How a foreign national can start and register company in India?

Guiding Businesses

How a foreign national can start and register company in India?

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Amy, a Czechican, is an accountant- 9 to 7 desk job- and loves travelling. Like many of us, she doesn’t enjoy the work but is working as it pays her bills. Deep inside, Amy wants to set up a business and get her freedom back.

Amy visits India on vacation- her business mind follows her wherever she goes. She arrives at Vadodra, a city located in Western India. The business mind overpowers her leisure mind as she observes that a good cab service is missing in the city. She sets aside her tourist plans. Amy says, “this may be my chance to escape the 9 to 7 desk job.”  Like a person on a mission, she researches about the cab market, and her business mind is right- reliable and well-connected cab service is missing in the city.

Being an accountant, Amy quickly figures the finances for her business. But the legal part is a challenge- Amy had many questions in her mind.

Amy’s first question is, “Are foreigners allowed to set up business in India?” Yes, Amy. India more than welcomes foreign investors.

If I set up a business in India, what should be my business structure? Amy’s next question.

Indian laws stop foreigners from starting a proprietorship or partnership or One Person Company in India. A foreigner can invest in L.L.P., but before that, they need permission from the R.B.I. Amy is agitated. She says: Why the Indian government has a problem with foreigners investing or setting up a business? It’s a colonial hangover, Amy.

Anyway, Amy, you can set up your business as a private limited company or a public limited company. Amy is happy that the Indian government has not closed all doors for foreigners. But she is also confused: Amy goes “Public or Private”? Private is the way to go, whether its professional or personal. Amy remembers that her mom has always told her not to announce her plans to the world. Her mom says, and I agree with her mom: “We are living in a world where people you come across or interact daily with want you to fail more than succeed.  Just go about your business silently- at least initially.

Okay! Enough appeal to feelings. Business decisions are based on logic, not feelings. So, Amy, for the logical side of yours:

To start a public company, Amy, you require a minimum of seven members, whereas a private limited company requires minimum of two members.

A public company must call a statutory general meeting of members. Private companies may call a general meeting if they want to ensure the members are still members of the company.

Private companies can start the business after incorporation, but public companies can only start the business after receiving a commencement certificate.

Long story short: Amy, private companies, have fewer laws and procedures to comply with.

Amy’s next question: “How do I begin the company registration process? What documents I have to submit?”

Before I answer that, Amy, I would like you to know that the company registration process is called incorporation. At the end of the registration process, Amy, you will get an incorporation certificate. The certificate attests that the company is established according to the laws of the country.

Now for all the budding foreign entrepreneurs, and especially for Amy’s dream, I present the registration process.

The Ministry of Corporate Affairs (M.C.A.), India, has made the registration process online. Amy is excited and immediately thinks of resigning as registration will be a quick one. But Amy’s mother asks her to put the resignation plan on hold and find more about the registration process. As always, Amy listens to her mom.

Step 1 

Amy, you need to digitally sign the forms that you submit online for the registration. As a digital signature is a must, you must get a digital signature or D.S.C. D.S.C. is also a must for all subscribers and witnesses in the memorandum and articles of association.

Patience Amy. I will explain what the Memorandum of association (M.O.A ) and Articles of association (A.O.A) are later.

Step2 [DIN-Director Identification Number]

Every company must have a board of directors. Amy, it is like aeroplanes having pilots. Will you board an aeroplane that doesn’t have pilots? The Board of directors consists of individual directors. Public company require a minimum of three directors, whereas private company require two.  DIN is a must for anyone who wants to become a director in a company. At least one director must be an Indian resident.

The documents that Amy needs for getting the DIN and D.S.C. are:

Proof of identity. P.A.N. for Indians and Passport for foreigners

Copy of driving license, bank statement or any utility bill (not older than two months).

Residence permits for foreigners if residing in India.

Passport size photograph.

All the above documents must be notarized or consularized or apostilled by the competent authority in your country.

Step 3 [Name approval]

Two ways.

First way

Getting approval for company name through RUN [Reserve Unique Name]. The form allows two proposed names and one re-submission.

Second way 

Amy, you can apply for the proposed name through SPICEe (INC-32). I know Indians love spices.

Step 4 Form SPICe [INC-32]

SPICe [INC-32] is a form that Amy needs to fill for company registration- Electronic incorporation. Through this form, you can:

  • Apply for allotment of DIN
  • Reserve company name
  • Incorporate a company
  • Apply for P.A.N. and TAN

A professional must endorse the form. The endorsement signifies that particulars in the form is correct. The professional can be C.A., C.S., or Advocate

Step 5 E-MOA [INC-33] and E-AOA [INC-34]

Amy, you must file the Memorandum of Association and Articles of Association digitally along with the above documents. The proposed directors and shareholders must have signed the documents.

For documents signed outside India, the public notary of the residence country must notarize the documents, and it should also be consular zed, or a competent authority must apostille  the documents.

For documents signed in India, A copy of the visa and stamped passport proves the applicant’s presence in India when signing the documents.

Step 6 P.A.N. and T.A.N. application

P.A.N. [Form 49 A] and T.A.N. [FORM 49 B]. Once you submit the SPICe form, the system auto-generates the P.A.N. and T.A.N. forms.

Other knowledge nuggets about company registration

Private companies can start with any capital amount.

Minimum two shareholders for a private company. None of them must be Indian residents. Shareholders can be entities, individuals, or both.

The M.O.A and A.O.A are documents needed when setting up a company. The M.O.A tells the outsider what a company does and what it can do.

The A.O.A informs the reader about the company’s internal rules and policies. It tells the reader how a company does what it does.

I hope I have answered your queries Amy. If I come across anything new about company registration, I will let you know.

 

About the author : Suryash Kumar, working at Vidma Consulting Group LLP, who loves exploring the uncharted territories. He has always been fascinated by the legal field, and he believes writing is one of the ways through which he contribute to the growth of the legal field.

 

 

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