New Company Registration in India
The process of Company Formation in India proves to be a chore if you lack the best consultants on your team. At AVH Consultants, we invest the necessary time and effort to understand what your needs are. Our specialized team of corporate economic advisors, chartered accountants, tax consultants is fully equipped to aid you not just with the company registration in Delhi and Incorporation of company in India but also with a wide array of financial and accounting services. This will ensure both a smooth start and hassle-free functioning for your company. Your business will benefit from our experience in online accounting, corporate finance issues and matters related to foreign investments along with much more.
Persons desirous of forming a company must adhere to the step by step procedure as discussed below:-
- Apply for Directors Identification Number and Digital Signatures.
- Selection of type of the company.
- Selection of name for the proposed company.
- Drafting of Memorandum and Articles of Association.
- Stamping, digitally signing and e-filing of various documents with the Registrar.
- Payment of Fees.
- Obtaining Certificate of Incorporation.
- Preparation and filing of Prospectus/Statement in lieu of Prospectus and e-Form 19/20 (in case of public companies) for obtaining the certificate of commencement of business.
- Obtaining Certificate of Commencement of business (in case of public limited companies).
What are the Type of Business Entities in India?
The following types of Business entitles are available in India:
- Private Limited Company
- Public Limited Company
- Unlimited Company
- Sole Proprietorship
In addition to the above legal entities, the following types of entities are available for foreign investors/foreign companies doing business in India:
- Liaison Office
- Representative Office
- Project Office
- Branch Office
- Wholly owned Subsidiary Company
- Joint Venture Company
Both the Indian promoters and the foreign promoters can form the following business entities: Private Limited Company, Public Limited Company, Limited Liability Partnership, Unlimited Company, Partnership and Sole Proprietorship. The foreign companies also have the options of forming the following type of business entities: Liaison Office/Representative Office, Project Office, Branch Office, and Joint Venture Company. It must be noted that a Joint Venture Company is not a separate type of legal entity; it could be either a Private Limited Company, a Public Limited Company, or an Unlimited Company. Similarly a wholly owned Subsidiary of a foreign company in India could be either a Private Limited Company, a Public Limited Company, an Unlimited Company, or a Branch Office.
For a foreign Investor in India it is very important to choose a right kind of business or corporate entity which best suits its purposes and takes care of liability issues and tax planning issues. Foreign Companies planning to do business in India should pay special attention to Entry Strategies in India for Foreign Investors and corporate structuring to save taxes to the best extent allowed by laws and international tax treaties.
Typical Procedure to Establish Business in India
In India establishing a business takes some time. Besides incorporation there are many other formalities in establishing a business in India. The following chart contains typical formalities including incorporating a private limited company in India:
|Nature of Procedure in India||Procedure Number||Duration (days)|
STEPS FOR COMPANY FORMATION IN INDIA
|Obtain Director Identification Number DIN for proposed Directors of the new Company||1||1*|
|Obtaiinf Digtal Signature Certificate DSC for proposed Directors of the Company||2||2*|
|Filing the proposed name of company for approval to the Registrar of Companies (ROC)||3||2|
|Get the Memorandum of Asociation and Articles of Association printed||4||1|
|Pay stamp duties online||5||1|
|File all incorporation forms and documents online, including the Memorandum of Association and the Articles of Association.||6||2|
|Obtain the certificate of incorporation||7||2|
|Request and obtain Certificate to Commence Operation, if required||8||5|
OTHER STEPS FOR SETTING UP BUSINESS IN INDIA
|Obtain a company seal||9||3|
|Obtain a Permanent Account Number (PAN) from an authorized franchise or agent appointed by National Securities Depository Services Limited (NSDL) or Unit Trust of India (UTI)||10||7*|
|Obtain a Tax Account Number (TAN) for income taxes deducted at source from the Assessing Office in the Income Tax Department||11||7*|
|Register under Shops and Establishment Act||12||4*|
|Register for value added tax (VAT) before the Sales Tax Officer of the ward in which the company is located||13||12*|
|Register for Profession tax||14||2*|
|Register with Employees’ Provident Fund Organization||15||12*|
|Register with ESIC (medical insurance)||16||9*|
|Filing for Government Approval before RBI/FIPB for Foreigners and NRI’s||17||15*|
Note: Procedures sometimes take place simultaneously. Instances of this are marked with an asterisk (*). The above procedures and timings are indicative for a typical big city in India where all the required documents are ready with the promoters. The actual time and procedure may vary with city and state and the nature of business.
All the procedures must be followed.
Procedure for Formation of Company in India - FAQ
A Private Limited Company is a Company limited by shares in which there can be maximum 200 shareholders, no invitation can be made to the public for subscription of shares or debentures, cannot make or accept deposits from Public and there are restriction on the transfer of shares. The liability of each shareholder is limited to the extent of the unpaid amount of the shares face value and the premium thereon in respect of the shares held by him. However, the liability of a Director / Manager of such a Company can at times be unlimited. The minimum number of shareholders is 2. For Details see: Private Limited Company in India
A Public Limited Company is a Company limited by shares in which there is no restriction on the maximum number of shareholders, transfer of shares and acceptance of public deposits. The liability of each shareholder is limited to the extent of the unpaid amount of the shares face value and the premium thereon in respect of the shares held by him. However, the liability of a Director / Manager of such a Company can at times be unlimited. The minimum number of shareholders is 7.
A limited company has following advantages:
- Members’ (the directors and shareholders) financial liability is limited to the amount of money they have paid for shares.
- The management structure is clearly defined, which makes it easy to appoint, retire or remove directors.
- If extra capital is needed, it can be raised by selling more shares privately.
- It is simple to admit more members.
- The death, bankruptcy or withdrawal of capital by one member does not affect the company’s ability to trade.
- The disposal of the whole or part of the business is easily arranged.
- High status.
A limited company has following disadvantages:
- Requirement to register the company with the registrar of companies and provide annual returns and audited statement of accounts. All details of the company are available for public inspection so there can be no secrecy. There are penalties for failing to make returns.
- Can be more expensive to set up.
- May need professional help to form.
- As a director, you are treated as an employee and must pay tax.
- The advantages of limited liability status are increasingly being undermined by banks, finance house, landlords and suppliers who require personal guarantees from the directors before they will do business.
The minimum paid up capital at the time of incorporation of a private limited company has to be Indian Rupees 1,00,000 (about United States Dollars 2,000). There is no upper limit on having the authorized capital and the paid up capital. It can be increased any time, by payment of additional stamp duty and registration fee.
The authorized capital is the capital limit authorized by the Registrar of Companies up to which the shares can be issued to the members / public, as the case may be. The paid up share capital is the paid portion of the capital subscribed by the shareholders.
The following documents are required to be executed (signed) before they are submitted to the ROC:
1. MOA and AOA – These are required to be executed by the promoters in their own hand in the presence of a witness in quadruplicate stating their full name, father’s name, residential address, occupation, number of shares subscribed for, etc.
2. Form No. 1 – This is a declaration to be executed on a non-judicial stamp paper of INR 20 by one of the directors of the proposed company or other specified persons such as Attorneys or Advocates, etc. stating that all the requirements of the incorporation have been complied with.
3. Form No. 18 – This is a form to be filed by one of the directors of the company informing the ROC the registered office of the proposed company.
4. Form No. 29 – This is a consent obtained from all the proposed directors of the proposed company to act as directors of the proposed company. (Not required in case of private company).
5.Form No. 32 – This is a form stating the fact of appointment of the proposed directors on the board of directors from the date of incorporation of the proposed company and is signed by one of the proposed directors.
6.Name approval letter in original.
7.Power of Attorney signed by all the subscribers of MOA authorizing one of the subscribers or any other person to act on their behalf for the purpose of incorporation and accepting the certificate of incorporation.
8.Power of Attorney in case of a subscriber who has appointed another person to sign the MOA on his behalf.
9. Filing fees as may be applicable.
After the documents in FAQ 5 are filed, the ROC calls the attorney on a specific date for scrutiny and making the corrections in the MOA and AOA filed. On complying with the same, the certificate of incorporation is granted to the attorney.
On receipt of the certificate of incorporation, the public company has to complete certain other legal formalities such as a statutory meeting (within 6 months), statutory report, etc. On completion of the said formalities and on filing of the statutory report with the ROC the ROC issues the certification of commencement of business to the company. Thereafter, the Public Company can start the business operations. The Private Company can start its business immediately on incorporation.
You can give Power of Attorney to a person to sign the documents on your behalf. After the Company is incorporated, you can appoint Alternate Directors, to function on your behalf while you are not in India. But at least once, you should be in India within one month of the incorporation of the Company. There can be one meeting of Board of Directors during your stay in India and all other formalities including those of appointment of Alternate Directors can be complied with.