Company registration, Company formation, Company incorporation India

Home/Company registration, Company formation, Company incorporation India

Our law firm in Chandigarh provides the company registration services to domestic and international corporate houses, institutions and individuals. We fulfil the expectations and requirements of our clients by guiding them and completing all the procedural formalities which are required in company formation within and outside India. Our law firm has long experience in handling the complex legalities which may occur during company registration process. Our lawyers resolve client issues quickly and effectively. Our law firm believes that Indian economy grows at a faster rate when foreign entities and individuals incorporate companies in India. It is our aim to ensure that foreign investors in Chandigarh get effective and innovative solutions in Chandigarh itself.

There are several type of business entities which can be established in India. Some of them are Branch Office, Joint Venture Company, Liaison Office / Representative Office, Limited Liability Partnership (LLP), Partnership, Private Limited Company, Project Office, Public Limited Company, Sole Proprietorship, Subsidiary Company and Unlimited Company. Our law firm in Chandigarh can assist foreign investors choose the right type for their particular business. The choice that foreign investor makes regarding the business entity which is to be established in Chandigarh has long-term effects like personal liability and taxation issues. There are several government approvals which are required to be taken before investing in India. Most of these foreign investment approvals relate to reserve bank of Chandigarh (RBI) and foreign investment promotion board (FIPB).

Procedure for Formation of a Company in Chandigarh, Punjab and Haryana (India)

Indian corporate laws are in tune with the latest global corporate norms, and the formation of a company is fairly streamlined. Although there is a federal form of government structure in India, yet when it comes to the incorporation of a company, the rules and regulations are common across all the states within the country. So, the procedure for formation of a company in Chandigarh, Punjab and Haryana is pretty much similar to that followed in the rest of the country.

Before venturing into the procedure for formation of a Company in Chandigarh, Punjab and Haryana, let’s take a closer look at the types of companies prevalent in India.

Limited Company

A Limited Company is a business entity, the liability of whose members or subscribers is limited either by shares they hold or by guarantee. Forming a Limited Company has its pros and cons.

Pros

  • The financial liability of the members, including directors and shareholders, is limited to the amount of money they have paid for shares.
  • Additional capital can be easily raised by selling more shares privately.
  • Clearly defined management structure for easy appointment, removal or retirement of directors; adding more members
  • Death, bankruptcy or withdrawal of capital by one member does not affect the trading ability of the company.

Cons

  • Need to register the company with the Registrar of Companies and fulfil all the mandatory requirements, including filing annual returns and audited statement of accounts.
  • No secrecy as all the documents files with the Registrar of Companies are available for public inspection.
  • The director is an employee of the company and must pay taxes.
  • A little expensive and technical to set up, which may require a professional’s assistance.
  • The financial institutions are increasingly showing distrust on the directors of the companies by asking personal guarantees before agreeing to enter into any transaction with them.

Types of Limited Companies

There are two types of Limited Companies:

1. Private Limited Company is a business entity that is limited by shares. The salient features of a Private Limited Company are:

  • Minimum 2 and maximum of 200 shareholders;
  • Even foreign nationals and companies can be the shareholders subject to the Foreign Direct Investment (FDI) Guidelines;
  • Foreign parent or holding companies can incorporate a subsidiary as a 100% owned Private Limited Company, subject to FDI Guidelines;
  • Not permitted to invite investment from the public for the subscription of shares or debentures;
  • Minimum 2 and maximum 15 Directors;
  • Foreign nationals can also be Directors, provided at least one Director on the Board of Directors must be an Indian resident;
  • Minimum authorized capital of INR 100,000 (US $ 1500 approximately), and there is no upper limit;
  • Anywhere between 2 to 6 weeks are required for registration – shorter time may be required if you are seeking professional help for registration;
  • An Indian address (commercial, industrial or even residential) required for registration purposes;
  • No need for personal attendance in registration formalities;
  • Documents required for registration include: identity and address proof for all the proposed Directors; PAN card for Indian nationals; a Digital Signature Certificate (DSC) for all the proposed Directors; Director Identification Number (DIN) for all the proposed Directors; No Objection Certificate (NOC) from the landlord for having a registered office in his/her/its premises; identity and address proof of the landlord; Memorandum and Articles of Association;
  • Registration is valid on an ongoing basis provided annual compliances are complied with – in case of non-compliance, the company with become dormant and its name will be struck off after a period of time.
  • Registered Business Name must be followed by the word ‘Limited’ or ‘Ltd.’

2. Public Limited Company is a company limited by shares and in which there is no restriction on the maximum number of shareholders, transfer of shares and acceptance of public deposits. Other salient features of a Public Limited Company are:

  • Must have at least 7 shareholders;
  • Must have at least 3 Directors;
  • Liability of each shareholder is limited to the extent of the unpaid amount of the face value of shares and the premium thereon in respect of the shares held by the shareholder;
  • In order to be eligible to commence business as a corporation, trading certificate along with certificate of incorporation required;
  • Before starting business transactions, it publish a prospectus or file a statement in lieu of a prospectus;
  • It must hold statutory meetings and obtain government approval for the appointment of the management.

Unlimited Company

An Unlimited Company is a company without any limit over the liability of the shareholders or members. The salient features of an Unlimited Company are:

  • Shareholders are fully liable to cover the debts of the company;
  • Can be incorporated with or without a share capital;
  • Directors are only liable towards the company and not the creditors;
  • Liquidators can only ask the members to contribute with their personal assets;
  • Statutory meeting is not required.

Limited Liability Partnership

A Limited Liability Partnership (LLP) is a business entity that has the features and flexibility of both a limited liability company and a partnership firm. The internal management can be organized on the basis of a mutual agreement among the partners, while it enjoys the benefits of a limited liability company. The salient features of an LLP are:

  • It is a body corporate and a legal entity separate from its partners;
  • It will have perpetual succession;
  • The liability of the partners would be limited to their agreed contribution in the LLP;
  • No partner would be liable on account of the independent or unauthorized actions of other partners.

Other Options Available for Foreign Investors/Companies

In addition to the abovementioned corporate entities, the foreign investors/companies can also explore the following options to conduct business in India:

(a) Liaison Office: A Liaison Office or a Representative Office can be established only with the approval of Government of India. Such office has a limited role collecting information, promoting imports/exports, and facilitating technical/financial collaborations. No direct or indirect commercial activity is permitted through a Liaison Office.
(b) Project Office: In case a foreign company is executing any project in the country, they are permitted to open a temporary Site/Project Office for carrying out activities exclusively related to such project.
(c) Branch Office: Foreign companies that are engaged in manufacturing and trading activities abroad can set up Branch Offices in India for the following purposes:

  • Export/Import of goods;
  • Rendering professional or consultancy services;
  • Carrying out research work, in which the parent company is engaged;
  • Promoting technical or financial collaborations between Indian companies and parent or overseas group company;
  • Representing the parent company in India and acting as buying/selling agents in India;
  • Rendering services in Information Technology and development of software in India;
  • Rendering technical support to the products supplied by the parent/ group companies;
  • Foreign airline/shipping company;
  • not allowed to carry out manufacturing activities on its own, but can subcontract these to an Indian manufacturer.

(d) Subsidiary Company: Foreign investors can open a subsidiary in India subject to some Governmental approvals, like RBI approvals, FIPB approvals, FDI Guidelines, etc.
(e) Joint Venture Companies: A joint venture offers the best option for the foreign investors to do business in India. Although the Governmental rules and guidelines need to be followed, yet the joint venture companies offer the best investment options for the foreign investors.

Which is the Best Option for Foreign Investors to do Business in India?

A Joint Venture company is probably the best bet for foreign investors to enter Indian markets. However, the nature of such a company should ideally be a limited liability corporation, which has lesser compliance requirements; no requirement of securing finances through a public issue; and ownership can be closely held by a limited number of persons.

Why Invest in India?

  • Tax benefits, if investing in Special Economic Zones (SEZs);
  • Industry-specific tax incentives and tax-breaks;
  • Existence of Double Taxation Avoidance Treaties with many countries;
  • Minimum authorized capital of only INR 100,000 (US $1500 app.) is required to form a private company in India;
  • Cheap quality labour available in abundance;
  • Availability of large English-speaking skilled human resource.

Applicable Laws for Incorporating a Company in India

The compliance with the following laws is mandatory for incorporating a company in India:
(i) Companies Act 2013;
(ii) Companies (Central Government’s) General Rules and Forms 1956;
(iii) Income Tax Act 1961;
(iv) Foreign Exchange Management Act 1999

Documents Required for Registration of a Company

The following documents should be submitted with the Registrar of Companies along with the application for registration:

1) Memorandum of Association;
2) Articles of Association;
3) A list of Proposed Directors (in case of a Public Limited Company, a prescribed form must be used to submit such list);
4) Information about proposed Directors, Managing Directors, Managers and Secretary (to be submitted in a prescribed form);
5) Information about the registered office (to be submitted in a prescribed form);
6) A declaration stating that all the requirements of the Companies Act 2013 and the applicable rules with respect to the registration and other matters have been complied with, to be signed by either of the following:
(a) Proposed Director of the company;
(b) Proposed Manager of the company;
(c) Proposed Secretary of the company;
(d) An advocate of the Supreme Court or a High Court;
(e) An attorney entitled to appear before the High Court;
(f) A Chartered Accountant (CA) practicing in India.
7) Power of attorney in favour of one of the promoters or any other person, authorizing him/her to make corrections in the documents, if required;
8) Applicable registration fee.

Steps Involved in Registration of a Company

Generally, the following steps are involved in the registration of a Company:
1) Obtaining DIN for proposed Directors of the new Company;
2) Obtaining DSC for proposed Directors of the new Company;
3) Filing the proposed name of company for approval to the ROC);
4) Printing of Memorandum and Articles of Association;
5) Online payment of stamp duties;
6) Online filing of all forms and documents;
7) Obtaining Certificate of Incorporation;
8) Obtaining Certificate to Commence Operation (if required);
9) Obtaining a Company Seal;
10) Obtaining a PAN;
11) Obtaining a Tax Account Number (TAN);
12) Registration under Shops and Establishment Act 1953 (if required);
13) Registration for VAT;
14) Registration for Professional Tax (if applicable);
15) Registration with Employees’ Provident Fund Organisation (EPFO);
16) Registration with Employees’ State Insurance Corporation (ESIC);
17) Filing for Governmental approval before RBI/FIPB.