COMPANY FORMATION IN INDIA
Overview
With the rapidly growing economy of India, it has emerged as one of the hottest destinations for entrepreneurs and multinational companies. If you want to set up your company in India, the incorporation process is governed by the Companies Act, 2013, which has well defined and secured regulations. At SellersBuzz, we assist you through those regulations and make incorporation quick and smooth.
Overview of the Companies Act, 2013.
The enterprises Act of 2013 offers a legal foundation for Indian enterprises, assuring compliance, transparency, and effective governance. Whether you’re a foreign investor or a domestic entrepreneur, adherence to this Act is essential for incorporating and operating a business in the country.
Shareholders and Directors
Foreign nationals can establish companies in India and own up to 100% of the company’s equity, depending on the sector and regulatory approvals. Some industries need approval from the Reserve Bank of India (RBI) or the Foreign Investment Promotion Board (FIPB), but others let foreign investment happen without limits.
While foreigners are allowed to be directors, Indian regulations further provide that at least one must be a local director. In this way, the company is considered connected to India when it’s registered and subject to local regulations.
Memorandum & Articles of Association
The Memorandum of Association is the most important document that defines the objectives of a company, including its main and subsidiary undertakings. It spells out what the company can do or not do within the operations of the business.
AoA would define the manner and procedures in regard to the management of internal affairs of the company. It includes, inter alia, information about the operation of the company, the role of the directors, share capital structure, and many more. These documents have to be stamped and registered at the time of incorporation and stamp duty is payable depending upon the authorized share capital of the company.
Share Capital
In the case of incorporating a company in India, share capital should be a certain amount in Indian Rupees. Indian regulations do not permit “no par value” or “bearer” shares. Share capital defines the ownership structure of the company and can be adjusted as the business grows.
Accounts & Auditors
Each company in India is required to appoint an independent auditor, registered with the Institute of Chartered Accountants of India (ICAI), who is responsible for auditing the company’s financial records every year. This is a legal requirement that ensures openness for stakeholders like banks, investors, and regulatory bodies. A well audited financial statement increases your company’s reputation in the eyes of regulators and investors.
Public filings
Certain company information, such as directors’ names and personal information, share capital, registered office address, and charge register, must be recorded with the Companies Registry. These can be obtained by anyone as these are public records. Every change in the company structure has to be registered and maintained in public records.
Annual General Meeting (AGM)
There should be an Annual General Meeting in every company in India once a year, within six months after the end of the financial year. New companies can have their first AGM within nine months after their first financial year ends. AGMs are meant to show audited financial statements and see how the company fared out and plan for the future with the shareholders.
Why Choose SellersBuzz for Company Formation in India?
SellersBuzz makes business setup easy in India. From documentation to compliances, we will provide allround assistance in establishing a robust legal foundation for your company. Be it drafting paperwork or fulfilling any statutory requirement, we are the best at every stage of the process so that you can remain tranquil and put your efforts into making your venture successful.
- Expert Assistance: Our team of experts will take you through the regulations involved in your line of business and assist you through licensing or approval.
- Custom solution: Every business is unique in its own special way; thus, our services will meet your business needs, whether your business is a startup, a small or medium sized company, or a large corporation.
- Easy Documentation: We assist in drafting, stamping, and registration of M.o.A. and A.o.A., and take care to conform to the laws of India.
- Ongoing Compliance: We don’t stop our services where you would actually launch your venture. We would also be helping you comply with the annual rules, which are filing returns, holding AGMs, and audits.
Get started with your business in India.
Forming a company in India has countless prospects, but it is critical to get things right from the beginning. At SellersBuzz, we ensure that your business is correctly constituted and meets all legal criteria, giving you the confidence to expand in one of the world’s most active markets.
Contact us now to find out how we can assist you with your company formation in India.
FAQs on Indian Companies
What is a Private Limited Company?
It is a form of business organization wherein the liability of each shareholder is limited to the amount of unpaid shares by each shareholder. It can have a maximum of 200 shareholders and can’t invite the public to buy shares or deposit money. Transfers of shares are also restricted. At least two shareholders are required in a Private Limited Company.
What do you mean by a Public Limited Company?
A Public Limited Company may have unlimited shareholders. It does not impose restrictions on the transfer of shares. A Public Limited Company may also invite deposits from the public. Its shareholders would only be liable for the amount that remains unpaid on their respective shares. In the case of a Public Limited Company, there should at least be seven shareholders.
Which one will be the better option: Private Limited or Public Limited Company?
That depends on what you need. If you don’t plan to raise funds publicly and want to keep ownership limited to a few individuals, a Private Limited Company is usually a better fit since it has fewer compliance requirements.
What is the minimum capital for a Private Limited Company?
The minimum capital used to be ₹1,00,000 at incorporation, though this has been omitted in the Companies Act of 2013. You can increase this anytime by paying extra stamp duty and fees.
What is the difference between authorized capital and paid-up capital?
The authorized capital sets a limit, as per the Registrar of Companies, on the maximum number of shares a company is permitted to issue.
Paid up capital is the amount that is paid by the proprietor against the shares.
How do I approve a company name?
To get approval, you need to file Form INC1 online, signed by one of the proposed directors. You’ll need to:
- Submit several alternative names for the company.
- Provide the names and addresses of promoters (at least two for Private Limited and seven for Public Limited).
- Mention the authorized capital and the main objectives of the company.
- Include names of other companies you’re affiliated with.
What are the Memorandum of Association (MOA) and Articles of Association (AOA)?
Once the company name is approved, you draw up the MOA and AOA:
MOA states the main objectives of the company.
AOA sets rules for running the company, such as the authorized capital and the names of the first directors. The documents have to be stamped and signed by the promoters themselves.
What are the documents required to be filed for company incorporation in India?
You have to file:
- MOA and AOA signed by all promoters.
- Form INC7, INC8 – declaration, INC22 – notice of situation of registered office and DIR12 – consent of directors.
- Power of Attorney to be executed in favour of one individual who can deal with the incorporation process.
- Pay the fees applicable.
How is Certificate of Incorporation Issued?
After all the documents are submitted and verified by ROC, corrections will be made, if any, and the certificate of incorporation is issued.
What time can the company start business?
Private Limited Companies can start business instantly after obtaining the certificate of incorporation.
Public Limited Companies can start business only after the statutory meeting is held within six months and after filing the statutory report.
How do foreign investors abide by the legal formalities in India?
Foreign investors can authorize someone in India to act on their behalf using a Power of Attorney. Key documents (MOA, AOA, etc.) should be notarized by a public notary and attested by the Indian Embassy or Consulate in the foreign country.
What additional approvals are required for foreign investors in India?
Foreign investors must notify the Reserve Bank of India (RBI) of foreign equity or get approval from the Foreign Investment Promotion Board (FIPB), depending on the sector they wish to invest in.
How do foreign companies invest in India?
There are two primary routes:
- Automatic Approval: Most sectors are not under the approval route, and therefore the company has only to inform the RBI within 30 days of receipt of foreign investment.
- FIPB Approval: Proposals not covered under automatic approval have to be cleared by the Foreign Investment Promotion Board.