How to set up a company in India?

While setting up a business in India comes with many benefits, such as:

1. Huge scope for business due to growing economy;

2. Huge and qualified workforce for all kinds of sectors a labor force of nearly 530 million, of which the majority is under 30 years of age;

3. Low/economical operation cost;

4. Fertile ground for start-ups due to India being a hub for certain kinds of start-ups including but not restricted to technology, e-commerce, and financial services;

5. Growing ease of doing business and business friendly laws;

establishing a company in India is not easy. It is therefore important to guidance about legal, financial and cultural complexities.

That said, India is a country with enormous potential for foreign companies. The International Monetary Fund (IMF) says that India will be the fastest growing economy by 2019, with a growth rate of 7.8%, with positive prospects in the medium term.

Who can set up a company in India?

Anybody interested in doing business in India, can set up a business. It could for example be a joint venture (in case of starting a business with an existing company in India) or wholly owned subsidiary (of a foreign holding company) can set up a business in India. The kind would depend on the business activity that has to be undertaken on the ground. Is it trading, manufacturing, software development etc., one would be more inclined towards setting up a private limited company, due to the investment possibilities that it brings. Is it a company that is interested in providing small scale training and is already working with partners in India or abroad, it would be better off setting up a limited liability partnership. The advantages would be not having to deal with shareholders, dividend tax, less compliances post incorporation. 

Types of business that can be set up in India

Depending on the nature and purpose of the company, there are various options for foreign companies/investors to enter India, such as in the form of a: Representative Office, Branch Office, Liaison Office, Private Limited Company, Limited Liability Company, etc. After the incorporation one has to deal with 'post incorporation' formalities and the company can, among other things, open a bank account.

Public or private companies can be formed with limited or unlimited liability. The limited liability company (so-called private limited companies) is the preferred form in India, whereby personal liability remains limited. A foreign company doing business in India may also set up a branch office, which is liable to tax, and where the activities are limited to representing the parent company as a buying or selling agent, conducting research, promoting cooperation between India and foreign organizations, and exports and imports. A Project Office can be set up to carry out specific projects. A Liaison Office can facilitate and promote business activities at the parent company as a communication channel between the foreign parent company and Indian companies.

Documents required for incorporation 

In most cases, apart from the basic details of the foreign director, resident director and authorised representative of the shareholders in case of a corporate body, documents such as passport for proof of identity and excerpt from the local municipality as a proof of address are required to be legalised by the notary and apostilled by the local court in the respective country. Incorporation documents vary but mostly include board resolutions, basic declarations issuing consent from the directors, wherever applicable No Objection Certificate from owners of the property the company is renting etc. but most important documents being the Memorandum of Association and Articles of Association, as required by the Indian company law.

After the company has been incorporated, one needs to open a bank account in an Indian bank, bring in the Foreign Direct Investment, and intimate the Reserve Bank of India.

How to select a name

Before a company can be incorporated, one needs to get a name registered. This name should not be in conflict with the existing name in India. It is recommended to have at least three names, in order of preference, in case the first one gets rejected. One needs to ensure that there is no registered trademark in the same name by checking at ipindia.nic.com. If there is one, you can get an Non Objection Certificate from the trademark owner authorising you to use it. Also, the first half of the name has to  be unique. Second half has to describes the sector one is in.

Geographical references, adjectives, abbreviations and generic terms have to be avoided. Also, the words bank, exchange and stock exchange require approval from RBI and SEBI. If a company wishes to use a name used by for instance its holding company, the holding company is required to issue a Non Objection Certificate in order to be able to use the same name in India.

Registered Office

For incorporating a company, one needs to have an registered office. In initial stages, this is the correspondence address for the company being incorporated as most foreign companies don't have their own address at this point. In such cases, the company can use the address of the local director or any other address for the registration purposes. This does not have to be a commercial space and can be a residential address, of for instance the Indian director. If the local director is the owner of the property, he needs to issue a Non Objection Certificate and provide a rental agreement between him and the promoters of the company being set up. 

How can Miss Legal India help?

Miss Legal India can help companies with the following:

• Pre-incorporation analysis: advisory on FDI automatic route or through government approval, proposed business, business structure;
• Name registration;
• Incorporation of the business (private limited, LLP, etc.); 
• Post incorporation formalities such as opening a bank account, intimation of the Reserve Bank of India;
• Tax registrations;
• Company law compliances;

Miss Legal India makes sure our clients do not have to deal with the many layered bureaucracy and red tape in India. To make the incorporation process as smooth as possible, we guide our clients through the incorporation process from A to Z.  Apart from this, we also help our clients with all their legal queries while setting up in India, from drafting employment agreements, vendor agreements, review of existing agreements with parties involved, to protecting (existing and new) intellectual property, transfer pricing between associated enterprises etc. 

If you have questions about starting up in India or assistance with anything related to it, please contact Miss Legal India.