Basics of Registering a Company in India

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Basics of Registering a Company

The 7 Advantages to IncorporatingThere’s no question that hard work and a little luck is what it takes to

BE successful. But a little knowledge, especially when it comes to

setting up your business, will help you STAY successful.

While many business owners give a lot of thought to location, store

décor, customer service, hiring employees and management issues

(and rightly so); choosing the proper business structure (such as sole

proprietor, partnership, corporation, limited liability company) doesn’t

get the attention it deserves.

Many entrepreneurs don’t realize this, but the business form they

choose can often times be the difference between success and failure,

especially in today’s competitive and litigious marketplace. If you

want to succeed, you need all the advantages you can get. High on

the list of safe bets is the corporate form of business.

Incorporating, while definitely not for everybody, offers several distinct

and money-saving advantages over the other types of entities. Here

are seven of those advantages:

1.- Asset Protection

If you operate as a sole proprietor or partnership, there is virtually

unlimited personal liability for business debts or lawsuits. In other

words should you go out of business or be a defendant in a lawsuit,

your personal assets such as homes, jewelry, vehicles, savings, etc.

are up for grabs. This is generally NOT the case when youincorporate. When you incorporate you are only responsible for your

investment in the corporation. The limited liability feature of a

corporation, while not a guarantee, is DEFINITELY one of the most

attractive reasons for incorporating.

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2.- Easier To Sell

Corporations are generally much easier to sell and are usually more

attractive to buyers than either a sole proprietorship or partnership.

The reason for this is because a new buyer will not be personally liable

for any wrongdoings on the part of the previous owners. If someone

buys a sole proprietorship, for example, the new owner can be held

personally liable for any mistakes or illegalities on the part of the prior

owner…even if the new owner had NOTHING to do with the situation!

This is usually NOT the case with a corporation.

3.- Tax Savings

When you incorporate there are numerous tax advantages at your

disposal that are virtually impossible to accomplish with other business

entities. When you incorporate you create a separate and distinct

legal entity. Because of this, there are many transactions that you can

structure between you and your corporation to save big money on

taxes. For instance, if you own a building you can rent office facilities

to your corporation and claim depreciation and other deductions for it.

Your corporation can then claim the rental expense. You are prohibited

from doing this if you are a sole proprietor or a partner in a

partnership.

4.- Privacy and Confidentiality

The corporate form of business is a great way to keep your identity

and business affairs private and confidential. If you want to start a

business, but would like to remain anonymous, a corporation is the

best way to accomplish this. States such as Nevada offer even moreprivacy protection for corporations and their shareholders.

5.- Easier to Raise Capital



When you’re looking to raise money through investment or borrowing,

a corporation can actually make finding and getting the money you

need easier. If you want to take on investors you simply sell shares of

stock. If you want to borrow, a corporation can add clout when

dealing with banks or other lending institutions.

6.- Perpetuity

As I mentioned in #3, when you incorporate you create a separate and

distinct legal entity. This separate and distinct entity (the corporation)

can endure almost forever irrespective of what happens to the

shareholders, directors, or officers. This is NOT the case with sole

proprietorships, partnerships or even limited liability companies. Forexample, if an owner, partner, or member dies the business

AUTOMATICALLY ends or gets wrapped up in legal red tape.

Corporations, on the other hand, have unlimited life.

7.- Increases Credibility

Let’s face it. Most people feel more secure and confident dealing with

a corporation as opposed to a sole proprietorship. Having INC. or

CORP. after your company’s name adds a touch of professionalism and

credibility to your business dealings.

As always, be sure to consult with your attorney or business advisor

before undertaking any important legal or financial decision. While

there are many advantages and money-saving reasons to incorporate,

as I’ve said before, it’s not for everybody. However, you do owe it to

yourself to find out more.

How and When to Incorporate Your BusinessNearly all businesses start off as sole proprietorships and most people

don’t really give a thought to how and when to incorporate their

business.



In fact, many small business owners, especially those who are making

money in their spare time on the internet, don’t even really think of

themselves as business owners. But they are, and they should at least

consider incorporating for their own protection.

When you incorporate, you are making the company liable, not you

personally, should something go wrong. The plain truth is that many

small business owners don’t recognize the advantages of incorporating

and simply don’t know what to do to incorporate.

When you are operating a small business, the thought of incorporating

may not seem realistic or even necessary. Some might even think it’s

silly. Does Joe’s Landscaping Business really need an “Inc.” at the endof its name?

It does, especially if Joe has any employees. Here’s why. If an

employee should damage property in the course of a job, unless you

are incorporated, not only can your employee get sued, so can you. If

you are incorporated, you have a certain amount of protection and

your employees, typically, cannot be held liable for accidents that

happen on the job.

Some business owners, even one-person companies, incorporate

simply because it makes them appear to be a larger, well-established

company. That “Inc.” after the company names gives the perception to

consumers that they are dealing with a solid company.

So if you have a business, even if that business in only you,

incorporating it could be seen as a key marketing tool.

Incorporating can be expensive, and that is something you should

consider before filing any paperwork. If you’ve made the decision to

incorporate, the next step is to file the proper paperwork with your

state. Most states have this information available on their websites.

With that being said, it can be time consuming and expensive to do

this process yourself.



The days of hiring an expensive attorney to handle all the paperwork

and filing is over because today you can incorporate online. Prices

range from about $200 to more than $1,000 depending on the

complexity of the corporation, the state, type of entity, the paperwork

involved, the services rendered, and the company you hire.The most basic corporation has three officers, a president, secretary

and treasurer, and often times these are more paper titles than

positions with actual duties, especially in very small businesses. An

attorney, or a firm you hire to make the filings, completes the proper

paperwork and files it with you states Secretary of State. If you have a

corporation, you also going to have to apply to the Internal Revenue

Service for a Federal Employer Identification Number.

If you do hire a firm (there are several online) be certain to check with

the Better Business Bureau. And make sure to get a receipt for the

state fees you pay, because some companies will overcharge their

clients in this area after giving a supposed low quote for their services.

If this all seems like too much for your little business, it’s important to

note that even small businesses can create huge problems when they

are sued. In this litigious environment, it’s best to have the most

protection you can get.

A look at the RoC and its role

The Registrar of Companies (RoC) plays a pivotal role in facilitatingand promoting business culture. No company, under the Companies

Act, 1956, can come into existence without the approval of the RoC.

The registrar provides the certificate of incorporation which, in law, isconsidered as conclusive proof of the existence of a company. A

company, once born, cannot die unless its name is struck off the

register of companies. The office of the RoC is a huge repository of data on more than six lakh companies that operate in India. fe takes

a Closer Look at some of the important functions of the RoC:

How is a company registered by the RoC?

A company cannot come into existence on its own. It needs acertificate of incorporation which is issued by the RoC after completion

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of various statutory formalities. As part of the drill, the promoters arerequired to submit various documents to the RoC which include theMemorandum of Association (MoA),

Articles of Association (AoA), pre-incorporation agreement for

appointment of individuals as directors/ managing director and a declaration by

an authorised person (a high court lawyer or a chartered accountant) that allthe requirements of law relating to registration have been complied with.After

verifying the documents, the RoC enters the name of the company in the

register of companies and issues a certificate of ncorporation. The RoC also

issues a certificate for commencement of business. All public limited companies

are required to obtain this certificate before starting business.

RoC refuse to register a company?

It can do so on various grounds. The MoA which is submitted to the RoC contains

five clauses—

name clause;registered office clause;

objects clause;

liability clause;

and capital clause.

The RoC is required to prevent the registration of companies with an undesirable

name. In a specific case in England, two women tried to register a company as

‘Prostitutes Limited’. The companies’ registrar there refused to register this

name. In India too, no company with an objectionable name can be registered.

The RoC can also refuse to register a company with ‘unlawful objectives’.

Does the RoC’s role end with the registration of a company?The association of a company with the RoC never ends. For instance, a company

may need to change its name, its registered office or objectives. In all instances,

it will have to intimate the RoC after completion of the prescribed formalities.

Does a company have to file all its resolutions with the RoC?

The Companies Act, 1956, is quite clear in this regard. According to section 192,

every resolution, including special resolutions, have to be filed with the RoC

within 30 days of being passed by the company/ board of directors. The RoC is

required to record the resolution. Company law also provides for penalty for

failure to file the resolutions with the RoC on time. What it means is a company

will have to inform the RoC about all its activities including appointment of

directors/ managing directors, issuance of prospectus, appointment of

sole-selling agent, resolution concerning voluntary winding up, etc.

Why should the RoC keep such information?

A company is an artificial person and has an existence which is independent of

its members and promoters. It also has certain attributes. The MoA basically

defines these attributes—like name, registered office, objects, liability, capital,



etc. The objects clause states why the company exists and what it can do. A

company cannot undertake activities not authorised by the objects clause. For

instance, Indian Oil Corporation (IOC) cannot start constructing hotels without

making appropriate changes in the objects clause and informing the RoC.

The information is significant for persons wishing to deal with a company.

Legally, any person dealing with a company is supposed to know about itsbusiness, board of directors, registered office, capital, liability, directors, powers

of directors, etc. If a person overlooks these basic facts, he does so at his own

peril. The company cannot be held liable for the unathorised acts of its directors.

Anyone can seek information about a company from the RoC after paying the

prescribed fee.

What are some of the other powers of the RoC?

The RoC can ask for additional information from a company. It can its search

premises and seize its books of accounts after seeking authorisation from court.

Most importantly, the RoC can also file a petition seeking winding up of a

company.

A step-by-step guide to help you understand how to register acompany in India

Registering a company in India can take anything from 15 days to as manyas 35 days, though instances of getting the certificate of incorporation in aday to a week are also there.

Before you start the process, you have to decide on what kind of companyyou plan to set up—a private limited company, a public limited company, aproducer company or a branch of a foreign company in India.

If you are planning to start a business and looking forward to registeringyour company, here is a step-by-step guide to help you in your pursuit.

Procedure for Registration of a Partnership Firm

• The law relating to a partnership firm is contained in the IndianPartnership Act, 1932.

• Under Section 58 of the Act, a firm may be registered at anytime ( not merely at the time of its formation but subsequently

also ) by filing an application with the Registrar of Firms of thearea in which any place of business of the firm is situated orproposed to be situated.

o Application shall contain:- name of the firm place or principal place of business



names of any other places where the firm carries onbusiness.

date on which each partner joined the firm name in full and permanent address of partners. duration of the firm

o Application shall be signed and verified by all the partnersor their duly authorized agents.

o Application shall be accompanied by prescribed fee as wellas the following documents:

Prescribed Registration Form for Incorporation of aCompany. (Form No. 1 and Specimen of

Affidavit) certified true copy of the Partnership deed entered

into. ownership proof of the principal place of business

o Name of the firm should not contain any words which mayexpress or imply the approval or patronage of thegovernment except where the government has given itswritten consent for the use of such words as part of thefirms name.

• Under Section 59 of the Act, when the Registrar of Firms issatisfied that the provisions of section 58 have been dulycomplied with, he shall record an entry of the statement in theRegister of Firms and issue a Certificate of Registration.

• penalty for furnishing false particulars (Section 70)

Any person who signs any statement, amending statement,notice or intimation under this Chapter containing any particularwhich he knows to be false or does not believe to be true orcontaining particulars which he knows to be incomplete or doesnot believe to be complete, shall be punishable withimprisonment which may extend to three months, or with a fine

or with both.

• Any alterations, subsequent to Registration shall be notified tothe registrar:-

o Change in firm name and principal place of business(Section 60) shall require sending of a new application

http://business.gov.in/outerwin.php?id=http://industries.delhigovt.nic.in/Download/IN-F1A.pdf

http://business.gov.in/outerwin.php?id=http://industries.delhigovt.nic.in/Download/IN-AFF.pdf


http://business.gov.in/outerwin.php?id=http://industries.delhigovt.nic.in/Download/IN-F1A.pdf





form along with the prescribed fee, duly signed andverified by all the partners.

o Change relating to opening and closing of branches.(Section 61)

When a registered firm discontinues business at any placeor begins to carry on business at any place, such place notbeing its principal place of business, any partner or agentof the firm may send intimation thereof to the Registrar.

o Change in the name and permanent address of anypartner (Section 62)

When any partner in a registered firm alters his name orpermanent address, an intimation of the alteration may besent by any partner or agent of the firm to the Registrar

o Change in the constitution of the firm and its dissolution[Section 63(1)]

when change occurs in the constitution of the firm, any of the new, continuing or the outgoing partner, while when aregistered firm is dissolved , any person who was a partnerimmediately before the dissolution or the agent of anysuch partner or person specially authorized on his behalf,may give notice of such a change to the Registrar,

specifying the date thereof.

o Under Section 63(2), when a minor who has been admittedto the benefits of partnership in a firm attains majority andelects to become or not to become a partner, he or hisagent specially authorized in this behalf, may give noticeto the Registrar that he has or has not become a partner.

o Accordingly, the various forms prescribed under the IndianPartnership Act, 1932, for the alterations in the registeredpartnership firm are:-

a. Form No. II :- For change of principle place of business& change in the name of the firm.

b. Form No. III :- For change of the other then principleplace of business.

http://business.gov.in/outerwin.php?id=http://industries.delhigovt.nic.in/Download/Form%20No.%20II.pdf

http://business.gov.in/outerwin.php?id=http://industries.delhigovt.nic.in/Download/Form%20No.%20III.pdf

http://business.gov.in/outerwin.php?id=http://industries.delhigovt.nic.in/Download/Form%20No.%20II.pdf

http://business.gov.in/outerwin.php?id=http://industries.delhigovt.nic.in/Download/Form%20No.%20III.pdf



c. Form No. IV :- For change of name of the partners & permanent address of the partners.

d. Form No. V :- For change of constitution of forms & addition or retirement of partner.

e. Form No.VI :- For dissolution of the firm

f. Form No. VII :- For minor partner attains the age of majority.

• Partnership Act, 1932 does not provide for compulsoryregistration of firms. It is optional for partners to set the firmregistered and there are no penalties for non-registration.

However, Section 69 of the Act which deals with the effects of

non-registration denies certain rights to an unregistered firm.Under the Act :-

o A partner of an unregistered firm cannot file a suit in anycourt against the firm or other partners for theenforcement of any right arising from a contract or rightconferred by the Partnership Act unless the firm isregistered and the person suing is or has been shown inthe Register of Firms as a partner in the firm.

o

No suits to enforce a right arising from a contract shall beinstituted in any Court by or on behalf of a firm againstany third party unless the firm is registered and thepersons suing are or have been shown in the Register of Firms as partners in the firm.

o An unregistered firm or any of its partners cannot claim aset off (i.e. mutual adjustment of debts owned by thedisputant parties to one another) or other proceedings in adispute with a third party.Hence, every firm finds it advisable to get itself registered

sooner or later.

• However, non-registration of a Partnership firm shall not affect:-

o The rights of third parties to sue the firm and/or itspartners.

http://business.gov.in/outerwin.php?id=http://industries.delhigovt.nic.in/Download/Form%20No.%20IV.pdf

http://business.gov.in/outerwin.php?id=http://industries.delhigovt.nic.in/Download/Form%20No.%20V.pdf

http://business.gov.in/outerwin.php?id=http://industries.delhigovt.nic.in/Download/Form%20No.%20VI.pdf

http://business.gov.in/outerwin.php?id=http://industries.delhigovt.nic.in/Download/Form%20No.%20VII.pdf

http://business.gov.in/outerwin.php?id=http://industries.delhigovt.nic.in/Download/Form%20No.%20IV.pdf

http://business.gov.in/outerwin.php?id=http://industries.delhigovt.nic.in/Download/Form%20No.%20V.pdf

http://business.gov.in/outerwin.php?id=http://industries.delhigovt.nic.in/Download/Form%20No.%20VI.pdf

http://business.gov.in/outerwin.php?id=http://industries.delhigovt.nic.in/Download/Form%20No.%20VII.pdf



o The firms or partners in the firms which have no place of business in the territories to which this Act extends, orwhose places of business in the said territories are situatedin areas to which the act does not apply.

o any suit or claim or set-off not exceeding one hundredrupees in value which, in the Presidency-towns, is not of akind specified in Section 19 of the Presidency Small CauseCourts Act, 1882 (15 of 1882), or outside the Presidency-towns, is not of a kind specified in the Second Schedule tothe Provincial small Cause Courts Act, 1887 (9 of 1887), toany proceeding in execution or other proceeding incidentalto or arising from any such suit or claim.

o the enforcement of any right to sue for the dissolution of afirm or for accounts of a dissolved firm, or any right or

power to realise the property of a dissolved firm.

o the powers of an official assignee, receiver or Court underthe Presidency-towns Insolvency Act, 1909 (3 of 1909), orthe Provincial Insolvency Act, 1920 (5 of 1920), to realisethe property of an insolvent partner.

• Rectification of mistakes (Section 64 of the Act)

o The Registrar shall have power at all times to rectify anymistake in order to bring the entry in the Register of Firmsrelating to any firm into conformity with the documentsrelating to that firm filed under this Act.

o On application made by all the parties who have signedany document relating to a firm filed under this Act, theRegistrar may rectify any mistake in such document or inthe record or note thereof made in the Register of Firms.

• Inspection of Register and filed documents (Section 66 of theAct:)

o The Register of Firms shall be open to inspection by anyperson on payment of such fee as may be prescribed.

o All statements, notices and intimations filed under this Actshall be open to inspection, subject to such conditions andon payment of such fee as may be prescribed.



• Grant of copies (Section 67 of the Act)

The Registrar shall on application furnish to any person, anpayment of such fee as may be prescribed, a copy, certifiedunder his hand, of any entry or portion thereof in the Register of

Firms.

Registering a private limited companyRegistration of all sorts of companies in India is overseen by the Registrars of Companies (ROC), appointed under Section 609 of the Companies Act 1956.Every state has a regional office of the ROC to oversee the registrationprocess. The ROC is vested with the power to register companies in India andalso ensure they comply with all statutory requirements under the Act.

Registration process

Procedure Time to complete Cost to complete (Rs.)

1 Obtain directoridentification number(DIN) online

1 day 100

2 Obtain digital signaturecertificate online

1-6 days 400-2,650

3 Reserve the companyname with the Registrarof Companies (ROC)online

2-3 days 500

4 Memorandum andArticles of Associationvetted and printed

Has to be done withinsix months of nameapproval

Nil

5 Stamp the companydocuments either at thesuperintendent’s or anauthorized bank

1 dayCharges vary from state tostate

6 Get the Memorandumand Articles signed by atleast two subscribers

1 day Nil

7 Get the certificate of incorporation

3-7 days

4,000 for a company withauthorized capital of Rs 1 lakh(Fee keep on reducingsuccessively in slabs after this)

8 Make a seal 1 day 350

9 Obtain a PermanentAccount Number (PAN)

15 days 66 for fee and 5 for applicationform (if not downloaded)



from UTI or NSDL

10 Obtain a tax accountnumber (TAN) for incometaxes deducted at sourcefrom the Assessing Office

15 days,simultaneously withprocedure 9

55

11 Register for VAT withthe sales tax officer

12 days simultaneouslywith procedure 10

5,000 (registration) + 100(stamp duty)

12 Register withEmployees’ ProvidentFund Organization

2 days, simultaneouswith procedure 11

Nil

13 Register with ESIC(medical insurance)

1 day, simultaneouslywith procedure 11

Nil

14 Filing for governmentapproval before RBI/FIPB

for foreigners and NRIs

15 days Nil

The very first step in the process of registration begins with the prospectivedirectors of the company obtaining a directors’ identification number (DIN)and digital signature certificates. Both these can be obtained online. The nextstep involves approval of the name of the company by the ROC. One has tosubmit a list of six names (cannot be less than four) in order of preference tothe concerned ROC in Form 1A (of the General Rules and Forms) along with afee of Rs 500. The names should not resemble the name of any othercompany already registered and also should not violate the provisions of Emblems and Names (Prevention of Improper Use) Act 1950. The ROC is

supposed to respond to the application within six days, but it normally takesanywhere between two to three days. Nowadays this procedure is doneonline. The approved name is reflected on the Website of the Ministry of Company Affairs (MCA).

Following the approval of the name of the company, one has to get theMemorandum of Association (MoA) and Articles of Association (AoA) drafted.The MoA, according to Wikipedia, often simply called the memorandum, isthe document that governs the relationship between the company and theoutside world. The MoA clearly lays down the name of the company, the typeof company the objectives of the company, and the authorized capital. It alsomentions any other business company might like to venture into some time

in the future. The AoA of a company, according to Wikipedia, are theregulations governing the relationships between the shareholders anddirectors of the company. Thus, the AoA typically cover issues of shares,voting rights, dividends, provision for transfer of shares, board meetings andsimilar matters pertaining to internal functioning of the company. AoAs canbe amended by shareholders having the requisite majority. The Articles oncealtered in accordance with the Act become the Articles of Association of thecompany binding on all the members.



Once the MoA and AoA are drafted, these are printed and sent to the ROCconcerned for vetting and pointing out objections. After all objections, if any,are addressed, these are sent for stamping with the appropriate stamp duty,which varies from state to state. Request for stamping the documents shouldbe accompanied by unsigned copies of the MoA and AoA and the payment

receipt. The company must ensure that copies submitted for stamping areunsigned and have nothing written on them by hand. Once these are signed,at least two subscribers of the company should sign them, providing in ownhandwriting the name and detailed activities of the company, along with theirrespective addresses, occupations and number of shares subscribed. Theseshould be signed in presence of at least one witness.

Documents Required for Registration

Memorandum of Association of the proposed company, duly stamped

Articles of Association of the proposed company, duly stamped

Form no. 1 (Declaration of Compliance) as per the Companies General Rules & Forms 1956

Form no. 18 (notice of situation of registered office) as per the CompaniesGeneral Rules Forms 1956

Form no. 29 (for consent to act as director of a company) as per the CompaniesGeneral Rules Forms 1956

Form no.32 (particulars of directors, manager, or secretary) (in duplicate) as perthe Companies General Rules Forms 1956

Copy of the name availability letter issued by the ROC earlier

Power of Attorney on a stamp paper of the representative who appears forcorrection/alteration of any document

Other documents as ROC may require to be furnished

Finally, all the documents are sent to the ROC along with other details likeparticulars of appointment of the managing director, directors, manager andsecretary. This is followed by paying a registration fee, which depends on thecompany’s authorized capital. Once this procedure is completed, thecompany is registered as a private limited company under the Companies Act1956. The ROC issues a certificate of incorporation to the company

concerned, which can begin its operations right after getting this certificate.

The whole process, thus, consumes anywhere between 15 to 20 days. Thereare a few more necessities that a company needs to fulfill, but it can do thissimultaneously with starting operations. These necessities include getting apermanent account number (PAN), a company seal and registering for VATobtaining tax identification number (TIN). The company also has to registerfor professional tax, with the Employees’ Provident Fund Organization and



medical insurance. These procedures can be taken along with the procedureto register for obtaining TIN.

Rules for a private limited company

1. There can be maximum of 50 shareholders.

2. Minimum paid-up capital required is Rs 100,000.3. A minimum of two directors and two shareholders are required.

4. No limit on maximum number of directors. Articles of

Association of a particular company can fix a maximum number for

itself.

5. There can be no invitation to the public for subscription of

shares or debentures.

6. There can be no acceptance of deposits from public. However,

deposits can be accepted from members, directors and their relatives.

7. Transfer of shares is restricted as per the Articles of Association.

8. Compliance requirements are lower in number.Private Company vs. Public Company

Description Private Public

ShareholdersMinimum 2, maximum50

Minimum 7, no limit on maximum

Director Minimum 2 Minimum 3

Paid-up capital Minimum Rs 100,000 Minimum Rs 500,000

Public depositsRestriction on public

deposits

No restriction

Transfer of sharesRestricted as perArticles of Association

No restriction

Compliancerequirements

Lesser in number More in number

Commencement of business

Possible on obtainingcertificate of incorporation

Possible only after gettingcommencement of business certificatewithin six months of getting certificateof incorporation

Registering a public limited companyRules for a public limited company

1. Minimum number of shareholders is seven. No restriction on

maximum number of shareholders.

2. Minimum paid up capital requirement is Rs 500,000.



3. Minimum number of directors is three. Company with paid-up

capital and reserves of Rs 5 crore or more or turnover of Rs 50 crore or

more should have a minimum of seven directors.

4. No limit on the maximum number of directors, the limit of which

can be fixed by the Articles of Association of the company, though in

order to have more than 12 directors permission of the central

government is required.

5. No restriction on transfer of shares.

6. No restriction on acceptance of public deposits.

7. Invitation to the public for subscription of shares or debentures

is allowed.

8. Compliance requirements are far higher.

procedure for registering a public limitedcompanyThe procedure for registering a public limited company is more or less same,with a few additional steps needed to be taken. These are:

1. Consent of directors to act as such in Form No 29.

2. Arrange for payment of application and allotment money by

directors on shares taken or agreed to be taken.

3. File the Statement in Lieu of Prospectus with the ROC in

Schedule-iv of the Companies Act.4. File a declaration in Form-20 duly signed by one of the directors

stating that every director has paid to the company for shares taken or

contracted to be taken for cash in same proportion as is payable on

application.

5. Obtain the Certificate of Commencement of Business. Unlike a

private limited company, a public company is not authorized to start

business upon the grant of the Certificate of Incorporation. It has to

obtain a Certificate of Commencement of Business separately. The ROC

issues this once the company fulfills all the previous formalities and

submits a statutory report to it after holding a statutory general body

meeting (within six months of receiving the certificate of incorporation).

Registering unlimited companies is not so common in India as they are

more or less like partnership firms where partners are responsible for all

the actions of the companies. Their liabilities are not limited to just their

shares like it is in case of limited companies.



Registering a foreign company in India

Foreign investors willing to incorporate a company in India need to seekgovernment approval for doing so. Some approvals come through theautomatic route and some need special approvals. For sectors in whichinvestment is allowed under the automatic route, an application is required to

be submitted to the Reserve Bank of India (RBI). Investors are required tonotify the concerned regional office of the RBI within 30 days of receipt of inward remittances and file the required documents with that office within 30days of issue of shares to foreign investors. For sectors where prior approvalis required, proposals for investment by foreign investors are routed throughtheForeign Investment Promotion Board (FIPB).

The rest of the procedure is the same as that of registering a public or aprivate company, depending on what type of entity the foreign investors planto put in place. A foreign company can form a joint venture with an Indianpartner or establish its own subsidiaries. A company once incorporated inIndia even with 100% foreign ownership is treated like any other Indian

company.

Practically, there can be lots of problems for a foreigner in establishing acompany in India. “If you are not planning to set up your company in Delhior Mumbai, problem is more acute. Make sure you have an efficient advisorwho has prior experience of getting foreign companies registered in India,” says Christopher Rudd, a New Zealand resident who had to go through lots of procedural delays while establishing an export–import firm in India.

He adds, “Probably RBI officials in regional offices are also not aware of allprocedures as applications for foreign investment approvals at these centersare very few.”

However, a foreign investing company is entitled to acquire shares of anIndian company without obtaining any prior permission of the FIPB subject tocertain prescribed guidelines. But in case such an acquisition results in theacquisition of a company listed on the stock exchange, it would requireapproval from the Security Exchange Board of India (SEBI).

A foreign company is also free to set up its operations in India through aliaison office, project office or branch office. Companies have to registerthemselves with the ROC within 30 days of setting up a place of business inIndia. These offices are set up in the country only with the approval of the

RBI and are bound to carry on permitted activities only.

Producer company

With the number of cooperative societies with huge business set up rising,the government opted for an amendment allowing a cooperative to turn intoa ‘producer company’. This became possible with the Companies(Amendment) Act 2002, (1 of 2003), which added Part IXA to the CompaniesAct. According to the new provision, persons engaged in primary produce canparticipate in the ownership of a producer company, which can better be



understood as a hybrid between a private limited company and a cooperativesociety.

Under the Act, ten or more individuals involved in agriculture, handloom,handicraft or in cottage and ancillary industries can together incorporate aproducer company. On registration, the producer company shall function as if it is a private limited company. Members of the company will have limitedliability similar to a private limited company. However, a producer companyis exempted from maintaining a minimum paid-up capital of Rs 1 lakh.Provision of maximum 50 shareholders is also not applicable. Equity of themembers cannot be publicly traded, though it can be transferred.

Keywords in company name and minimum authorized capital

Sl.No.

KeywordsRequired minimumauthorized capital (Rs)

1 Corporation 5 crore

2International, Globe, Universal, Continental, Inter-Continental, Asiatic, or Asia being the first word of the name

1 crore

3If any of the words in option 2 above is usedwithin the name (with or without brackets)

50 lakh

4Hindustan, India, or Bharat, being the first wordof the name

50 lakh

5If any of the words of option 4 above is usedwithin the name (with or without brackets)

5 lakh

6 Industries/Udyog 1 crore

7 Enterprises, Products, Business, or Manufacturing 10 lakh

Source: Ministry of Corporate Affairs.

Every producer company is to have at least five and not more than 15directors. Usually, like a public limited company, the number of directors iskept at 12. The board also appoints a full-time chief executive, who can beentrusted with substantial powers of management as the board maydetermine. A producer company is also exempted from the obligation of

keeping a full-time secretary. Only a company having an average annualturnover exceeding Rs 5 crore in three consecutive years need to have a full-time secretary. This is quite in contrast to both private and public limitedcompanies, as they have to keep one if their paid-up capital is above Rs 2crore.

Section 25 company

Companies Act 1956 provides for registration of a not-for-profit companyunder Section 25. Under this provision a company can be formed to promote



commerce, art, science, religion, charity or any other useful object. Anyprofit or other income accruing of these companies have to be used forpromoting the very objectives of the company only. The company formedunder Section 25 is barred from paying any dividend. The company is alsoexempted from having a minimum paid up or authorized capital. Other rules

for registering a Section 25 company is same as for any other privatecompany. However, a company formed under Section-25 needs a minimumof three trustees, with no upper limit on the number. The board of management is in the form of a board of directors or managing committee.No stamp duty is required to get AoA or MoA stamped by the ROC.Other business entities

Other forms of business entities include sole proprietorship and partnershipfirms. Sole proprietorship is the most common and simple type of businessentity, where legal formalities are few. There is no obligation to file financialinformation to the ROC, to keep records and get them audited. There is nolegal distinction between the proprietor and the company, and hence liabilityis unlimited.

Partnership is something where two or more proprietors come together toform a bigger pool of capital, skills and resources. Partnerships are governedby the Partnership Act 1932. The Act restricts the maximum number of partners to ten if the firm thus formed is a banking business. For businessesof other types, the maximum number of partners allowed are 20. Normally,partners get profits divided in the proportion of their investment, but thingsare governed according to the “partnership deed” or “agreement” formed atthe beginning. The agreement, which can be prepared by a lawyer, shouldcontain all information about the partnership — the amount of initial capitalcontributed by each partner, profit or loss sharing ratio for each partner,

salary or commission payable to the partners, if any, duration of business, if any, name and address of the partners and the firm, duties and powers of each partner, nature and place of business and any other term andconditions the partners want to include. Liability of partners in a partnershipfirm in also unlimited. Unlike companies, partnership firms have no separatelegal existence from its owners. No partner can sell or transfer his/her shareto any one else without the consent of other partners.

Limited Liability Partnership Act 2008

This is a new law that has been enacted recently to bridge the gap betweenthe existing partnership laws and the provisions under the Companies Act1956. The law limits the liability of a partner to his or her own stakes only in

the company. No partner is liable on account of independent or unauthorizedacts of other partners. At the same time, all partners are also held jointlyliable for all acts of the firm, irrespective of the stake of a person in thecompany. The Act allows the partners to organize their internal managementon the basis of a mutually-arrived agreement, as is the case in anypartnership firm in India.



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Company Formation in India

Companies Act

Companies incorporated or registered in India are governed by theCompanies Act 1956.

Shareholders and Directors

A. There is no need to appoint local director or shareholder to incorporatea company in India.

B. Foreign nationals can incorporate company in India and hold foreignequity to the extent of 100% which is dependent upon sector in whichcompany will operate and is subject to approval from either ReserveBank of India(RBI) or Foreign Investment Promotion Board (FIPB).

Memorandum & Articles of Association

The memorandum and articles are the primary legal document of acompany. Memorandum contains the name of the company, authorizedshare capital, initial members and object clause. Articles are a set of internal regulations that govern the day to day operations of the company.Both memorandum and articles have to be filed with Registrar of companies at the time of incorporation or if there are any changesthereafter. At least two subscribers (shareholder) are required in thememorandum and each of the subscriber must subscribe to at least oneshare in the company.

Share Capital

Shares must be expressed in a fixed amount. "No par value" or "bearer"shares are not permitted. Shares to be subscribed must be expressed inIndian rupees.

Annual Meetings

An annual general meeting (AGM) must be held once in every financialyear and not more than 6 months after the end of financial year. However,a company need not hold its first AGM until 18 months of its incorporation.

Public Filings

The names and personal particulars of the directors and secretary, registerof charges, share capital, registered office address etc. must be filed withthe Companies Registry for public inspection upon incorporation and if there is any change thereafter.

Accounts & Auditors



Every company is required to appoint an auditor each year at its AGM. Anauditor must be qualified by virtue of the Institute of CharteredAccountants of India Act 1949 and completely independent of thecompany. Audited accounts of the company serve as tool for variousstakeholders like creditors, bankers, investors and revenue authorities.

Benefits of company incorporation through us:

Our executives will spend the time it takes to ensure your Indian offshorecorporate structure provides the following benefits:

• Limited liability for corporate directors;

• Minimisation of international tax liabilities;

• Minimal statutory filing obligations;

• Incorporation in a politically stable jurisdiction;

• A corporate bank account with an international retail or private bank;

• Nominee shareholders and directors for confidentiality of beneficialowners;

• Low share capital requirements;

Corporate Finance Services

We help organisations in following matters:

• Preparations of Project Reports including Financial Viability of theProject.

• Assisting clients in raising finance through various instrumentsavailable in market viz. private placement of shares, Inter-CorporateDeposit, Terms loans, working capital limits.

• Assistance in External Credit Borrowing (ECB) from overseas bodiesand approval from Indian authorities.

Corporate Matters

Company legislation requires businesses to perform many administrationtasks that take up a lot of valuable company time. The last thing you needas a business owner is to be stressed out trying to ensure you arecomplying with the Companies Act 1993.

The possible threat of penalties for failing to keep up with the changing

rules is too great a risk to take.

Here, we are able to relieve this burden for you. Our services include:

• General advice on company law

• Company formations

• Filing of annual returns on your behalf



• Preparation of all documentation related to minutes and resolutions

• Maintenance of statutory books

• Assistance in changes of directors, shareholders, addresses, and officedetails

•

Bonus Issues• Share transfers

• Registered Office Facility

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Establishing an IT or ITES Company

We specialize in setting up your business in India IT and ITES

sector. Our expert team provides the following services for clients

in IT & ITES sector:

• Incorporation of a company.

• Compliance with Registrar of Companies (ROC).

• Liaison with the Reserve Bank of India towards FDI approvals

• Registration of the Corporation under STP scheme to avail the abovereferred benefits.

• Registering the Corporation with the Income Tax Department andobtaining Permanent Account Number (PAN) and Tax Account Number(TAN).

• Setting up Payroll and Payroll Taxes.

• Setting up the accounting by using the client preferred software.

We do not just set-up your business in India. We also continue tohelp you by:

• Offering part time CFO services.

• Undertaking write-up work for you.

• Preparation of Financial statements.

•

Calculation and payment of withheld taxes.• Preparation and filing of returns of income and withheld taxes.

• Filing of various returns with the Registrar of Companies.

• Any other consulting under the Income Tax Act and the CompaniesAct.



This way you can focus on core issues of business of softwaredevelopment / processing and we take care of the other non-corefunctions.

Basics of Registering a Company in India

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