Indian Company Registration

Indian Company Registration

India draws a lot of foreign direct investment (FDI) and private equity money due to its ranking among the world's nations with the fastest expanding economies. Nomura, a Japanese brokerage firm, recently released a research estimating that FDI into India may have reached a record high of $34.9 billion in the most recent fiscal year, a staggering increase of 61.6% over the $21.6 billion in the prior fiscal. India continues to be a popular investment location for foreign companies and foreign citizens due to its second-largest population in the world and its abundant talent pool of highly qualified IT workers. For foreign people and foreign businesses, we offer a thorough introduction to Indian Private Limited Companies in this article.

Overview of India Entry Strategies for Foreign Companies / Foreign Nationals

Following are the available types of entry strategies into India:

Incorporation of a Private Limited Company or Limited Company

Incorporation of a private limited company is the easiest and fastest type of India entry strategy for foreign nationals and foreign companies. The automatic route, where no Central Government approval is needed, allows foreign direct investment of up to 100% into private limited companies or limited companies. The quickest, cheapest, and easiest way for foreign businesses and individuals to enter India is by forming a private limited company as a totally owned subsidiary of a foreign business or joint venture.

Incorporation of a Limited Liability Partnership

Incorporation of a Limited Liability Partnership (LLP) is also an India entry strategy for foreign nationals or foreign citizens as 100% FDI in LLP is now allowed. An LLP, however, cannot have shareholders and must be represented by Partners – thereby making it an ideal choice for investment vehicles and professional firms.

Through Proprietorship Firms or Partnership Firms

Proprietorship firms or Partnership firms are the most basic types of business entities mostly used by very small businesses or unorganised players. Foreign investment into a proprietorship firm or partnership firm requires prior RBI approval. Hence, proprietorship firms or partnership firms are not suitable for a foreign company or foreign national investment into India.

Registration of Branch Office, Liaison Office or Project Office

Registration of Branch Office, Liaison Office or Project Office requires RBI and/or Government approval. As a result, the fees and time required to register a branch office, liaison office, or project office for a foreign company are more expensive than those required to form a private limited company. Furthermore, foreign nationals are not permitted to form a liaison, project, or branch office. This option is therefore restricted to being a foreign companies' exclusive India entry strategy.

FDI in Private Limited Company

Foreign Direct Investment (FDI) into an Indian Private Limited Company or Limited Company is allowed upto 100% in most sectors. Only a very few sectors require prior Central Government approval for investment by foreign company or foreign national. The following sectors require Government Approval for investment by Foreign Company or Foreign National:

1. Petroleum sector (except for private sector oil refining), Natural gas / LNG pipelines.
2. Investing in companies in Infrastructure
3. Defence and strategic industries
4. Atomic minerals
5. Print Media
6. Broadcasting
7. Postal Services
8. Courier Services
9. Establishment and operation of Satellite
10. Development of Integrated township
11. Tea Sector
12. Asset Reconstruction Companies

Incorporation of Private Limited Company for Foreign Companies and Foreign Nationals

The following are the steps involved in the incorporation of a Indian Private Limited Company for foreign nationals or foreign companies:

Management and Shareholding Structure

The minimal number of shareholders and directors for a private limited company is two. Both individuals and corporations are eligible to become shareholders. A Director, however, must be a living individual. An Indian Private Limited Company will accept applications from foreigners to serve as directors.

The Indian Private Limited Company must have one director who is both an Indian citizen and an Indian resident on its board of directors. The Indian Director need not own any stock in the company, while it is not a requirement. Consequently, the majority of international businesses or foreign nationals prefer to form a company in India with three directors: two foreign directors and one Indian director.

A combination of foreign corporations and/or foreign citizens may hold the entire outstanding stock of the Indian Company. The minimal number of shareholders for Indian private limited businesses is two. An Indian Private Limited Company's shares cannot, therefore, be owned by a single corporation or individual.

Obtaining Digital Signature for Foreign National Directors

A digital signature is required for filing the incorporation documents and continued compliance documents for a company. Hence, Digital Signatures must be obtained for one or more Director(s) of the company. The following video is a guide to submitting Digital Signature application:

The following are the documents and information required for obtaining Digital Signature for a foreign national:

• 1. Foreign national is residing in native country

• If native country is a signatory of Hague Convention: For attestation, proof of identity, address proof and photo on DSC application should be notarized by the Public Notary of that foreign country and apostilled by the competent authority of that foreign country.
• If native country is not a signatory of Hague Convention: For attestation, proof of identity, address proof and photo on DSC application should be notarized by the Public Notary of that foreign country and consularized by the competent authority of that foreign country . Documents required: Passport, Application form with Photo (all attested).

• 2. Foreign national residing in India

• The following documents should be certified by Individual’s Embassy

• Resident Permit certificate issued by Assistant Foreigner Regional Registration Officer, an officer of Bureau of Immigration India.
• Passport
• Visa
• Application form with Photo(attested)

• 3. Foreign national neither in India nor in the native country

• The following documents should be certified by the local embassy of the country to which the person belongs:

• Passport
• Visa
• Application form with Photo(attested)

Name Approval

In parallel to the digital signature application process, name approval can be obtained for the proposed company. The name of the Indian Company must be unique and should end with the words “Private Limited”. Click here to know more about Naming an Indian Private Limited Company.

Filing for Incorporation of a Private Limited Company

Once name approval is obtained, incorporation documents can be filed with the Ministry of Corporate Affairs to incorporate the Company. The incorporation documents to be filed includes affidavits & declarations from Directors, Memorandum of Association, Articles of Association Subscriber Sheet and Registered Office Address proof.

The affidavit and declarations from the Directors contain certain declaration from the Directors. Affidavit and Declaration would have to be executed independently for each of the Director and notarized (For Indian Director & Foreign Director).

Subscribing to the Memorandum of Association (MOA) & Articles of Association (AOA)

By subscribing to the MOA & AOA, the shareholders (either foreign companies or foreign nationals or Indian companies or Indian national) show their intention for becoming a shareholder in the company to be incorporated.

In case a Foreign Company is a subscriber to the MOA & AOA of the proposed Indian Company:

The following documents pertaining to the foreign entity subscribing to the shares of the Indian Company must be submitted:

• Board resolution of the Foreign Entity authorising investment in shares of the Indian Company.
• Copy of the certificate of incorporation of the foreign entity.
• Copy of address proof for the foreign company.

If the necessary documents are presented along with the application for business incorporation and are accepted, the Registrar will issue a Certificate of Incorporation for the Indian Private Limited business.

The Indian Company can apply for a PAN Card and complete the necessary steps to create a bank account for the Company in India after receiving the Incorporation Certificate.

Proprietorship vs Limited Liability Partnership (LLP) vs Company

Documents Required For Indian Subsidiary

Recent Utility Bill

Business Place

Aadhaar Card

Aadhaar is mandatory for Indian Directors.