As Company Secretaries at Yalamuris & Co., we often encounter queries about the compliance requirements for Wholly Owned Subsidiary (WOS) companies. While WOS companies must adhere to standard company compliances, there are specific additional requirements that apply due to their relationship with holding companies.
Key Point: The compliance requirements for WOS are largely the same as for standalone companies, except for accounting treatments related to consolidation and certain additional provisions that specifically address the holding-subsidiary relationship.
Companies Act 2013 Compliances
The Companies Act 2013 contains several provisions that specifically address the relationship between holding companies and their wholly owned subsidiaries:
1. Loans to Directors & Related Parties (Section 185)
While companies are generally restricted from advancing loans to directors, these restrictions don't apply to:
- Loans made by a holding company to its WOS
- Guarantees or security provided by a holding company for loans to its WOS
Example: Holding Private Limited can give a loan to WOS Private Limited without needing a special resolution as per Section 185(3)(c).
2. Loans & Investments by Company (Section 186)
The requirement for special resolutions for large loans/investments doesn't apply when:
- A loan or guarantee is given to a WOS or joint venture
- A holding company acquires securities of its WOS
3. Related Party Transactions (Section 188)
For WOS companies, an ordinary resolution passed by the holding company is sufficient for RPTs between the holding company and WOS, provided:
- The WOS's accounts are consolidated with the holding company
- The consolidated accounts are placed before shareholders at the general meeting
4. Financial Statements (Section 129(3))
Holding companies must prepare consolidated financial statements (CFS) that include all subsidiaries. These CFS must be:
- Approved by the Board
- Filed in Form AOC-4 (in XBRL format)
- Laid before the AGM along with standalone financials
5. Other Key Compliances
| Compliance | Description | Form/Reference |
|---|---|---|
| Declaration of Beneficial Interest | One-time compliance at WOS formation | Form MGT-6 |
| Subsidiary Disclosures | In Board's Report and financials | Rule 8, Form AOC-1 |
| Related Party Register | Must include holding-subsidiary contracts | MBP-4 |
| Ultimate Beneficial Ownership | Declaration of ultimate holding structure | BEN-1/BEN-2 |
FEMA Compliances for WOS Companies
Foreign Exchange Management Act (FEMA) regulations impose specific requirements on WOS companies with foreign investment:
| Compliance | Description | Timeline |
|---|---|---|
| FC-GPR Filing | For share allotment to foreign holding company | Within 30 days of allotment |
| FLA Return | Annual return on foreign liabilities/assets | By July 15 each year |
| ODI Reporting | For Indian holding companies with overseas WOS | Form ODI Part I within 30 days, APR by Dec 31 |
| ARF Filing | For inward remittance against share issue | Within 30 days of remittance |
Important: All FEMA filings must be done through the RBI FIRMS portal (https://firms.rbi.org.in) or FLAIR portal (https://flair.rbi.org.in), typically via an Authorized Dealer Bank.
SEBI LODR Compliances for Listed Holding Companies
Listed holding companies have additional disclosure requirements regarding their WOS under SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015:
| Regulation | Requirement | Frequency |
|---|---|---|
| Reg. 24(1) | Independent Director on board of material unlisted Indian subsidiary | Ongoing |
| Reg. 24(2) | Audit Committee to review unlisted subsidiary financials | Quarterly |
| Reg. 24A | Secretarial Audit of material unlisted Indian subsidiary | Annually by May 30 |
| Reg. 33 | Consolidated Financial Results including subsidiaries | Quarterly & Annually |
Material Subsidiary Definition
A subsidiary is considered "material" if its income or net worth exceeds 10% of the consolidated income/net worth of the listed entity and its subsidiaries.
Income Tax Act Compliances
Key tax-related compliances for holding-WOS structures:
| Compliance | Description | Form |
|---|---|---|
| Transfer Pricing Disclosures | For international transactions between holding and WOS | Form 3CEB |
| Master File & CbCR | For large international groups | Form 3CEAA/3CEAB |
Compliance Summary Table
| Compliance | Applicability | Due Date |
|---|---|---|
| Consolidated Financial Statements | Holding Company | Annually with AGM |
| Form AOC-1 (Subsidiary financials) | Holding Company | With AOC-4 filing |
| FLA Return | WOS with foreign investment | July 15 annually |
| ODI Annual Performance Report | Indian Holding Co. with overseas WOS | December 31 annually |
| Form 3CEB (Transfer Pricing) | Cross-border transactions | November 30 |
Download Complete Compliance Guide
For a comprehensive reference document covering all WOS compliance requirements, download our detailed guide:
Download PDF GuideHow Yalamuris & Co. Can Assist
Our team of experienced Company Secretaries can help your organization:
- Establish proper compliance frameworks for holding-WOS structures
- Prepare and file all required forms and returns
- Conduct compliance audits to identify gaps
- Develop policies for material subsidiaries
- Handle FEMA and RBI compliance matters
For personalized assistance with your WOS compliance requirements, contact our team today.
Disclaimer: The information provided in this article is for general guidance only and does not constitute professional advice. Please consult with qualified professionals for advice specific to your situation.