Foreign companies can set up a wholly-owned subsidiary (WOS) in sectors where 100 percent foreign direct investment is permitted under India’s national FDI policy. Operating through a WOS keeps the management control intact.
Key Features of company
- A company is governed by its Charter documents, which are as under :
- Memorandum of Association (MOA) : covers the activity carried out by the company and
- Article of Association (AOA): covers the rules and regulations within which the company shall operate
- Every company being formed in India need to have a Certificate of Incorporation provided by the jurisdictional office of the Registrar of Companies, Ministry of Corporate Affairs. Certificate of Incorporation of the company is like its birth certificate.
- Management of the company is typically led by the Board of Directors. The Board, subject to the Articles of Association, has full powers to act on behalf of the companyin accordance with the provisions of the Companies Act
- Directors are persons appointed by the company who take or assist in taking the decision on behalf of the company. The directors appointed can be executive, non-executive orindependent. An executive director can be a managing director or a whole-time director. There is no restriction on appointing foreign nationals as directors; However,at least one director should be an Indian resident. Regardless of nationality or residence, all the directors needs to obtain a unique Director Identification Number (DIN)
- Members of the company are its owners, who subscribe to the shares in the company.
- Shares of the company are either equity shares (common stock) or preference shares (preferred stock). Equity shareholders are the owners of the company whereas preference shareholders are akin to creditors, as the preference shares are to be redeemed within 20 years except incase of infrastructure companies. Equity shareholders have the right to participate in the management of the company whereas there is no management right for preference shareholders. The other differences are about dividend rate whether fixed or not, first right to capital on liquidation etc.
