Business Incorp

8/3/2019 Business Incorp

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What are the type of Business Entities Available in India?

The following types of Business entitles are available in

India:

Private Limited Company Public Limited Company Unlimited Company Partnership 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

What is a Private Limited Company?

A Private Limited Company is a Company limited by shares in which there can be maximum

50 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.

What is a Public Limited Company?

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 minimumnumber of shareholders is 7.

Limited Liability Partnership, LLP in

India

A law to allow "Limited Liability

Partnership" (LLP) in India has

been enacted by the Parliament of

India recently.

For more details visitLLP in India
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What are the advantages of a Limited Company?

A limited company has following advantages:

Members' (the directors and shareholders) financial liability is limited to the amountof money they have paid for shares.

The management structure is clearly defined, which makes it easy to appoint, retireor 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 thecompany's ability to trade.

The disposal of the whole or part of the business is easily arranged.High status.

What are the disadvantages of a Limited Company?

A limited company has following disadvantages:

Requirement to register the company with the registrar of companies and provideannual 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.

What entity is best suited?

The choice of entity depends on circumstance of each case. Private Limited Company has

lesser number of compliances requirements. Therefore, generally where there is no

requirement of raising of finances through a public issue and the ownership is intended to

be closely held by limited number of persons, Private Limited Company is the best choice.
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What is the minimum paid-up capital of a Private Limited Company?

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 2,250). There is no upper limit onhaving the authorized capital and the paid up capital. It can be increased any time, by

payment of additional stamp duty and registration fee.

What is the difference between authorized capital and paid up capital?

The authorized capital is the capital limit authorized by the Registrar of Companies up towhich 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.

What is the procedure in obtaining a name approval for the proposed Company?

An application in Form No. 1A needs to be filed with the Registrar of Companies (ROC) of

the state in which the Registered Office of the proposed Company is to be situated. The

application is required to be signed by one of the promoters. The details to be state in the

said application are as follows:1. Four alternative names for the proposed company. (The

name can be coined names from the objects of the proposed company or the names of the

directors, etc. but should definitely be indicative of the main object of the company.

Justification for the name needs to be specified along with the application)2. Names and

addresses of the promoters (Minimum 7 for a public company while 2 for private

company).3. Authorized Capital of the proposed company.4. Main objects of the proposed

company.5. Names of other group companies. On submitting the application, the ROC

scrutinizes the same and sends the approval / objections in about 10 days to the applicant.

On fulfilling of the objections a formal letter of name approval is issued.

What is the Memorandum of Association (MOA) and the Articles of Association (AOA) of a

company and what is the procedure in their regard?

On receipt of the name approval letter from the ROC the MOA and the AOA are required tobe drafted. The MOA states the main, ancillary / subsidiary and other objects of the
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proposed company. The AOA contains the rules and procedures for the routine conduct of

the proposed company. It also states the authorized share capital of the proposed company

and the names of its first / permanent directors. After the MOA and AOA are required to be

stamped.

A stamp duty is required to be paid on the MOA and on the AOA. The stamp duty dependson the authorized share capital.

What are the documents required to be executed for incorporation?

The following documents are required to be executed (signed) before they are submitted tothe ROC:

1. MOA and AOA - These are required to be executed by the promoters in their ownhand 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 ofINR 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 companyinforming the ROC the registered office of the proposed company.

4. Form No. 29 - This is a consent obtained from all the proposed directors of theproposed 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 proposeddirectors 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 signthe MOA on his behalf.9. Filing fees as may be applicable.

How is the certificate of incorporation issued?
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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.

When can the newly formed company start its business operations?

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.

How do we comply with the legal formalities when we are not stationed in India?

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 theincorporation 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.

What other approvals are required for

foreign investor in India?

Generally, prior approval is required from the

RBI before investing in India. Some categories

of businesses are covered under automatic

approval process. However, one has to apply

for the same. There are some post-

incorporation filing formalities after the

remittance of capital from overseas to India

and on issue of shares.

IT is mandatory for foreign investors to

obtain governmental approval for

incorporating in India or forming a joint

venture in India. In some sectors certain

restrictions apply. Proper legal advice must

be obtained before incorporating in India to

ascertain the eligibility and applicable

restrictions.

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What are other formalities before or after incorporation?

Obtaining Permanent Account Number (PAN) from Income Tax Department Obeying Shop and Establishments Act Registration for Import Export code from Director General of Foreign Trade Software Technologies Parks of India registration (STPI) if required RBI approval for foreign companies investing in India andFIPB approval, if required. The directors of an Indian company, both Indian and foreigner directors, are

required to obtainDirector Identification Number - DINandDigital Signature

Certificate - DSC

For More Information on other formalities in India click here

What are the requirements for issuing Sweat Equity in an India Company?

Can an Indian company can issue sweat equity? There are separate rules for sweat equity in

a private company in India and a public company in India.

Sweat Equity in a private company in India

The provisions for issue of Sweat Equity are covered under Section 79A of the Companies

Act. It provides that a company may issue sweat equity shares of a class of shares already

issued if the following conditions are fulfilled:

the issue of sweat equity shares in authorized by a special resolution passed by thecompany in the general meeting.

The resolution specifies the number of shares, current market price, consideration, ifany, and the class or classes of directors or employees to whom such equity shares

are to be issued.

not less than one year has, at the issue elapsed since the date on which the companywas entitled to commence business.

The sweat equity shares of a company whose equity shares are listed on arecognized stock exchange are issued in accordance with the regulations made by

the Securities and Exchange Board of India in this behalf.

In view of the above provisions, you can't issue Sweat Equity at the time ofincorporation of your Company as one year has not elapsed since the date on which

the company was entitled to commence business.

In addition to the above provision, other regulatory provisions are applicable for issuing

sweat equity shares for a private company in India. Please feel free toContact usfor further

information about sweat equity in an Indian company.
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Sweat Equity in a public company in India

The aforesaid provisions regarding issuing of Sweat Equity under Section 79A of the

Companies Act are applicable to a public company in India.

The sweat equity shares of a company whose equity shares are listed on a recognized stockexchange are issued in accordance with the Securities and Exchange Board of India (Issue of

Sweat Equity) Regulations, 2002. Please feel free toContact usfor further information

about sweat equity in an Indian company.

What are the requirements for a Foreign company forming a subsidiary in India?

A foreign company planning to form a subsidiary in India, in addition to meeting all

requirements of forming a company, is required to seek governmental approval before

investing in India. Some approvals are automatic, -RBI Approvals - though application is

required for those approvals. Special Permission -FIPB Approvals- could be obtained to

invest over and above the regular percentage allowed. See ourFDI in India Sector wise

Guidefor more information on various conditions of investing in India. Also seeWithholding

Tax Rates For Foreign Companies Doing Business In India Under The Tax Treaties& theJoint

Ventures in India. Also seeEntry Strategies in India for Foreign Investors

What are the requirements for a Foreign company opening a branch in India?

Foreign investors are required to seek governmental approval before investing in India.

Some approvals are automatic, -RBI Approvals - though application is required for those

approvals. Special Permission -FIPB Approvals- could be obtained to invest over and above

the regular percentage allowed. See ourFDI in India Sector wise Guidefor more information

on various conditions of investing in India. Also seeWithholding Tax Rates For Foreign

Companies Doing Business In India Under The Tax Treaties. Also seeEntry Strategies in India

for Foreign Investors

What are the requirements for a Foreign company forming a joint venture in India?

Foreign investors planning to form a joint venture in India are required to seek

governmental approval before investing in India. Some approvals are automatic, -RBIApprovals - though application is required for those approvals. Special Permission -FIPB
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Approvals- could be obtained to invest over and above the regular percentage allowed. See

Joint Ventures in India. Also seeFDI in India Sector wise Guidefor more information on

various conditions of investing in India. Also seeWithholding Tax Rates For Foreign

Companies Doing Business In India Under The Tax Treaties. Also seeEntry Strategies in India

for Foreign Investors

What are the requirements for an American company planning to establish business in

India?

An American or USA company planning to open business in India - subsidiary, branch, or

joint venture - should meet all the requirements mentioned here. It is also required to seek

governmental approval before investing in India. Some approvals are automatic, -RBIApprovals - though application is required for those approvals. Special Permission -FIPB

Approvals- could be obtained to invest over and above the regular percentage allowed. See

ourFDI in India Sector wise Guidefor more information on various conditions of investing in

India. Also seeWithholding Tax Rates For Foreign Companies Doing Business In India Under

The Tax Treaties& theJoint Ventures in India. Also seeEntry Strategies in India for Foreign

Investors

What are the compliance requirements for Companies in India?

All the companies who are related cyber business are required to comply with the

requirements of the law.

In addition, all the Multinational Companies

Doing Business in India and having cyber

involvement are required to comply with the

corporate and other laws of India including

cyber law compliance.

The cyber law mandates all companies to have

an information technology security policy. This

documents the architecture of the network,

the roles and responsibility of employees,

security parameters and authorization

required for data access, among other things.

Other compliances that are required include relate to retention and authentication of

electronic records and security of data.

IT is mandatory to set up corporate

compliance programs including cyber lawcompliance program. If you company does

not have the compliance program, then

contact us to help you set up one for you.

_____****_____
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Moreover, Indian Information Technology Act of 2000provides for further personal

liabilities. For example, Section 85(1) of the IT Act provides that where a person committing

a contravention of any of the provisions of this Act or of any rule, direction or order made

there under is a Company, every person who, at the time the contravention was committed,

was in charge of, and was responsible to, the company for the conduct of business of the

company as well as the company, shall be guilty of the contravention and shall be liable tobe proceeded against and punished accordingly.

All the Indian companies and all foreign companies doing business in India, either directly or

indirectly, should comply with this law. For Corporate Compliance Programs in India click

here

For More Information on Incorporating company in India click here

What are the Requirements for a Private Limited Company?

A Registered Business Name: This must be followed by the word Limited' or Ltd'. The

Companies Registration Office exercises some control over the choice of name, it cannot be

identical (or very similar to) the name of an existing company. It won't be considered if it is

offensive or illegal and the use of certain words in a company (for example, `Institute',

`National') can only be used in certain circumstances. The company name must be displayed

in a conspicuous place at every office, or other premises where the company carries outbusiness.

A Registered Office: This need not necessarily be the same address as the business is

conducted from. Quite frequently the address used for the registered office is that of the

firm's solicitor or accountant. This is the address, through, where all official correspondence

will go.

Shareholders: There must be a minimum of two shareholders (also described as `members'

or `subscribers'). A private company can have up to fifty shareholders.

Share Capital: The company must be formed with a stated, nominal share capital divided

into shares of fixed amounts. Small companies are frequently formed with a nominal share

capital of Rs.100.

Memorandum of Association: The memorandum is the company's charter. It states the

company's name; the situation of its registered office; its share capital; the fact that liability

is limited and, most importantly, the object for which the company has been formed. In

theory, the company can only operate in the areas mentioned in the objects clause but in
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practice the clause is drawn to cover as wide an area as possible, and anyway a 75 per cent

majority of the members of the company can change the objects whenever they like.

Nevertheless, it is worth bearing in mind that directors of the company will incur personal

liability if the company engages in a type of business which is not authorised by the objects

clause. The memorandum must be signed by at least three shareholders.

Articles of Association: The document contains the internal regulations of the company, the

relationship of the company to its shareholders and the relationship between the individual

shareholders. Many companies don't bother to draw up their own articles but adopt

(sometimes with some modifications) articles set out in the Companies Act.

Certificate of Incorporation: This is the document, which the registrar of companies issues to

you once he has approved your choice of name and your memorandum. When you receive

this document your company legally exists and is ready to trade.

Auditors: Every company must appoint a qualified auditor. The auditor's duty is to report to

the treasurer whether or not the books of the company have been properly kept, and that

the balance sheet and profit and loss account presents (or doesn't present) a true and fair

view of the company's affairs and complies with the Companies Act. Auditors are appointed

or re-appointed at general meetings at which annual accounts are presented, and they hold

office from the conclusion of the meeting until the next general meeting.

Accounts: The Companies Act lays down strict rules on accounting. Every company must

maintain a set of records, which show the financial position at any one time with reasonable

accuracy. The accounts comprise a profit and loss account and balance sheet with the

auditors' and directors' reports appended. A new company's accounting reference period

begins on its incorporation and runs until the following 31st March - unless the company

notifies the registrar of companies otherwise. Within ten months of the end of an

accounting reference period, an audited set of accounts must be laid before the

shareholders at a general meeting and a set delivered to the registrar of companies.

Registers, etc.: In addition to the accounts books, companies are required to have: a register

of members and share ledger; a register of directors and secretaries; a register of share

transfers; a register of charges; a register of debenture holders; a book can be purchased to

hold all of the above. This will be provided automatically if you buy a running concern.

Company Seal: All companies must have an engraved seal. This must be impressed on share

certificates and must be used whenever the company has to execute a deed. Again, this is

included in the ready-made company package.


11/24

For More Information on Incorporating company in India click here

Types of Business Entities in India

Types of Companies in India - Types of Corporate Entities in India - Types of Legal Entities

in India - Options for Foreign Investors Doing Businessin India

In India, the following types of business entities are

available:

Private Limited Company Public Limited Company Unlimited Company Limited Liability Partnership (LLP) Partnership Sole Proprietorship Liaison Office/Representative Office Project Office Branch Office Joint Venture Company Subsidiary Company

Both the Indian promoters and the foreign promoters

can form the following business entities:Private

Limited Company,Public Limited Company,LimitedLiability 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, andJoint 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

ownedSubsidiary of a foreign company in Indiacouldbe either aPrivate Limited Company, aPublic 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 toEntry Strategies in India for Foreign Investorsand corporate structuring to

save taxes to the best extent allowed by laws and international tax treaties.

It is also mandatory for foreign investors or foreign shareholders, both individuals and

corporate shareholders, to seekGovernment Approvals for Investing in India In some

Foreign Investors Establishing

Business in India

Foreign investors planning to

incorporate in India are required to

seek governmental approval before

investing in India. Some approvals

are automatic, -RBI Approvals -

though application is required forthose approvals. Special Permission

-FIPB Approvals- could be

obtained to invest over and above

the regular percentage allowed.

See ourFDI in India Sector wise

Guidefor more information on

various conditions of investing in

India. Also seeWithholding Tax

Rates For Foreign Companies Doing

Business In India Under The TaxTreaties& theJoint Ventures in

India

_____****_____

Contact us for incorporating in

India & setting up business in India
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special casesForeign Investment Promotion Board, FIPB Approval for Foreign Investment in

Indiais required. In other casesReserve Bank of India, RBI Approvals for Foreign Investment

in Indiais required.The sectors where RBI Approval for foreign investors is available under

automatic route can be found atFDI in India Sector wise Guide.

There are varioussteps required to establish a business in India, before and afterincorporation, as mentioned hereinafter. See also theProcedure for Formation of Company

in India.

A Company in India can have foreign directors provided some conditions are fulfilled. The

directors of an Indian company, both Indian and foreigner directors, are required to obtain

Director Identification Number - DINandDigital Signature Certificate - DSC

There are some restrictions regarding issuingsweat equity for a company incorporated in

India.

Also seeAnnual Corporate Filings in Indiafor corporate maintenance requirements in India.

Private Limited Company

A private company is a company which has the

following characteristics:

shareholders right to transfer shares isrestricted;

the number of shareholders is limited tofifty; and

an invitation to the public to subscribe toany shares or debentures is prohibited.

A Private Limited Company is the most popular

form of business entity used for Foreign Investors in India, including USA investors in India.It takes some time to incorporate in India as there are varioussteps required in forming a

private limited company in India. There are varioussteps required to establish a business in

India, before and after incorporation, as mentioned hereinafter.

Public Limited Company

IT is mandatory for foreign investors to

obtain governmental approval for

incorporating in India or forming a joint

venture in India. In some sectors certain

restrictions apply.

_____****_____

Limited Liability Partnership now

available in India India
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A public company is defined as a company which is not

a private company. The following conditions apply only

to a public company:

It must have at least seven shareholders. A public company is not authorized to start

business upon the grant of the certificate of

incorporation. In order to be eligible to

commence business as a corporation, it must

obtain another document called "trading

certificate".

It must publish a prospectus or file a statementin lieu of a prospectus before it can start

transacting business.

A public company is required to have at leastthree directors.

It must hold statutory meetings and obtaingovernment approval for the appointment of

the management.

There are several other provisions contained in the

Companies Act 1956 which are applicable only to

public

compani

es and

should be consulted.

Liaison Office/Representative Office

A Liaison Office could be established with the approval of the government of India. The role

of Liaison Office is limited to collection of information, promotion of exports/imports and

facilitate technical/financial collaborations.

Liaison office cannot undertake any commercial activity directly or indirectly.

Project Office

Foreign companies planning to execute specific projects in India can set up a temporary

project/site offices in India for carrying out activities only relating to that project. The

Government of India has now granted general permission to foreign entities to establish

project offices subject to specified conditions.

A law to allow "Limited Liability

Partnership" (LLP) in India has

been enacted by the Parliament of

India recently. (Limited Liability

Partnership (LLP) Act of 2008)

LLP is an alternative corporate

business entity that provides the

benefits of limited liability of a

company but allows its members

the flexibility of organizing their

internal management on the basis

of a mutually-arrived agreement,

as is the case in a partnership firm.

This format would be quite useful

for small and medium enterprises

in general and for the enterprises

in services sector in particular,

including professionals and

knowledge based enterprises.

For more details visitLLP in India
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Branch Office

Foreign companies engaged in manufacturing and trading activities abroad are allowed

to 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 inIndia.

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.A branch office is not allowed to carry out manufacturing activities on its own but is

permitted to subcontract these to an Indian manufacturer. Branch Offices established with

the approval of RBI, may remit outside India profit of the branch, net of applicable Indian

taxes and subject to RBI guidelines Permission for setting up branch offices is granted by the

Reserve Bank of India (RBI).

Procedure for Formation of Company in India

Limited Liability Partnership (LLP)

A law to allow "Limited Liability Partnership" (LLP) in India has been enacted by the

Parliament of India recently. (Limited Liability Partnership (LLP) Act of 2008).

LLP is an alternative corporate business entity that provides the benefits of limited liabilityof a company but allows its members the flexibility of organizing their internal management

on the basis of a mutually-arrived agreement, as is the case in a partnership firm.

This format would be quite useful for small and medium enterprises in general and for the

enterprises in services sector in particular, including professionals and knowledge based

enterprises.

As proposed in the Bill, LLP shall be a body corporate and a legal entity separate from its

partners. It will have perpetual succession. While the LLP will be a separate legal entity,

liable to the full extent of its assets, the liability of the partners would be limited to theiragreed contribution in the LLP.
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Further, no partner would be liable on account of the independent or unauthorized actions

of other partners, thus allowing individual partners to be shielded from joint liability created

by another partners wrongful business decisions or misconduct.

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)

ObtainDINfor proposed Directors of the new Company 1 3*

ObtainDSCfor proposed Directors of the Company 2 3*

Filing the proposed name of company for approval to the

Registrar of Companies (ROC); Get the Memorandum and

Articles of Association vetted by the ROC and printed

3 7

Make an application to the Superintendent of Stamps or an

authorized bank requesting for stamping of the Memorandum

of Association and Articles of Association.

4 1

Present the required documents along with the registration fee

to the Registrar of Companies to get the certificate of

incorporation

5 9

Obtain a company seal 6 3

Apply for UTI Investors Services Limited/National Securities

Depository Ltd. to obtain a Permanent Account Number (PAN)

7 15*

Obtain a Tax Account Number (TAN) for income taxes

deducted at source from the Assessing Office in the Income Tax

Department

8 15*

Register under Shops and Establishment Act 9 2*
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Register for value added tax (VAT) before the Sales Tax Officer

of the ward in which the company is located

10 12*

Register for Profession tax 11 2*

Register with Employees' Provident Fund Organization 12 2*

Register with ESIC (medical insurance) 13 1*

Filing for Government Approval before RBI/FIPB for Foreigners

and NRI's

14 15*

Totals: 14 40

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.

SPECIAL NOTE

NEW DIRECTOR REGISTRATION REQUIREMENTS IN INDIA

DIN - Director Identification Number

Directors for an Indian company, both Indian and foreigners, must register and get and

identification number under the new requirements. It is called Director Identification

Number- DIN.

DSC - Digital Signature Certificate for Directors

Directors for an Indian company, both Indian and foreigners, are also required to get Digital

Signature Certificate - DSC - under the new requirements. Digital Signature Certificate (DSC)

is required for all Directors or authorized representatives of any company and professional

who will require to sign ROC forms or documents. A DSC, like hand written signature,

establishes the identity of the sender filing the documents through internet which sender

can not revoke or deny. A DSC is not only a digital equivalent of a hand written signature it

adds extra data electronically to any message or a document where it is used to make it

more authentic and more secured. There are various classes of DSC.

Click here to Contact us for Obtaining DIN and DSC in India
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17/24

Requirements for a Private Limited Company

1. A Registered Business Name: This must be followed by the word Limited' or Ltd'.The Companies Registration Office exercises some control over the choice of name,

it cannot be identical (or very similar to) the name of an existing company. It won't

be considered if it is offensive or illegal and the use of certain words in a company

(for example, `Institute', `National') can only be used in certain circumstances. The

company name must be displayed in a conspicuous place at every office, or other

premises where the company carries out business.

2. A Registered Office: This need not necessarily be the same address as the business isconducted from. Quite frequently the address used for the registered office is that of

the firm's solicitor or accountant. This is the address, through, where all official

correspondence will go.

3. Shareholders: There must be a minimum of two shareholders (also described as`members' or `subscribers'). A private company can have up to fifty shareholders.

4. Share Capital: The company must be formed with a stated, nominal share capitaldivided into shares of fixed amounts. Small companies are frequently formed with a

nominal share capital of Rs.100.

5. Memorandum of Association: The memorandum is the company's charter. It statesthe company's name; the situation of its registered office; its share capital; the fact

that liability is limited and, most importantly, the object for which the company has

been formed. In theory, the company can only operate in the areas mentioned in the

objects clause but in practice the clause is drawn to cover as wide an area as

possible, and anyway a 75 per cent majority of the members of the company can

change the objects whenever they like. Nevertheless, it is worth bearing in mind thatdirectors of the company will incur personal liability if the company engages in a

type of business which is not authorized by the objects clause. The memorandum

must be signed by at least three shareholders.

6. Articles of Association: The document contains the internal regulations of thecompany, the relationship of the company to its shareholders and the relationship

between the individual shareholders. Many companies don't bother to draw up their

own articles but adopt (sometimes with some modifications) articles set out in the

Companies Act.


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7. Certificate of Incorporation: This is the document, which the registrar of companiesissues to you once he has approved your choice of name and your memorandum.

When you receive this document your company legally exists and is ready to trade.

8. Auditors: Every company must appoint a qualified auditor. The auditor's duty is toreport to the treasurer whether or not the books of the company have been properly

kept, and that the balance sheet and profit and loss account presents (or doesn't

present) a true and fair view of the company's affairs and complies with the

Companies Act. Auditors are appointed or re-appointed at general meetings at which

annual accounts are presented, and they hold office from the conclusion of the

meeting until the next general meeting.

9. Accounts: The Companies Act lays down strict rules on accounting. Every companymust maintain a set of records, which show the financial position at any one time

with reasonable accuracy. The accounts comprise a profit and loss account and

balance sheet with the auditors' and directors' reports appended. A new company's

accounting reference period begins on its incorporation and runs until the following

31st March - unless the company notifies the registrar of companies otherwise.

Within ten months of the end of an accounting reference period, an audited set of

accounts must be laid before the shareholders at a general meeting and a set

delivered to the registrar of companies.

10.Registers, etc.: In addition to the accounts books, companies are required to have: aregister of members and share ledger; a register of directors and secretaries; a

register of share transfers; a register of charges; a register of debenture holders; a

book can be purchased to hold all of the above. This will be provided automatically if

you buy a running concern.

11.Company Seal: All companies must have an engraved seal. This must be impressedon share certificates and must be used whenever the company has to execute adeed. Again, this is included in the ready-made company package.

Corporate Documents & Registration of a Company

For incorporating a company in India, an application for registration should be submitted to

the registrar of companies with the following documents:


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1. Memorandum of Association;

2. Articles of Association;

3. a declaration signed by a person named in the articles of the proposed company as a

director, manager, or secretary of the company, or by an advocate of the Supreme Court orHigh Court, or by an attorney entitled to appear before the High Court, or by a chartered

accountant practicing in India stating that all the requirements of the Companies Act 1956

and the applicable rules with respect to the registration and other matters have been

complied with;

4. a list of persons who have consented to act as directors of the company.

5. if the proposed company is a public company, consent of very person prepared to act as a

director must be submitted in a prescribed form;

6. information about directors, managing directors and managers and secretary must be

submitted in a prescribed form;

7. information about the registered office in a prescribed form;

8. power of attorney in favor of one of the promoters or any other person, authorizing

him/her to make corrections in the documents submitted to the registrar of the companies,

if it becomes necessary; and

9. applicable registration fee payable to the registrar of the companies.

Advantages of Incorporating in India

Many tax exemptions available to the company set up in Special Economic Zone; Many tax incentives available to IT companies; India has got double taxation treaties with many countries; Minimum authorized capital of only INR 100,000 (US $ 2250 approximately) is

required to form a private company in India;

Skilled and intelligent employees available at nominal rate; With its large base of English speaking skilled human resource, it is most sought after

destination for business process outsourcing, Knowledge processing etc.


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Applicable Laws for Forming a Company in India

The laws applicable for incorporating a company in India include the Indian Companies Act

of 1956, read with Companies (Central Governments') General Rules and Forms,1956, the

Indian Income Tax Act, and other laws & regulations. The Foreign Exchange Management

Act of 1999 is applicable for foreign investments and transactions.

See alsoDoing Business with India Free Guide|FDI in India Sector wise Guide|Formation

of Subsidiary in India|Starting a Business in India|Opening Branch in India|

Incorporating company in India|Procedure for Formation of Company in India|

Government Approvals for Investing in India|Entry Strategies in India for Foreign

Investors|FIPB Approval for Foreign Investment in India | RBI Approvals for FDI in India

|FDI in Small Scale Sector in India Further Liberalized |Tax Rates in India|Withholding

Tax Rates For Foreign Companies Doing Business In India Under The Tax Treaties|AnnualCorporate Filings in India|Joint Ventures in India|Outsourcing to India|Legal

Outsourcing

Where to Incorporate in India?

A company incorporated in any state of India can do business in all the states of India. The

following are the locations of ROC's in India:

States & U.T.'s of India ROC Locations

Delhi & HaryanaRegistrar of Companies Delhi & Haryana,

NEW DELHI

KarnatakaRegistrar of Companies Karnataka

BANGALORE

Maharashtra, Dadra & Nagar Haveli Registrar of Companies MaharashtraMUMBAI ( Bombay )

Pune, Kolhapur, Ratnagiri, Satara,

Sindhudurga, Sangli, Sholapur &

Ahmednagar districts in Maharashtra

Registrar of Companies Pune,

PUNE

Tamil NaduRegistrar of Companies Tamil Nadu,

CHENNAI ( Madras )

Coimbatore, Nilgiris, Periyar Salem, Registrar of Companies Coimbatore
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Dharmapuri & Dindigul, Quaid-e-Milleth

districts in Tamil Nadu

COIMBATORE

GujaratRegistrar of Companies Gujarat,

AHMEDABAD

Andhra Pradesh Registrar of Companies Andhra Pradesh,

HYDERABAD

Assam, Tripura, Manipur, Nagaland,

Meghalaya, Arunachal Pradesh, Mizoram &

Shillong

Registrar of Companies Assam, Tripura,

Manipur, Nagaland, Meghalaya, Arunachal

Pradesh, Mizoram & Shillong

SHILLONG

Bihar & Jharkhand Registrar of CompaniesPATNA

Goa, Daman & Diu Registrar of Companies Goa, Daman & Diu,

GOA

Jammu & Kashmir Registrar of Companies Jammu & Kashmir

JAMMU & SRINAGAR

Kerala, Amindivi, Minicoy & Lakshadweep

Islands

Registrar of Companies Kerala

COCHIN

Madhya Pradesh & Chhattisgarh Registrar of Companies Madhya Pradesh,

GWALIOR

Orissa Registrar of Companies Orissa

CUTTACK

Pondicherry Registrar of Companies

PONDICHERRY

Punjab, Himachal Pradesh & Chandigarh Registrar of Companies Punjab, Himachal

Pradesh & Chandigarh,

JALANDHAR

Rajasthan Registrar of Companies Rajasthan ,

JAIPUR

Uttar Pradesh & Uttaranchal Registrar of Companies Uttar Pradesh,

KANPUR


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West Bengal Registrar of Companies West Bengal

CALCUTTA (Kolkata)

AndamanThe Registrar of Companies Andaman

PORT BLAIR

Sweat Equity in a company in India

The question is asked a lot, if an Indian company can issue sweat equity. There are separate

rules for sweat equity in a private company in India and a public company in India.

Sweat Equity in a private company in India

The provisions for issue of Sweat Equity are covered under Section 79A of the Companies

Act. It provides that a company may issue sweat equity shares of a class of shares already

issued if the following conditions are fulfilled:

the issue of sweat equity shares in authorized by a special resolution passed by thecompany in the general meeting.

The resolution specifies the number of shares, current market price, consideration, ifany, and the class or classes of directors or employees to whom such equity sharesare to be issued.

not less than one year has, at the issue elapsed since the date on which the companywas entitled to commence business.

The sweat equity shares of a company whose equity shares are listed on arecognized stock exchange are issued in accordance with the regulations made by

the Securities and Exchange Board of India in this behalf.

In view of the above provisions, you can't issue Sweat Equity at the time ofincorporation of your Company as one year has not elapsed since the date on which

the company was entitled to commence business.

In addition to the above provision, other regulatory provisions are applicable for issuing

sweat equity shares for a private company in India. Please feel free toContact usfor further

information about sweat equity in an Indian company.

Sweat Equity in a public company in India

The aforesaid provisions regarding issuing of Sweat Equity under Section 79A of the

Companies Act are applicable to a public company in India.

The sweat equity shares of a company whose equity shares are listed on a recognized stock

exchange are issued in accordance with the Securities and Exchange Board of India (Issue of
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Sweat Equity) Regulations, 2002. Please feel free toContact usfor further information

about sweat equity in an Indian company.

Procedure involved to Start a Company (Private Limited) in India

Posted bykumaranon September 6, 2006

This information will be useful for those who are looking in a nutshell the steps involved to

start a Private Limited company in India

1. First and foremost identify the Directors of the Company. Minimum of two directors need

to present and Maximum of 8 is allowed.

2. All Directors should have DIN (Directors Identification Number). If you do not have one

you can apply DIN onlineatwww.mca.gov.in. FAQ on DIN

http://www.mca.gov.in/MinistryWebsite/dca/faq/faq1.html

Documents required for DIN

A. Identity Proof (Any one of the following)

PAN Card

Driving License

Passport

Voter ID Card

Others (to be specified)B. Residence Proof (Any one of the following)

Driving License

Passport

Voter ID Card

Telephone Bill

Ration Card

Electricity Bill

Bank Statement

Others (to be specified)

3. Once you have got your DIN then you need to apply for Company name. You need to go

with 5-6 names in the order which you prefer.If the name is not available then they go to

the next one in the order you have provided.

4. You need to apply online for the name availability . You need to Fill in Form 1A. Forms are

avilable at this

location.http://www2.mca.gov.in/MinistryWebsite/dca/downloadeforms/eformTemplates/

1030-Form1A_help.zip

5. Once you have got your name approved you have to apply for the Incorporation of

Company. For this you
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will have to prepare Memorandum of Association which will detail what the company;s

operations the first list of directors

who are going the be in the board need to be defined in this document. This should be

applied along with Form 1

http://www2.mca.gov.in/MinistryWebsite/dca/downloadeforms/eformTemplates/1022-

Form1_help.zip. Ocne this has been approved make atleast 10-15 copies of your Certificateof Incorporation and Memorandum of Association and have it in a booklet form.

6. Once your company has been incorporated you can open a Current account in any of the

leading banks

for carrying out your operations. You will need to submit a copy of Certificate of

Incorporation and Memorandum of Association along with Borad resolution to open the

bank account.

7. Thenyou need to apply for TAN and PAN for the Company

https://tin.tin.nsdl.com/pan/form49A.htmlhttps://tin.tin.nsdl.com/tan/form49B.html

8. If your services are in Software related area you can apply for STPI license which will give

you certain benefits

like Company need not pay tax for 5 years, there will be no import or expurty duty levied on

software/hardware,

You will get office spaces at lower rates at STPI units. These are few of the benefits of

becoming an STPI member.

All this you can do on your own or you can outsource these to professional auditor. We didit through Auditor and it took almost three weeks (Upto Step 7 excluding STPI) and all

charges(excluding sTPI) would approximately cost you Rs.25,000.

I am not sure how much it would cost if you do it on your own. I read in one of the blogs

that in Delhi the whole

process was completed in 30 minutes after the e-Governance was launched.

Good Luck and If you need more information or any guidance drop in a mail.

`
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