India Company Incorporation Guide

Introduction

India has often been a top destination for international companies establishing a local operation. Companies setting up a team as part of their global expansion journey will need to work through the process to establish a local company. This India company incorporation guide serves as an introduction to common considerations and steps.

Company Types

Foreign companies setting up a legal entity in India often choose between a branch office, subsidiary or joint venture office. The most common option is a foreign owned private limited company. 

• Private Limited: A Private Limited Company in India is a privately held small business entity and considered as an independent legal entity on incorporation. It has a minimum of one and a maximum of fifty shareholders. Unlike Public Limited Companies, Private Limited Companies cannot publicly trade its shares. It can have a minimum of two and a maximum of fifteen directors.
• Branch Office: Foreign companies engaged in manufacturing and trading activities abroad can set up Branch Offices in India. Branch Offices are not allowed to carry out manufacturing activities on their own but can subcontract those to an Indian manufacturer. Before commencing operations, the branch office requires an approval from the Reserve Bank of India (RBI). Commercial activities of any nature are not allowed for a Branch Office.
• A Joint Venture (JV):  A new business entity created through a partnership between foreign and Indian investors, in which the partners jointly share the profits, losses, management responsibilities, and operation expenses. The advantages of joint ventures are that the foreign company can utilize the well-established contact network, distribution, marketing channels, and the available financial resources of the Indian partner. A JV also offers the investors to jointly manage the risks involved with the new business and limit their individual exposure by sharing the liabilities.

Incorporation Requirements

Paid up capital: The Companies Act, 2013 earlier mandated that all Private Limited Companies have a minimum paid–up capital of Rs. 1 lakh. This meant that Rs. 1 lakh worth of money had to be invested in the company by purchase of the company shares by the shareholders to start the business.

Foreign Percentage Ownership: Foreign companies can also set up wholly owned subsidiary in sectors where 100% foreign direct investment is permitted under the FDI policy. … Once a company has been duly registered and incorporated as an Indian company, it is subject to Indian laws and regulations as applicable to other domestic Indian companies.

Local Director: At least two directors; new company law regulations mandate the appointment of a local director. Consequently recommend three directors, one from India and two from parent company’s location.

Corporate Secretary: Must appoint a Company Secretary, where the paid up capital of the company exceeds the prescribed limit (INR 50 million – threshold increased to INR 100 million effective 1 April 2020). Till such threshold can appoint a third-party service provider to manage corporate compliance.

Office: Local office or a virtual office capable of accepting letters/post is mandatory before incorporation. The local office address acts as the Registered office of the entity in the Incorporation documents.

Complete Legal Paperwork

In order to register a company a legal firm, corporate secretary, or corporate service provider will assist with the preparation of company incorporation paperwork. This will include articles of incorporation, constitution, first AGM meeting, share certificate, member consent forms, consent to act as director and other legal documents to support the incorporation. The provider will then continue to manage any new company resolutions that are required over the course of the company lifecycle. 

Documents

The following documents are required for company registration in India:

• INC-9
• MOA
• AOA
• PAN Card/Passport
• Address proof
• Residential proof
• Registered office lease and bill
• Shareholder identity and address proof
• Parent company incorporation documents

Company Incorporation

Once the legal paperwork has been executed, the service provider will provide a copy of the official certificate of incorporation issued by NSDL e-Governance Infrastructure. In India, the Income Tax PAN service unit will send the PAN documentation which is unique to your business entity. The Ministry of Corporate Affairs maintains a website portal to manage the company account information.

File Mandatory Registrations

Once the company paperwork has been completed and the company registered a PAN and TAN number will be provided. With the PAN Number they can begin the process of registering with the required Indian agencies. In India these includes: 

• PAN Number: Permanent Account Number
• TAN Number: Tax Deduction Account Number
• ESIC: Employer State Insurance Corporation
• EPFO: Employer Provident Fund
• GST
• Industry specific license

Setup Bank Account

The final step is to establish a bank account with a local bank. India has a developing industry but still suffers from bureaucracy and legacy solutions. The process of establishing a bank account can be an unexpectedly long process that many companies do not sufficiently plan for. This can include extensive application documents, notarized director documents, KYC documentation and in person signatures. Common local banks in India include HDFC, State Bank of India, ICICI, IndusInd and Axis.

This article does not constitute legal advice.