Introduction
A foreign corporation can set up a company in India through several entrance moods. The final objective is to be competent completely to work on the choice of corporate structure. In India, a Foreign Corporation may conduct business in two different ways: thereby setting up a branch office and thereby forming a limited liability company. In this article, we look at information such as “What is a Branch Office and “Wholly Owned Indian Subsidiary?” And what is the difference between the Branch Office and a Wholly Owned Indian Subsidiary?
Branch Office
RBI gives approval to the companies incorporated outside of India and involved in manufacturing or trading which are permitted to set up Branch Offices.The Branch Office should typically be involved in the Parent business of the company. It is possible to pay the debts of the branch office with the help of the assets of the parent company. In India, the Branch Office’s complete expenditures shall be covered either by money received from Head Office through standard banking channels or thereby revenue produced.
Advantages of Branch Office
There are some advantages of branch offices are as follows:
- The main firm has more control over the branch office. A branch office is a type of dependent business which designated that the parent company makes all of the decisions affecting its operations.
- As it will utilize the same name as the parent firm and in India, the branch office upholds the brand value of the parent company.
Wholly Owned Indian Subsidiary
A subsidiary company is a business in which a holding company or another organization holds onto a controlling interest. In India, a wholly owned Indian subsidiary company is an organization that has been incorporated and registered under the Companies Act, 2013. Apart from its shareholders and Parent Company exists as a separate legal entity.
The responsibility of the Parent Company is constrained by the percentage of the subsidiary it owns that it owns. There are no attachments affecting the assets of the foreign company. Its commercial activity is generated through all revenues.
Advantages of Wholly Owned Indian Subsidiary
The list of 5 key advantages of a Wholly Owned Subsidiary is mentioned below:
- Indian subsidiary companies have their own Management structure, which is different from the parent company.
- Shareholders or the owners of an Indian Subsidiary Company have limited liability towards the company.
- In the case of an Indian Subsidiary Company, FDI is allowed 100% without any prior permission then it needs posts facto filing or intimation to the RBI.
- Parent Company can retain 100% effective ownership of its Indian Counterpart.
- The parent company can give the monetary means and capability to jump-start new companies and products.
The difference between Branch Office and Wholly Owned Indian Subsidiary
The difference between Branch Office and a Wholly Owned Indian Subsidiary Company which are given following:
| Branch Office | Wholly Subsidiary Company |
| The Branch office of the company has unrestricted liability. It is possible to pay the debts of the Branch office with the help of the parent company’s assets. | The responsibility of the Parent Company is constrained by the percentage of the subsidiary it owns. |
| The Branch Office is permitted to do the same business as the Head office of the Company. | But the subsidiary firm or company might or might not conduct the same commercial activities as the owning company. |
| The Branch office of the company may manage their accounts jointly or separately. | While Wholly Owned Subsidiaries maintain their separate account. |
| In India, the Branch Office’s complete expenditures shall be covered either by money received from Head Office through standard banking channels or thereby revenue produced. | Wholly Owned Subsidiary companies generated all revenue through their commercial activity. |
| For its operations, a branch office must submit a report to its head office. | On the other hand, the subsidiary holding company, which owns its majority ownership or it is beneath the subsidiary business. |
| Branch Office is administered by Authorized Representative and it is residing in India. | At least two directors are required in which one director shall be an Indian Director. |
| If it makes continuous losses then a Branch Office can be closed down. | On the other hand, if a Wholly Own Subsidiary company makes continuous losses then the parent company has the option to sell the business. |
Conclusion
It concluded that in India, Greater control over the parent firm may result from the establishment of a branch office. This implies that the parent firm or company is in charge of all operations at the branch office of the company. Additionally, the parent company has complete managerial authority over the branch. While the subsidiary company operates independently of the parent company and is a separate legal entity. eStartIndia will help you with Indian Subsidiary Registration from the comfort of your home.