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Overview of Company Registration in India By Foreigners
Under Current Scenario, many foreigners or NRI's wants to establish their Company in India to take advantage of the huge market, cheaper resources and prospect of emerging market. Private Limited Company, Public Limited Company and Limited Liability Partnership (LLP) are considered as most favorable business structures for doing business in India by NRIs and foreigners. One resident Indian director/partner is mandatory to form such business entity in India.
Foreign Investment in India is permitted under two ways, i.e. Automatic Route and Approval Route. Foreign Direct Investment (FDI) into India under the automatic route is allowed for Private Limited Company and Public Limited Company only, while FDI in LLP requires prior approval from the Reserve Bank of India.
Glance at available types of Limited Liability Business Entities in India:
Incorporation of Private Limited Company
A private Limited company is a privately owned business entity formed for any lawful purpose under the provisions of the Companies Act, 2013 having minimum of two and maximum of two hundred members and the name of the company must end with the words ‘Private Limited’.
A company incorporated outside India seeking interest to start their operations in India as a start-up structure can incorporate a private limited company with substantially relaxed and lesser compliance regime as compared to a public limited Company.
Incorporation of Public Limited Company
A Public Limited company is a business entity formed for any lawful purpose under the provisions of the Companies Act, 2013 and which is not a private company. A Public company shall have minimum of seven members. However, there is no limit on the maximum number of members in case of a Public Limited Company. The name of the company must end with the word ‘Limited’.
A company incorporated outside India seeking interest to start their operations in India as a start-up structure can incorporate a public limited company with an option to raise capital from public.
Incorporation of LLP
Limited Liability Partnership (LLP) is a body corporate formed and registered under the Limited Liability Partnership Act, 2008 and is a legal entity separate from that of its partners. LLP has perpetual succession. Any change in the partners of LLP shall not affect the existence, rights or liabilities of the LLP.
Every LLP shall have at least two designated partners who are individuals and at least one of them shall be resident in India. In case of a LLP in which all the partners are bodies corporate or in which one or more partners are individuals and bodies corporate, at least two individuals who are partners of such LLP or nominees of such bodies corporate shall act as designated partners.
Advantages of Company Registration in India By Foreigners
1. Limited Liability
The liability of members of a limited company is limited to the amount of share capital remaining unpaid on the shares held by them.
2. Perpetual Succession
Existence of a Limited entity is uninterrupted, even the death or insolvency of any director/partners cannot affect the continuity of business
3. Separate Legal Entity
As a juristic legal person, both the company and its members have separate legal identity that is distinct from each other.
4. Easy Transferability of Ownership
The ownership in a limited company is easily transferable by way of transfer of shares from one member to another.
5. Transparency
The transparency principle of limited company is required to increase the confidence, support, and participation of stakeholders or all parties concerned with the company.
Regulatory Authorities for Indian Subsidiary Company Registration
The Ministry of Corporate Affairs (MCA is responsible for setting and enforcing the rules and regulations governing company registration and compliance. Registrar of Companies (ROC) offices handle the procedures related to company incorporation, ensuring companies follows legal requirements. Reserve Bank of India (RBI) regulates foreign currency exchange aspects for foreign subsidiary company in india, ensuring adherence to financial regulations.
How to Register a Subsidiary Company in India?
Incorporation of foreign subsidiary in india involves several key steps and compliance requirements. Here's a step-by-step guide on how to register a subsidiary company in India:
1. Determine the Type of Company
Decide on the type of company you want to establish Incorporation of foreign subsidiary in india.
2. Obtain Digital Signature Certificate (DSC)
Since the registration process is conducted online, you must obtain a Digital Signature Certificate (DSC) for the proposed directors of the company. The DSC is used to sign the necessary documents during the registration process electronically.
3. Apply for a Director Identification Number (DIN)
The directors of the subsidiary company must obtain a Director Identification Number (DIN) from the Ministry of Corporate Affairs (MCA). This can be done by submitting the DIN application online.
4. Name Approval
Please choose a unique name for your subsidiary company and apply for its approval through the MCA's online portal. Ensure that the chosen name adheres to the naming guidelines provided by the MCA.
5. Draft Memorandum of Association (MoA) and Articles of Association (AoA)
MoA and AoA are legal documents that outline the company's objectives, rules, and regulations. Prepare these documents following the Companies Act 2013.
6. File Incorporation Documents
Once your chosen name is approved, you must file the incorporation documents, including the MoA, AoA, and other required forms, with the Registrar of Companies (ROC) through the MCA's online portal. The incorporation process is typically done using the SPICe+ form on the Ministry of Corporate Affairs portal.
7. Payment of Registration Fees
Pay the necessary registration fees to the ROC based on the authorized capital of the subsidiary company.
8. Obtain a Certificate of Incorporation (COI)
If all the submitted documents and information are in order, the ROC will issue a Certificate of Incorporation. This certificate officially confirms the indian subsidiary registration for a company.
9. Apply for Permanent Account Number (PAN) and Tax Registration
After obtaining the CoI, apply for a Permanent Account Number and a Tax Deduction and Collection Account Number from the Income Tax Department for the subsidiary company.
10. Open Bank Account
Finally, open a bank account in the name of the foreign subsidiary company in india.
Compliance with Other Regulations: In addition to the company registration process, ensure compliance with other relevant regulations.
11. Obtain a GST Number
Goods and Services Tax (GST) registration is required after completing the above steps, mainly if the company engages in various business activities. Every Indian company must apply for a GST number for taxation purposes.
12. Initiating Business Operations
Once the incorporation of a foreign subsidiary in India is completed, the company can commence its business operations.
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