Company Registration
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Types of Business Entities in India
The following types of Business entitles are available in India:
- Private Limited Company
- Public Limited Company
- Unlimited Company
- Limited Liability Partnership (LLP)
- 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
- 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, Limited Liability 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, and Joint 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 owned Subsidiary of a foreign company in India could be either a Private Limited Company, a Public 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 to Entry Strategies in India for Foreign Investors and 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 seek Government Approvals for Investing in India In some special cases Foreign Investment Promotion Board, FIPB Approval for Foreign Investment in India is required. In other cases Reserve Bank of India, RBI Approvals for Foreign Investment in India is required.
There are various steps required to establish a business in India, before and after incorporation, as mentioned hereinafter. See also the Procedure 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 - DIN and Digital Signature Certificate - DSC.
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Private Limited Company
A private company is a company which has the following characteristics:
- shareholders' right to transfer shares is restricted;
- the number of shareholders is limited to fifty;
- an invitation to the public to subscribe to any 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 various steps required in forming a private limited company in India. There are various steps required to establish a business in India, before and after incorporation.
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ASCC Service Offering:
ASCC will liaise with ROC (Registrar of Companies, Ministry of Corporate Affairs, Govt. of India) to help you with registration as a Private Limited Company.
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Public Limited Company
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 statement in lieu of a prospectus before it can start transacting business.
- A public company is required to have at least three directors.
- It must hold statutory meetings and obtain government approval for the appointment of the management.
There are several other provisions contained in the Companies Act 1956 which are applicable only to public companies and should be consulted.
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ASCC Service Offering:
ASCC will liaise with ROC (Registrar of Companies, Ministry of Corporate Affairs, Govt. of India) to help you with registration as a Public Limited Company.
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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 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.
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 their agreed contribution in the LLP.
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 partner's wrongful business decisions or misconduct.
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ASCC Service Offering:
ASCC will liaise with ROC (Registrar of Companies, Ministry of Corporate Affairs, Govt. of India) to help you with registration as a Limited Liability Partnership.
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Foreign investors / Foreign companies : 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.
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ASCC Service Offering:
ASCC will liaise with ROC (Registrar of Companies, Ministry of Corporate Affairs, Govt. of India) to help you with registration as a Liaison Office/Representative Office and also help you with RBI Approvals.
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Foreign investors / Foreign companies : 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.
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ASCC Service Offering:
ASCC will liaise with ROC (Registrar of Companies, Ministry of Corporate Affairs, Govt. of India) to help you with registration as a Project Office and also help you with RBI Approvals.
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Foreign investors / Foreign companies : 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 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.
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).
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ASCC Service Offering:
ASCC will liaise with ROC (Registrar of Companies, Ministry of Corporate Affairs, Govt. of India) to help you with registration as a Project Office and also help you with RBI Approvals.
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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 list contains typical formalities for incorporating a private limited company in India:
- Obtain DIN for proposed Directors of the new Company
- Obtain DSC for proposed Directors of the Company
- 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
- Make an application to the Superintendent of Stamps or an authorized bank requesting for stamping of the Memorandum of Association and Articles of Association
- Present the required documents along with the registration fee to the Registrar of Companies to get the certificate of incorporation
- Obtain a company seal
- Filing for Government Approval before RBI/FIPB for Foreigners and NRIs
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ASCC Service Offering:
ASCC will liaise with ROC (Registrar of Companies, Ministry of Corporate Affairs, Govt. of India) and RBI/FIPB for Foreigners/NRIs to help you with company registration (DIN, DSC, Selection of Name, MoA, AoA, Company Seal) in India.
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Registration as Firm
Register a firm in India is done to prevent other people from using the name of your firm or company. It is very important to register your firm. Registration can be done in most at just one time payment which is valid for life time. An office is available in all the states in India for registering a firm in India.
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ASCC Service Offering:
ASCC will liaise with Registrar of Firms, State Government Department to help you with firm registration.
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