India is the second largest country in the world in terms of population and the seventh largest economy in the world. With several economic reforms already made and others in progress, India is becoming a major hub for setting up new businesses. Favorable business environment, growth opportunities, inexpensive labour and development-friendly reforms, all this and much more makes India a lucrative bet for setting up a company in India. Let’s grab this opportunity to grow together with the Indian economy.
Apart from the above-mentioned benefits, India has much more to offer to its investors. However, even with so much of facilities and ease in procedures, setting up a new business can be an overwhelming task. By offering its comprehensive knowledge and services, DSRV and Co LLP supports you in your endeavor of setting up or start a new business in India.
Foreign investors or companies intending to setup or start a new business in India, may opt for any of the following setup:
A liaison office is an office that acts as a channel of communication between the foreign company in India and its principal place of business i.e. the parent company. Its role is limited to collecting and providing information regarding the possible market opportunities in India to its parent company.
Following conditions are required to be fulfilled for setting up a liaison office in India:
A foreign company can set up a project office in India, provided it has secured a contract from an Indian company to execute a project in India, and
A project office can be said to be a place of business representing the interests of a foreign company executing a project in India, but it does not include Liaison office. The difference between a project office and liaison office being that unlike the liaison office, a project office can undertake commercial activity related to the projects.
Time limits for opening a project office:
As per the Companies Act 2013, a branch office in relation to a company, means any establishment described as such by the company. It refers to an establishment that carries out the same activities as by its Head Office. If the company wants to increase its customer-base and spread its business to diverse locations, setting up a branch office is the preferred option.
Following conditions are required to be fulfilled for setting up a branch office in India:
A wholly owned subsidiary is an entity of which 100% shares are held by another company i.e. the Holding Company. It is a company that is entirely owned by another company. A wholly owned subsidiary can be incorporated as a private, limited by share, limited by guarantee or an unlimited liability company. In order to form a wholly owned subsidiary a minimum of two directors and two shareholders are required in case of a private company and seven in case of public company. Unlike a branch office and liaison office, a wholly owned subsidiary can undertake any legal activity authorized by its character. And is also liable to pay tax on the income earned. In case of a wholly owned subsidiary, 100% FDI is allowed through automatic route, i.e. without any prior approval of Government and RBI. However, winding up a wholly owned subsidiary, is a lengthy process. It can take months depending on the complexities involved and the kind of assets owned.
A joint-venture is a form of tactical partnership, where two or more persons incorporate a company in India and subscribe to the shares of the said company in agreed proportion, in cash and commence a new joint-venture business. A joint-venture company is formed by transferring the business of one party to the newly formed company and in consideration to such transfer, shares are issued by the company for subscription by that party. The other party subscribes to the shares in cash. A joint-venture company is one of the most preferred corporate structure by foreigners who invest in setting up a business in India.
Before entering into a joint-venture company, following are some of the points that should be assessed carefully:
As per the Companies Act, 2013 there are various forms of companies that can be incorporated in India. Following are the most common business structures that can be incorporated as a separate legal entity.
Sole Proprietorship is the easiest and simplest form of business setup in India. All you require is a PAN card, Bank A/c, certain licenses and capital. There is no need for formal online registration and other complex procedures. The owner is the whole and soul of such sort of business. He enjoys all the profits as well as bears the losses. The right to all the asset lies in the hands of the owner and his liability is unlimited. Sole Proprietorship allows you maximum privacy. And if circumstances change in future, it is easy to change your legal structure depending on your business requirements.
Partnership is defined as a relation between persons who have agreed to share the profits of a business carried on by all or any one of them acting for all. In case of Partnership the liability of the members is unlimited. The minimum number of partners required is 2 and the maximum can be 20. In case of banking companies, the maximum number of partners is limited to 10.
A Limited Liability Partnership is a legal entity separate from its partners. The liability pf the partners is restricted to their contribution in the LLP. Another salient feature that separates an LLP from a partnership firm is that the action of one partner do not bind the others, all partners are agents of the LLP. The rights and duties of all the partners are governed by an agreement designed by them in accordance with the act. A minimum of 2 members are required to form an LLP, there is no limit to the maximum number. LLP enjoys the benefits of perpetual succession and common seal also.
One Person Company (OPC) is a type of private company that has only one shareholder as its member. An OPC shall have a minimum of 1 director and can have a maximum of 15 directors. The only member may also be the director of the company. One Person Company is preferred by many instead of a sole proprietorship because of its several advantages and benefits available to it under the Companies Act. Some of the privileges of OPC include:
a) They are not required to hold annual general meeting (AGM).
b) Provisions of Independent Director do not apply to OPCs.
c) The directors can also sign the annual reports, etc.
P.S. OPCs cannot convert voluntarily into other form of companies until the expiry of a term of two years from the date of their incorporation.
A Small Company is a company in which –
a) The paid-up share capital does not exceed fifty lakh rupees or such higher amount as may be prescribed which shall not be more than five crore rupees; or
b) The turnover as per its last profit and loss account does not exceed two crore rupees or such higher amount as may be prescribed which shall not be more than twenty crore rupees.
Only a private company can claim the status of a Small Company. A Small Company enjoys certain privileges over other forms of companies. It may hold only 2 board meetings in a year as compared to the requirement of 4 board meetings by other companies. Small Companies are exempt from the requirement of mandatory rotation of auditors, they are also exempt from certain complex provisions that are designed exclusively for large companies. But the above provisions do not apply to its holding company, subsidiary company and section 8 company or any other company governed by any Special Act.
Co-operatives is a voluntary form of organization formed by individuals. The minimum number of members required is ten. There is no limit on the maximum number of members. There is no restriction to the entry or exit of any member a Co-operative. A distinct feature that differentiates a co-operative from other forms of business is that its motive is service to the members rather than making profit. It is compulsory to register a Co-operative with the Registrar of Co-operatives Societies. After registration it becomes a separate legal entity i.e. a body corporate independent of its members. Co-operative also enjoy perpetual succession, which means it will continue to exist irrespective of death, retirement, insolvency, etc. of its members.
A Private Limited Company is the most preferred vehicle for carrying out a business. In this type of company, the articles of association restrict the rights to transfer its shares. It is also not allowed to invite subscriptions to any of its shares or debentures. A Private Limited Company should have a minimum of 2 members and 2 directors. The only 2 members of the company may also be its 2 directors. The maximum number of members in a Private Limited Company is limited to 200. Some of the benefits of Private Limited Company are: limited liability, perpetual succession, easy transferability of ownership, capacity to sue and be sued, etc. A Private Limited Company can be incorporated in the following three variants:iling the form and other documents:A Private Limited Company is the most preferred vehicle for carrying out a business. In this type of company, the articles of association restrict the rights to transfer its shares. It is also not allowed to invite subscriptions to any of its shares or debentures. A Private Limited Company should have a minimum of 2 members and 2 directors. The only 2 members of the company may also be its 2 directors. The maximum number of members in a Private Limited Company is limited to 200. Some of the benefits of Private Limited Company are: limited liability, perpetual succession, easy transferability of ownership, capacity to sue and be sued, etc. A Private Limited Company can be incorporated in the following three variants:
a) Private Limited Company
b) Small Private Limited Company
c) One Person Company
A Public Limited Company has limited liability and can raise capital from its investors, promoters or close relatives and can also trade its securities in open market by offering it to public at large. It is a type of company whose stocks can be freely traded and listed on a stock exchange. A Public Limited Company should have a minimum of 7 shareholders and 3 directors. However, there is no limit to the maximum number of shareholders and directors. In order to protect the interest of the investors, there are strict regulations and controls in relation to a Public Limited Company that one must comply with. A Public Limited Company is required to publish its true and fair financial accounts which are available for inspection to its shareholders and potential investors. It is mandatory for a Public Limited Company to obtain a trading certificate in order to run its business.
Before getting a company registered or company registration in India, the following steps are to be followed for its incorporation –
Select a suitable name for your company, a maximum of 6 names. The name should not violate the provisions of emblems and names (Prevention of Improper Use Act, 1950), and should not be similar to the name of any other already registered company. It can be done by availing the services of checking name availability on the MCA portal.
The application for registration of the name should be sent to the RoC of the respective state. Within 60 days of name approval, the applicant can apply for registration of the new company. Failing which the applicant will have to apply again to the Registrar for the revalidation of the approval.
MoA is the constitution of the company, describing its scope and objects along with its relation with the outside world. Ensure that the Memorandum is signed and stamped properly. The MoA is required to be signed by a minimum of 7 persons in case of a public company and 2 persons in case of a private company. The Memorandum should be dated on a date after the date of signing.
The Articles of Association is a document containing rules and regulations relating to internal management of a company. Like the Memorandum, the Articles is also required to be properly stamped and signed. In case of a public limited company, it may not file its own Articles of Association, instead it may adopt model clauses prescribed in Table A, Schedule 1 of the Act.
The next step is to log in to the portal and fill the required e-forms such as forms 1, 18, 32 and attach the mandatory documents. After filling the forms, the applicant is required to attach the digital signature and submit the form. He is required to pay the requisite filing and registration fees and send the physical copy of Memorandum and Article of Association to the RoC.
After the processing of form is completed and corporate identity is generated, the RoC will issue the Certificate of Incorporation. The date of incorporation of the company is mentioned in the certificate.
After completing the formalities of company incorporation, the next step is capital subscription. A company can opt to raise funds by its preferred method.
The final step involves obtaining Certificate of Commencement of Business. A public company is required to obtain a Certificate of Commencement of Business before it can actually commence its business. However, there is no such requirement for private companies.
Setting up a new business requires fulfilling a lot of compliances and procedures. With over decades of experience and widespread knowledge in various fields, DSRV and Co LLP is steadfast in its commitment of serving you.
Services we offer:
Experienced & Professional team: We have an experience of over 30 years in providing financial services to people in and out India. Our highly experienced team of professionals have rendered their valuable services in almost every field of accounting and finance, making lives of its clients easier.
Wide knowledge base: Our team is constantly updating itself with the current changes in the financial sector and believes in continuous learning. With a wide client-base across the globe, we have vast knowledge about variety of procedures followed around the world. Our organization is up-to-date with the best business practices.
Maintenance of technical and professional standards: We ensure that our work complies with technical and professional standards. We refrain from malpractices and work without conflict of interest. We follow a straight-forward and honest work-approach.
Tailor-made services: We believe each client is unique and so are their business requirements. At DSRV and Co LLP, we offer personalized services to our clients that suits them best. Client’s privacy and satisfaction is foremost to us. In case of geographical constraints, we also offer virtual office services.
Fast and quality services: Timeliness and quality are our hallmark. Our forte to deliver quality work before deadlines is what that distinguishes us from others.