Business Guide For Foreign National

India has been one of the fastest growing economies globally amongst the developing countries. The rate of growth has been unprecedented and statisticians have forecasted India to be the 3rd largest economy by 2035.

This growth has been fuelled by demand in the core sector, technology, healthcare, consumer segment, logistics and in its wake, have led to opportunities and entrepreneurship never seen before. Also, the demographic dividend (population) is highly favourable with India having a young population for the next 35 years, with the current average age at 29 years.

All these factors have piqued interest amongst the global community for investments in India and this is exhibited by the Foreign Direct Investments (FDI) flows into India. The Government on its part has also been simplifying the regulatory climate and making it conducive for cross border investments and ease of doing business. The World Bank Index 2020 for Ease of doing business has placed India on the 63rd Rank. India jumped 79 positions from rank 142 in 2014. While there is still a long road ahead, the efforts put in by the Government have been immense and will continue eclipsing all barriers in the days to come. Non- resident Investor segments includes Individuals as well Body Corporates, who have shown keen interest in Investments in India in the last couple of years. The growing numbers in the Non-Resident investments across greenfield projects, traditional businesses and even start-ups are a testimony of their confidence in the economy and the opportunities it presents in growing their wealth.

Contrary to many of the retrograde feedbacks Non-Residents would have about setting up a businesses in India due to the regulatorily climate, our belief is that if various legal compliances and laws of land are understood, managed properly in the right framework, the process is simple and seamless or else it could result in a nightmare.

The most widely used form of business for Foreign Direct Investment by Non-Residents is Private Limited Company for setting up their business in India. Private Limited Company with Foreign Direct Investment in India is governed by Companies Act, 2013 & Foreign Exchange Management Act, 1999 and it is regulated by Ministry of Corporate Affairs (MCA) & Reserve Bank of India -the regulatory bodies.

What awesome is that the process of registration of a Private Limited Company is quite simple and can be completed within a week and the best part is that it can be registered without your physical presence. In other words, you can be in any corner of the world and can register a Private Limited Company in India.

The idea here is to remove cobwebs and to share thoughts on how Non-Residents can register a Private Limited Company in India, fulfil compliances under Companies Act, 2013 and Foreign Exchange Management Act, 1999, once the company is registered in an effortless manner.

Before we dive deeper into the steps of registering a Private Limited Company in India, let us understand the basics of Private Limited Company and various terms used while registration of Private Company. Effort has been made to explain these terms in a simple language so it can be easily understood and the right perspective gained from it. Surely once you skim through these you will be in the better position to appreciate and understand the registration process.

Top 8 commonly used Key terms in Company registration activity:

1. Shareholders:

a. Shareholders are those people who invest money in the company, they are also known as owners of the company.

b. Minimum number of shareholders required are 2 (Two) to start the company.

c. Shareholders and Directors can be same person.

d. Any individual or registered Body Corporate having legal existence and identity in the eyes of law can become shareholder in the company.

2. Directors

a. The person(s) who manage day to day affair of the company are known as Director of the Company and are fully responsible for any type of default/noncompliance in the company.

b. Minimum two number of Directors are required in the company. Out of these, 2 (Two) directors 1 (One) should be mandatorily Indian Resident as defined under the Income Tax Act, 1961.

c. Any natural person of sound mind can be appointed as the Director of the company.

d. Directors are always appointed/confirmed by the shareholders of the company.

e. The person who is appointed as the director of the company is allotted 8 digits unique number ie; Director Identification Number (DIN) and the same number can be used for all the subsequent appointments as and when required.

3. Digital Signature Certificate

DSC is the abbreviated form of Digital Signature Certificate used commonly in India. It is electronic form of signature used for signing all applications for registration of the company and other formal documents.

4. Memorandum of Association

Memorandum of Association is the charter document of the company and it contains the following information:

a. Name of the Company;

b. Objects;

c. Place of Registered Office;

d. Authorized Share Capital (as defined below);

e. Subscribers to Memorandum

5. Articles of Association

Articles of Association is also the charter document of the company containing internal rules and regulation of the company. It also defines interse roles & responsibilities between shareholder and director, directors and company and company & outsider.

6. Registered office

You can select any place to be your registered office of the company. State selection is very important role while selecting your registered office as your company can claim benefits from various policies of the state governments in addition to central government benefits depending on the type of your business.

7. Share Capital

a. There are 2 (Two) types of share capital i.) Authorized Share Capital and ii.) Paid Up Share Capital.

b. Authorized share capital means the capital mentioned in the memorandum of association up to which the company is authorized to raise the money from the shareholders.

c. Paid up capital means the capital which is raised from the shareholder of the company.

d. Company cannot raise capital more than its authorized capital. In order to raise more capital company needs to alter the memorandum of association and increase its authorized capital post which the paid up capital can be raised.

8. Ministry of Corporate Affairs

Registration of Private Limited Company in India is governed by Ministry of Corporate Affairs (MCA). You can visit www.mca.gov.in for obtaining more information on the governing authority. Ministry of Corporate Affairs has further delegated powers to Central Registration Centre (CRC) which looks after all the matters related to registration of all type companies and Limited Liability Partnership (LLP) and their routine compliances.

Now that you have a hang on the terms used in registration of Private Limited Company in India, lets now get to our main agenda of getting a grip on the process of registration of Private Limited Company in India for Non-Residents. Here are the steps for you to understand the complete registration process.

6 STEPS to Register a Private Limited Company for Non-Residents (Individuals/Body Corporates)

Step 1: Obtain digital signatures (DSCs) of all people who are required to be appointed as the Director and individual shareholder of the company.

Note: In case shareholder is body corporate then Digital Signature is not required.         

Step 2: Choose a unique name for the proposed company to be registered. Name availability can be checked by Clicking Here

Once the name availability search is completed, then the application is required to be made in Form Spice + Form (Part A) for reservation of the proposed name.

Quick Tip: Please also undertake a trademark search before making name application of the proposed name as it reduces the chance of getting name rejected. Trademark search can be done by Clicking Here 

Step 3: Once the confirmation for proposed name is received from the Ministry of Corporate Affairs, you are required to proceed to filing, complete application with all the details of shareholders, directors, share capital, main objects, registered office etc in Spice+ Form (Part B), Spice+ MOA & AOA, Spice+ Agile Pro with all the requisite documents need to be attached with the said form for verification.

A. Following are the documents required in case Foreign Direct Investment is done by Non-Resident (Individual) who can be Director and/or Shareholder of the proposed Indian company

1. PAN, if available

2. Passport Copy Mandatory

3. Proof of Address (Electricity Bill/Bank Statement/Telephone Bill/Mobile Bill not older than 2 months)

Note: 

- If the documents are signed in India, then copy of Visa and stamped passport, proving his/her presence in India at the time of signing is required.

- If the documents are signed outside India, then the same have to be notarized by a Public notary of the residence country and consularized or apostilled by the competent authority, as the case may be.

B. Following are the documents required in case Foreign Direct Investment is done by Non-Resident (Body Corporate) who can only be a shareholder of the proposed Indian company

1. Charter Documents (Memorandum of Association and Articles of Association

2. Proof of Identity & Address s defined above for the Director of the Body Corporate attesting the Charter Documents

Note: All the documents are required to be duly translated in English and required to be certified by Indian Consulate

C. Following are the documents required for Registered Office Address:

1. Proof of Registered office address (Conveyance/ Lease deed/Rent Agreement/Maintenance Bill).

2. Copy of the utility bills of the registered office (Electricity Bill/Telephone Bill not older than two months).

Step 4: Submit the complete application with the Ministry of Corporate Affairs as prepared in Step 3 by using Digital Signature of all the proposed Directors of the Company.

Step 5: Submitted details and documents in Step 4 will be verified by the authorities and on it being found in order they would proceed for approval of the application. In case of any discrepancy found by the Central Registration Centre (CRC), then the application could be sent back with the remark for resubmission within the given time frame.

Step 6: The last step in completing the registration process is issuance of Certificate of Incorporation (COI and unique Corporate Identification Number (CIN) by the CRC and the same is sent on the email used during the registration process.

Please make note that no hard copies of any documents are ever sent by MCA or CRC to Director/Shareholder or to company at the registered office.

And viola, that completes the Registration process with the receipt of the COI and CIN no. Now that you have the green light to start business operations in India, you may still want to know post company registration what the ongoing or routine compliances would be etc.

You are in luck and we will try to answer some of the most common queries. You may be curious to understand the post compliance required to be complied by Private Limited Company under Companies Act, 2013 and Foreign Exchange Management Act, 1999 (FEMA). Well, here is the take;

1. Post Registration compliances under Companies Act, 2013

a. Holding First Board Meeting within 30 days of registration.

b. Appointment of First Statutory Auditors within 30 days of registration

c. Depositing fund in the Company’s Bank Account by the Non-Resident Shareholder within 60 days of registration.

d. Issuance of Share Certificates to Non-Resident Shareholders within 60 days of registration.

e. Filing of Form INC 20A i.e. Business Commencement Certificate within 180 days of registration.

2.  Post Registration compliances under FEMA, 1999

a. Filing of Form FC-GPR for reporting of allotment of shares within 30 days of allotment of shares to Non-Resident.

Surely, we hope if you are a Non-Resident you have got some mighty valuable inputs on this important topic of making investments in India. Last but not the least the process and the compliances for registering a Foreign Subsidiary in form of Private Limited Company remains the same as explained above with a small change that in order to form a Foreign Subsidiary there should be one Shareholder who shall be Non Resident Body Corporate holding at least 51% of paid up share capital of the proposed Indian company.

Instabizfilings has been at the forefront of helping Non-Residents Individuals and Body Corporates to make Foreign Direct investments into India by hand holding the entire process and also deeply engaged with these relationships in fulfilling their routine compliances. Our Online platform backed by competent professionals have the expertise across a wide array of regulatory, compliance and a multitude of business solutions making business easy.

Feel free to write to us/ contact us on connect@instabizfilings and we would only be glad to help. You could also subscribe to our Newsletter for regular inputs.