The legal system of India is based on English common law.
The main source of law is Constitution 1950 which is the largest constitution in the world.
Companies in India are governed by Companies Act 1956.
The principal forms of business organization in India are:
- Sole Proprietorship
- Limited Liability Partnership
- Private Limited Company
- Public Limited Company
- Joint Venture Company
- Liaison Office/Representative Office
- Project Office
- Branch of a foreign company
The most common structure is the private limited liability company. Shelf companies of this type are available.
There is a range of requirements to the company name in India:
- the name of the company should only be in English;
- should end “Private Limited” in the case of a private limited company;
- shall not be identical with or resemble too nearly to the name of an existing company;
- shall not constitute an offence under any law for the time being in force;
- shall not be undesirable in the opinion of the Central Government;
- shall not contain any word or expression which is likely to give the impression that the company is in any way connected with, or having the patronage of, the Central Government, any State Government, or any local authority, corporation or body constituted by the Central Government or any State Government under any law for the time being in force unless the previous approval of the Central Government has been obtained for the use of any such word or expression.
The following steps are required to incorporate a Private Limited company in India:
- Obtain director identification number (DIN) online: submit e-Form DIN-1 along with photograph and scanned copy of supporting documents i.e. proof of identity, and proof of residence as per the guidelines. Along with the supporting documents, the applicant has to attach a document (Affidavit) which contains the applicant's name, middle name, date of birth, text as specified and the physical signature of the applicant. The Affidavit should be duly notarized. The e-Form has to be digitally signed and uploaded on MCA21 portal after which the fees (100 INR) for the same is paid.
- Obtain digital signature certificate online: to use the new electronic filing system under MCA 21, the applicant must obtain a Class-II Digital Signature Certificate. The digital signature certificate can be obtained from one of six private agencies authorized by MCA 21 such as Tata Consultancy Services, NIC, E-Mudhra, MTNL Trust line. Each agency has its own fee structure, ranging from INR 400 to INR 2650. The details of these Certification Agencies are available on the portal of the Ministry of Corporate Affairs (www.mca.gov.in).
- Reserve the company name with the Registrar of Companies (ROC) online: check availability of the proposed name by checking on the MCA21 portal for other companies or LLPs having similar names; prepare the application in eForm 1A with all relevant details and declarations; upload the eForm 1A to the MCA 21 portal and pay fees of Rs. 1000 electronically (net banking or credit card). The name, if made available to the applicant, will be reserved for the applicant to use for 60 days from the date of approval. If the proposed company is not incorporated during this 60 day period, the approval will lapse and the name will be available to other applicants.
- Pay stamp duties online, file all incorporation forms and documents online and obtain the certificate of incorporation: for registration, the following forms are required to be electronically filed on the website of the Ministry of Company Affairs: e-form 1; e-form 18; e-form 32. Along with these documents, scanned copies of the signed and the Memorandum and Articles of Association, must be attached to Form 1. Proof of location Registered Office in the Form of Lease Deed or NOC from the Owner must be attached to Form 18. The 3 forms as well as the memorandum and articles of association must be certified by a practicing professional regarding the correctness of the information/declarations. The fees for registering a company can be paid online using a credit card or by payment in cash at certain authorized banks. The certificate of incorporation is immediately issued by the Registrar of Companies, signed digitally and sent via email to the Company. The registration fees paid to the Registrar are scaled according to the company’s authorized capital (as stated in its memorandum): e.g. INR 100,000 or less: INR 4,000. If the nominal share capital is over INR 100,000, additional fees based on the amount of nominal capital apply to the base registration fee of INR 4,000. Registrar filing fees for the articles and for the other forms (l, 18, and 32): INR 200 for a company with authorized share capital of more than INR 100,000 but less than INR 500,000.
- Make a seal: although making a seal is not a legal requirement for the company to be incorporated, companies require a company seal to issue share certificates and other documents.
- Obtain a Permanent Account Number (PAN): the PAN is a 10-digit alphanumeric number issued on a laminated card by an assessing officer of the Income Tax Department. Visit an authorized franchise or agent appointed by National Securities Depository Services Limited (NSDL) or Unit Trust of India (UTI) Investors Services Ltd to obtain PAN. The application for PAN can also be made online but the documents still need to be physically dropped off for verification with the authorized agent. For more details (www.incometaxindia.gov.in , www.utiisl.co.in , www.tin-nsdl.com)
- Obtain a tax account number for income taxes deducted at source from the Assessing Office in the Mumbai Income Tax Department, simultaneous with previous procedure: the tax deduction and collection account number (TAN) is a 10-digit alphanumeric number required by all persons responsible for deducting or collecting tax. Failure to apply for a TAN or to comply with any of the other provisions of the section is subject to a penalty of INR 10,000/- . The application for allotment of a TAN must be submitted at any TIN Facilitation Center authorized to receive e-TDS returns. Locations of TIN Facilitation Centers are at www.incometaxindia.gov.in and tin.nsdl.com. The processing fee for application is INR 55 (plus applicable taxes - currently at 12.36%). The application for TAN can be made either online TAN can be through the NSDL website www.tin-nsdl.com or offline. However, after the payment of the fee by credit card, the hard copy of the application must be physically filed with NSDL.
- Register with Office of Inspector, simultaneous with previous procedure: a statement containing the employer’s and manager’s name and the establishment’s name (if any), postal address, and category must be sent to the local shop inspector with the applicable fees. The employer must register the establishment in the prescribed manner within 30 days of the date on which the establishment commences its work.
- Register for VAT online, simultaneous with previous procedure: application for registration of VAT by the founders who are required to obtain registration or those who voluntarily desire to get registration can be filed electronically on the website www.mahavat.gov.in. After the completed application form is submitted online, registration certificate will be printed and issued to the company on the appointed date. Usually, the appointment date is scheduled in the next 10 days.
- Register for profession tax, simultaneous with previous procedure: all applications for registration (i.e. for obtaining a Profession Tax Registration Certificate) are required to be made online, on the website of www.mahavat.gov.in, in 'Form I'. Every employer (not being an officer of the government) is liable to pay tax and shall obtain a certificate of registration from the prescribed authority. Depending on the nature of the business, the application should be supported with such documents as address proof, details of company registration number under Indian Companies Act (1956), details of head office (if the company is a branch of company registered outside the state), company deed, certificates under any other act, and so forth.
- Register with Employees' Provident Fund Organization, simultaneous with previous procedure: the Provident Fund registration focuses on delinquent reporting, underreporting, or non-reporting of workforce size. Provident Fund registration is optional if workforce size is not more than 20. All employers must register online with the EPFO online portal in order to generate challans for making any remittances (www.epfindia.gov.in).
- Register for medical insurance (ESIC), simultaneous with previous procedure: registration is the process by which every employer/factory and every employee employed for wages are identified for the purpose of the medical insurance scheme and their individual records are set up for them. As per the Employees' State Insurance (General), Form 01 is the form required to be submitted by Employer for registration. It takes 3 days to a week for the Employer Code Number to be issued. In order to insure that all the insured persons receive their identity cards to enable them to receive cash and medical benefit, the identity cards will be delivered to the insured persons directly by the ESI Corporation rather than through the employers. Employers can now submit application online for registration on the ESIC website (www.esic.in).
The formation of a new company in India takes about 3 weeks.
Each company in India shall, on and from the fifteenth day of its incorporation and at all times thereafter, have a registered office capable of receiving and acknowledging all communications and notices as may be addressed to it. The company shall furnish to the Registrar verification of its registered office within a period of thirty days of its incorporation in such manner as may be prescribed.
Every company shall paint or affix its name, and the address of its registered office, and keep the same painted or affixed, on the outside of every office or place in which its business is carried on, in a conspicuous position, in legible letters, and if the characters employed therefor are not those of the language or of one of the languages in general use in that locality, also in the characters of that language or of one of those languages.
Notice of every change of the situation of the registered office, verified in the manner prescribed, after the date of incorporation of the company, shall be given to the Registrar within fifteen days of the change, who shall record the same.
If any default is made in complying with these requirements, the company and every officer who is in default shall be liable to a penalty of one thousand rupees for every day during which the default continues but not exceeding one lakh rupees.
It is required to keep books of account, minutes of meetings, register of directors, register of shareholders, register of debenture-holders, register of any other security holders, register and index of beneficial owners at the registered office. However, a company may, if so authorised by its articles, keep in any country outside India, in such manner as may be prescribed, a part of the register, called “foreign register” containing the names and particulars of the members, debenture- holders, other security holders or beneficial owners residing outside India.
If a company does not maintain a register of members or debenture-holders or other security holders or fails to maintain them in accordance with the law, the company and every officer of the company who is in default shall be punishable with fine which shall not be less than fifty thousand rupees but which may extend to three lakh rupees and where the failure is a continuing one, with a further fine which may extend to one thousand rupees for every day, after the first during which the failure continues.
There are statutory requirements for a company in India to have a seal known as a common seal. Companies require a common seal to issue share certificates and other documents.
The redomiciliation of companies to or from India is not permitted.
Every company in India must have a Board of Directors consisting of individuals as directors and shall have a minimum number of two directors in the case of a private company, and a maximum of fifteen directors. Every company shall have at least one director who has stayed in India for a total period of not less than one hundred and eighty-two days in the previous calendar year.
Every individual intending to be appointed as director of a company shall make an application for allotment of Director Identification Number to the Central Government in such form and manner and along with such fees as may be prescribed. No individual, who has already been allotted a Director Identification Number, shall apply for, obtain or possess another Director Identification Number.
No person shall hold office as a director, including any alternate directorship, in more than twenty companies at the same time.
Name of directors and their identification numbers given by the government are in public domain.
Every company shall hold the first meeting of the Board of Directors within thirty days of the date of its incorporation and thereafter hold a minimum number of four meetings of its Board of Directors every year in such a manner that not more than one hundred and twenty days shall intervene between two consecutive meetings of the Board. The participation of directors in a meeting of the Board may be either in person or through video conferencing or other audio visual means, as may be prescribed, which are capable of recording and recognising the participation of the directors and of recording and storing the proceedings of such meetings along with date and time. Directors’ meetings can be held anywhere in the world.
According to Indian legislation, in case of companies having paid-up capital of INR 50 million or above required fulltime company secretary which should be a qualified secretary. Other Indian companies are not required to appoint a company secretary.
Each company in India must have at least two shareholders. There is no restriction on the nationality or residency of the shareholders. The shareholders can be individuals and/or legal persons.
Shareholders information is disclosed on a yearly basis.
The Annual General Meeting (AGM) of a Company is required to be held once in every calendar year and not more than 15 months shall elapse between the date of one AGM and that of the next. This meeting can be held only in the same city or town, where the registered office is situated.
The details of the beneficial owner are not available on public record. The information is only required to be disclosed with the banker at the time of opening a bank account.
Minimum authorized capital in India is set at INR 100,000. However, in case of use of specific words in a company name (e.g. International, Business, India, Manufacturing) the minimum can go up.
Minimum capital should be paid up within 30 days of registration of the company.
Standard par value of shares is generally INR 10 per share.
Bearer shares and shares with no par value are prohibited.
How much does it cost to register a company in India?
The cost of opening a company in India depends on the type of company to be registered and the type of activity you will be engaged in. The minimum package of services costs USD 7600 and includes: registration of the company on a turnkey basis, lease of the registered office for a year and secretarial services, payment of all necessary duties and fees, as well as apostilled translation of the constituent documents.
Can I register a company without office in India?
Yes, you can register a company without an office in India. A company can have its legal address anywhere in India, even if it does not have a physical office. In such a case, the legal address serves as the official communication address for the company. It is where all official communications and notices from the government authorities, such as the Registrar of Companies will be sent. However, it is important to note that having a registered office in India is mandatory for any company incorporated in India, as per the Companies Act, 2013. Additionally, the company is required to maintain and keep proper books of accounts and other important records at the registered office, or at another place within India, as the board of directors may decide.
Can an Indian company be a non resident?
Yes, an Indian company can be considered a non-resident company if it satisfies certain conditions under Indian tax laws. A non-resident company is one that is incorporated outside India and does not have a place of business in India, or a permanent establishment (PE) in India, but carries out business activities in India. Non-resident companies are taxed in India only on their income that is sourced in India. The tax rate for non-resident companies in India is 40% on their taxable income.
Can a foreign company do business in India without registration?
A foreign company cannot do business in India without registering with the Registrar of Companies under the Companies Act, 2013. The foreign company must first obtain a certificate of incorporation from the Registrar and then comply with other legal requirements, such as obtaining PAN and TAN numbers and registering with the Service Tax department, if applicable. Foreign companies must also comply with the Foreign Exchange Management Act and the Indian Income Tax Act. Failing to comply with these requirements can result in significant penalties and legal consequences.