisite. This regulatory step ensures compliance with the country’s foreign investment
regulations and safeguards the interests of all stakeholders involved.