A Step by Step Guide to India Company Registration
The registration of foreign companies in India is a simple, quick and easy process. The guidelines for registration of foreign companies in India is regulated by the Companies (Registration of Foreign Companies) Rules, 2014. It generally takes about three to ten working days to register a foreign company in India. This article provides Guide To India Company Registration.
If you’re interested in conducting business in India, you first need to establish your company’s legal presence in India by registering your business as an Indian subsidiary or as a foreign company. You would also need to consider if it is used for commercial purposes or otherwise. Under Section 2(42) of the Companies Act 2013, a foreign company is defined as a company or a body corporate incorporated outside India which has a place of business either by itself or through an agent in this country.
There are several types of business forms that local and foreign investors can register to start a company in India. The majority of Indian companies are registered as private limited companies which are the most common method of starting a business.
Registration Steps of an Indian Company
The Registrar of Companies (ROC) is a department working under the supervision of the Ministry of Corporate Affairs and all companies operating in India must register with them. To open a company in India, there are specific company incorporation steps which investors must follow. Once you have chosen a business form suited to your investment needs, you should start selecting a trading name for the company, it has to be unique. Your trading name should not resemble any other company already in operation and respect the requirements imposed under the Prevention of Improper Use Act 1950. Next, you should prepare the application for registration of business name; this also includes a minimum of four and a maximum of six proposed trading names. Once all the company’s statutory documents are prepared, you need to file them at the ROC. You can proceed to register for social security, once the company concluded the first employment contract.
There a few things that are necessary for you to obtain: –
- Director Identification Number (DIN)
- Class II Digital Signature Certificate (DSG), which can be obtained by a licensed vendor of the Ministry of Corporate Affairs (MCA). This represents the director’s signature necessary for various company documents (filed and registered with the ROC).
- Company’s Statutory Documents such as articles of association and memorandum of association which must be signed by a company secretary.
- There are certain fees, including stamp duty.
Once all the steps above have been successfully completed, the investors will receive the certificate of incorporation.
Types of Entities in India
Private Limited Company (PLC)
A PLC is one of the most suitable methods to start a business in India. This business form has many advantages, one of which is its great flexibility. Keep in mind that investors will be able to modify the structure of the company’s ownership. This can be done through the transfer of shares which requires the consent of other shareholders. PLCs in India are governed by the regulations of the Companies Act 2013 and the Company Incorporation Rules 2014. The company must be founded by at least two shareholders and needs to be represented by a minimum of two and a maximum of fifteen directors. At least one director must be an Indian citizen and the founders can be represented by natural persons or legal entities domiciled in India or abroad. Investors must also set up an official business address.
A sole trader is the simplest way to start a company in India, it is also known as an individual entrepreneur. This is for those that can carry the business operations in his/her own name and will be held liable for everything related to the company including debts. Liability is not limited and also covers the owner’s personal assets. The advantage of a sole trader is its simple registration procedure and basic compliance with the local authorities. The basic aspects that need to be decided are the selection of a suitable company name and a location to be used as the company’s official address. There are multiple ways for a sole trader to be registered in India depending on the nature of your business.
A key thing to take note of is that the Indian legislation provides the legal framework for the conversion of a sole trader to a limited liability company (LLC). This conversion is recommended when the company is starting to expand as a growing business may incur more debt. There are a few steps to follow. First, the investor will need to obtain a Digital Signature Certificate and a Director Identification Number, as a limited liability company needs a director. Next, you will need to apply with the MCA for the registration of a new company. Then, you would need to update the information of your existing bank account with your new company information. You will also need to submit all required documents, such as identity documents, proof of registered office, etc.
This is another unique business form available in India. This is a hybrid legal entity, which shares the characteristics of a sole trader and a limited liability company. It is stated in the Companies Act 2013 that in a one-person company, the company and the founder are separate legal entities. Though this is similar to an LLC, it is only recommended for registration in the case of small businesses and cannot be converted into a company as stated under Section 8 of the Companies Act 2013.
Public Liability Company
The registration of a public limited company is allowed by the Indian legislation. This type of entity has similar characteristics with an LLC. The only difference is that the shares offered by a public liability company can be offered to the general public whereas an LLC cannot. This type of business entity can also accept foreign direct investments and it must be set up by a minimum of seven members. A good thing to take note of is that it is easy to transfer the shares of the company and the members are only liable to the extent of their capital participation in the company, unless the debt stems from their own wrongdoing.