There is a lot of interest among foreign companies to start their operations in India and tap into one of the largest and fast growing market, and have access to some of the best human resources in the world. A Foreign National (other than a citizen of Pakistan or Bangladesh) or an entity incorporated outside India (other than entity incorporated in Pakistan or Bangladesh) can invest and own a Company in India by acquiring shares of the company, subject to the FDI Policy of India. In addition, a minimum of one Indian Director who is a Indian Director and Indian Resident is required for incorporation of an Indian Company along with an address in India.
Investment and acquisition of equity shares of a Company can be broadly divided into two categories: investment under automatic route and investment under Government approval route. The automatic route requires no requirement of any prior regulatory approval for investment in equity shares of an Indian business and only post facto filing/intimation with the Reserve Bank of India within 30 days of receipt of investment money in India and filing of prescribed documents and particulars of allotment of shares within 30 days of allotment of shares to foreign investors. Foreign Direct Investment of upto 100% is allowed under the automatic route in most activities/sectors in India. Investment in activities / industries where automatic route is not available can be made with the approval of the Government under the Government Approved FDI method. CivilIndia can be your legal and professional partner in India to get your New Company / Subsidiary in India started quickly and cost-effectively.
Indian Subsidiary Incorporation Process
Step 1: Private Limited Company Incorporation
You can incorporate a Private Limited Company in 30 to 60 days, subject to ROC processing time.
Step 2: Obtaining DSC & DIN
Digital Signature Certificate(DSC) and Director Identification Number(DIN) is requried for the proposed Directors of the Private Limited Company. DIN and DSC can be obtained for the proposed Directors within 5 to 7 days.
Step 3: Name Approval
A minimum of one and a maximum of six proposed names must be submitted to the MCA. Subject to availability, naming guidelines and MCA processing time, Name Approval can be obtained in 5 to 7 working days.
Step 4: Company Incorporation
Incorporation documents can be submitted to the MCA along with an application for incorporation. MCA will usually approve the application for incorporation in 5 to 7 days, subject to their processing time.
Frequently Ask Questions (FAQs)
|1||How many people are required to incorporate a private limited company?|
|To incorporate a private limited company, a minimum of two people are required. A private limited company must have a minimum of two Directors and can have upto a maximum of fifteen Directors. A minimum of two shareholders and a maximum of upto 200 shareholders are allowed in a private limited company.|
|2||What are the requirements to be a Director?|
|The Director needs to be over 18 years of age and must be a natural person. There are no limitations in terms of citizenship or residency. Therefore, even foreign nationals can be Directors in a Indian Private Limited Company.|
|3||What is the capital required to start a private limited company?|
|You can start a Private Limited Company with any amount of capital. However, fee must be paid to the Government for issuing a minimum of shares worth Rs.1 lakh [Authorized Capital Fee] during the incorporation of the Company. There is no requirement to show proof of capital invested during the incorporation process.|
|4||Is an office required for starting a Private Limited Company?|
|An address in India where the registered office of the Company will be situated is required. The premises can be a commercial / industrial / residential where communication from the MCA will be received.|
|5||Do I have to be present in person to incorporate a Private Limited Company?|
|No, you will not have to be present at our office or appear at any office for the incorporation of a Private Limited Company. All the documents can be scanned and sent through email to our office. Some documents will also have to be couriered to our office.|
|6||What are the documents required for incorporation?|
|Identity proof and address proof is mandatory for all the proposed Directors of the Company. PAN Card is mandatory for Indian Nationals. In addition, the landlord of the registered office premises must provide a No Objection Certificate for having the registered office in his/her premises and must submit his/her identity proof and address proof.|
|7||How long will it take to incorporate a Company?|
|You can incorporate a Private Limited Company for in 7-15 days. The time taken for incorporation will depend on submission of relevant documents by the client and speed of Government Approvals. To ensure speedy incorporation, please choose a unique name for your Company and ensure you have all the required documents prior to starting the incorporation process.|
|8||What do I need to quickly incorporate my Company?|
|To incorporate a Company quickly, make sure the proposed name of the Private Limited Company is very unique. Names that are similar to an existing private limited company / limited liability partnership / trademark can be rejected and additional time will be required for resubmission of names.|
|9||How long is the incorporation of the Company valid for?|
|Once a Company is incorporated, it will be active and in-existence as long as the annual compliances are met with regularly. In case, annual compliances are not complied with, the Company will become a Dormant Company and maybe struck off from the register after a period of time. A struck-off Company can be revived for a period of upto 20 years.|
|10||What is a Digital Signature Certificate?|
|A Digital Signature establishes the identity of the sender or signee electronically while filing documents through the Internet. The Ministry of Corporate Affairs (MCA) mandates that the Directors sign some of the application documents using their Digital Signature. Hence, a Digital Signature is required for all Directors of a proposed Company.|
|11||What is Director Identification Number (DIN)?|
|Director Identification Number is a unique identification number assigned to all existing and proposed Directors of a Company. It is mandatory for all present or proposed Directors to have a Director Identification Number. Director Identification Number never expires and a person can have only one Director Identification Number.|
|12||What is authorized capital fee?|
|Authorized capital of a Company is the amount of shares a company can issue to it shareholders. Companies have to pay the Government an authorized capital fee to issue shares in a Company. Companies have to pay authorized capital fee for a minimum of Rs.1 lakh.|
|13||What are the statutory compliances required for a Private Limited Company?|
|A private limited company must hold a Board Meeting at least once in every 3 months. In addition to the Board Meetings, an Annual General Meeting must be conducted by the Private Limited Company, at least once every year.|
|14||Can NRIs / Foreign Nationals be a Director in a Private Limited Company?|
|Yes, a NRI or Foreign National can be a Director in a Private Limited Company after obtaining Director Identification Number. However, at least one Director on the Board of Directors must be a Resident India.|
|15||Can NRIs / Foreigners hold shares of a Private Limited Company?|
|Yes, NRIs / Foreign Nationals / Foreign Companies can hold shares of a Private Limited Company subject to Foreign Direct Investment (FDI) Guidelines.|
|16||What are FDI Guidelines for Foreigners in a Private Limited Company?|
|100% Foreign Direct Investment is allowed in India in many of the industries under the Automatic Route. Under the Automatic Route, only a post-investment filing is necessary with the RBI indicating the nature of investment made. There are a few industries that require prior approval from the RBI, in such cases, approval must first be obtained from RBI prior to investment.|
|17||Can a foreign company or foreign national own or start a business in India?|
|Yes, a foreign company or foreign national can own or start a business in India by acquiring equity shares of the company. Investment in a Company can be under two routes, automatic route or Government approval route. The automatic route requires no requirement of any prior regulatory approval for investment in equity shares of an Indian business and is allowed in most of the businesses.|
|18||What type of business entity is suitable for foreign investment?|
|A private limited company or limited company type of business constitution is most suitable for foreign investment in India. Investment of foreign funds in other types of business entity like proprietorship, partnership and limited liability partnership require RBI prior approval. Foreign company or foreign nationals are not allowed to be Director or Nominee Director in a One Person Company.|
|19||Can a foreign national be Director of an Indian company?|
|Yes, foreign nationals can be Directors of an Indian company after obtaining a Director Identification Number. Director Identification Number for a foreign national can be obtained by applying for the same with the Ministry of Corporate Affairs.|
|20||What are businesses in which foreign nationals or companies can’t invest?|
|Foreign investment in any form is prohibited in businesses engaged or proposes to engage in the following business: i) Business of chit fund; or, ii) Nidhi Company; or, iii) Agricultural or plantation activities (excluding floriculture, horticulture, development of seeds, animal husbandry, pisiculture, cultivation of vegetables, mushrooms, etc., under controlled conditions, services related to agro & allied sector and tea plantations); or, iv) Real Estate business, or construction of farm houses (Does not include development of townships, construction of residential / commercial premises, roads or bridges); or, v) Trading in Transferable Development Rights (TDRs).|
|21||What are the requirements for starting a business in India?|
|For a foreign national or foreign company to start a Company in India, the foreign National must have an address for Registered Office in India and one Director on the board, who will be a Indian Citizen and Indian Resident.|
|22||What are the documents required for Foreign National during incorporation?|
|If a foreign national is on the Board of Directors, then a copy passport along with copy of address proof that is apostil led by the Indian Embassy or a Notary will be required. In addition, the witness of the MOA and AOA documents would have to be a Notary or the Indian Embassy. If the shares of the Indian Company would be owned by a Foreign Company, then a Board of Resolution also needs to be passed by the foreign company for acquiring shares in the Indian company.|
|23||How long does it take to incorporate a Company in India?|
|To incorporate a company in India, it takes foreign nationals or foreign company about 30 days to file prepare the necessary paperwork and file the same with the Government and obtain Certificate of Incorporation.|
|24||Are there any further regulatory requirements after incorporated Company?|
|Yes, after incorporation of the Company and flow of equity fund into the Company from foreign source, Reserve Bank of India must be notified about the foreign investment in the Company through proper filing. In case the activity performed by the business requires Government approval for Foreign Investment, approval must be obtained prior to the funds being invested in the company.|
Advantages of Limited Company
Separate Legal Entity:
A company is a legal entity and a juristic person established under the Act. Therefore a company form of organization has wide legal capacity and can own property and also incur debts. The members (Shareholders/Directors) of a company have no liability to the creditors of a company for such debts.
A company has ‘perpetual succession’, that is continued or uninterrupted existence until it is legally dissolved. A company, being a separate legal person, is unaffected by the death or other departure of any member but continues to be in existence irrespective of the changes in membership.
Foreign Direct Investment:
100% Foreign Direct Investment (FDI) is allowed in many of the sectors through Company type business entity without any prior Government approval. FDI is not allowed in Proprietorship or Partnership, LLP requires prior Government approval.
Shares of a company limited by shares are transferable by a shareholder to any other person. Filing and signing a share transfer form and handing over the buyer of the shares along with share certificate can easily transfer shares.
A company being a juristic person, can acquire, own, enjoy and alienate, property in its own name. No shareholder can make any claim upon the property of the company so long as the company is a going concern.
Limited Liability means the status of being legally responsible only to a limited amount for debts of a company. Unlike proprietorships and partnerships, in a limited liability company the liability of the members in respect of the company’s debts is limited.
Capacity to sue and be sued:
To sue means to institute legal proceedings against or to bring a suit in a court of law. Just as one person can bring a legal action in his/her own name against another in that person’s name, a company being an independent legal entity can sue and also be sued in its own name.
In the company form of organization it is possible for a company to make a valid and effective contract with any of tis members. Thus, a person can at the same time be a shareholder, creditor, director and also an employee of the company.
- Indian Subsidiary ,
- Indian Subsidiary Incorporation Process ,
- Making a Company