Form a Private limited Company in India- minimum share capital=Rs 1 lakh and 2 directors, in just 10 working days-
Step by step guide to Formation/Registration/Incorporation of a Private Limited Company, in India.
A Registered Business Name: This must be followed by the word ‘Limited' or ‘Ltd'. The Companies Registration Office exercises some control over the choice of name, it cannot be identical (or very similar to) the name of an existing company. It won't be considered if it is offensive or illegal and the use of certain words in a company (for example, `Institute', `National') can only be used in certain circumstances. The company name must be displayed in a conspicuous place at every office, or other premises where the company carries out business.
1. What are the forms in which business can be conducted by a foreign company in India?
A foreign company planning to set up business operations in India has the following options:
Such offices can undertake activities permitted under the Foreign Exchange Management (Establishment in India of Branch Office or other place of business) Regulations, 2000.
2. How does a foreign company invest in India? What are the regulations pertaining to issue of shares by Indian companies to foreign collaborators/investors?
FDI up to 100% is allowed under the automatic route in all activities/sectors except the following which require prior approval of the government:
FDI in activities not covered under the automatic route requires prior Government approval and are considered by the Foreign Investment Promotion Board (FIPB), Ministry of Finance. Application can be made in Form FC-IL, which can be downloaded from www.dipp.gov.in. Plain paper applications carrying all relevant details are also accepted. No fee is payable.
General permission of RBI under FEMA
Indian companies having foreign investment approval through FIPB route do not require any further clearance from the Reserve Bank of India for receiving inward remittance and issue of shares to the non-resident investors. The companies are required to notify the concerned regional office of the Reserve Bank of India of receipt of inward remittances within 30 days of such receipt and submit form FC-GPR within 30 days of issue of shares to the non-resident investors.
3. Which are the sectors where FDI is not allowed in India, under the Automatic Route as well as Government Route?
FDI is prohibited under Government as well as Automatic Route for the following sectors:
4. What should be done after investment is made under the Automatic Route or with Government approval?
A two-stage reporting procedure has been introduced for this purpose.
a) Non-resident entity/ies (other than individuals) to whom it has issued shares does / do not have any existing joint venture or technology transfer or trade mark agreement in India in the same field.
b) The company is not investing in an SSI unit & the investment limit of 24 % has been observed/ requisite approvals have been obtained.
c) Shares have been issued on rights basis and the shares are issued to non-residents at a price that is not lower than that at which shares are/were issued to residents.
d) Shares issued are bonus shares.
e) Shares have been issued under a scheme of merger and amalgamation of two or more Indian companies or reconstruction by way of demerger or otherwise of an Indian company, duly approved by a court in India.
5. What are the guidelines for transfer of existing shares from non-residents to residents or residents to non-residents?
Transfer from Non-Resident to Resident:
The term 'transfer' is defined under FEMA as including "sale, purchase, acquisition, mortgage, pledge, gift, loan or any other form of transfer of right, possession or lien."
The FEMA Regulations give specific permission covering the following forms of transfer i.e. transfer by way of sale and gift. These permissions are discussed below:
A: Transfer by way of sale:
A person resident outside India can freely transfer share/convertible debenture by way of sale to a person resident in India as under:
B: Transfer by way of Gift:
A person resident outside India can freely transfer share/convertible debenture by way of gift to a person resident in India as under:
Transfer from Resident to Non-Resident:
A: Transfer by way of sale - General Permission under Regulation 10 of Notification No. FEMA 20/2000-RB dated May 3, 2000.
This general permission is not available where:
B: Transfer by way of gift:
A person resident in India who proposes to transfer to a person resident outside India [other than erstwhile OCBs] any security, by way of gift, shall make an application to the central office of the foreign exchange department, Reserve Bank of India furnishing the following information, namely:
(i) 5% of the paid up capital of the company per donee, and
(ii) Amount does not exceed $25,000 per calendar year for each donor. The valuation of these shares shall be in accordance with pricing guidelines prescribed.
6. What if the transfer from resident to non-resident does not fall under the above facility?
In case the transfer does not fit into any of the above, either the transferor (resident) or the transferee (non-resident) can make an application for the Reserve Bank's permission for the transfer. The application has to be accompanied with the following documents:
7. Are the investments and profits earned in India repatriable?
All foreign investments are freely repatriable except for the cases where NRIs choose to invest specifically under non-repatriable schemes. Dividends declared on foreign investments can be remitted freely through an Authorised Dealer.
8. What are the guidelines on issue and valuation of shares in case of existing companies?
i) The average of the weekly high and low of the closing prices of the related shares quoted on the stock exchange during the six months preceding the relevant date or
ii) The average of the weekly high and low of the closing prices of the related shares quoted on the stock exchange during the two weeks preceding the relevant date.
9. What are the regulations pertaining to issue of ADRs/GDRs by Indian companies?
10. What is meant by Sponsored ADR & Two-way fungibility Scheme of ADR/GDR?
11. Can Indian companies issue Foreign Currency Convertible Bonds (FCCBs)?
12. Can I invest through Preference Shares? What are the regulations applicable in case of such investments?
13. Can shares be issued against Lumpsum Fee, Royalty and ECB?
Issue of equity shares against lump sum fee, royalty and external commercial borrowings (ECBs) in convertible foreign currency are permitted, subject to meeting all applicable tax liabilities and sector specific guidelines.
14. Other than issue of shares under Automatic /Government Route, what other general permissions are available under RBI Notification No.FEMA 20 dt.3-5-2000?
15. Can I invest in unlisted shares issued by a company in India?
Yes. As per the regulations/guidelines issued by the Reserve Bank of India/Government of India, investment can be made in unlisted shares of Indian companies.
16. Can a foreigner set up a partnership/proprietorship concern in India?
No. Only NRIs/PIOs are allowed to set up partnership/proprietorship concerns in India. Even for NRIs/PIOs investment is allowed only on non-repatriation basis.
17. Can I invest in Rights shares issued by an Indian company at a discount?
There are no restrictions under FEMA for investment in Rights shares at a discount, provided the rights shares so issued are being offered at the same price to residents and non-residents.
II - Foreign Technical Collaboration
1. What are the payment parameters for foreign technology transfer under the Automatic Route of Reserve Bank of India? How should royalty be calculated?
2. What should be done, if Automatic Route of Reserve Bank of India for technology transfer is not available?
Proposals, which do not satisfy the parameters prescribed for automatic route of RBI, require clearance from Department of Industrial Policy and Promotion, Ministry of Commerce and Industry, Government of India.
III -- Foreign Portfolio Investment
1. What are the regulations regarding Portfolio Investments by Foreign Institutional Investors (FIIs)?
2. What are the regulations regarding Portfolio Investments by NRIs/PIOs?
IV - Investment in Government Securities and Corporate debt
1. Can a Non-resident Indian invest in Government Securities/Treasury bills and Corporate debt?
Under the FEMA Regulations only NRIs and SEBI registered FIIs are permitted to purchase Government Securities/Treasury bills and Corporate debt. The details are as under;
A. A Non-resident Indian can purchase,
(1) i) Government dated securities (other than bearer securities) or treasury bills or
units of domestic mutual funds;
ii) bonds issued by a public sector undertaking(PSU) in India;
iii) shares in Public Sector Enterprises being disinvested by the Government of India.
(2) They can also invest, on non-repatriation basis, in dated Government securities (other than bearer securities), treasury bills, units of domestic mutual funds, units of Money Market Mutual Funds in India, or National Plan/Savings Certificates on non-repatriation basis. The guidelines for these schemes are framed by the concerned Government agencies.
B. A SEBI registered Foreign Institutional Investor may purchase, on repatriation basis, dated Government securities/treasury bills, non-convertible debentures/bonds issued by an Indian company and units of domestic mutual funds either directly from the issuer of such securities or through a registered stock broker on a recognised stock exchange in India. The FIIs is required to ensure that;
i) the FII allocation of its total investment between equity and debt instruments (including dated Government Securities and Treasury Bills in the Indian capital market) should not exceed the ratio of 70:30.
ii) In case the FII is set-up as a 100% debt FII, it can invest the entire corpus in dated Government Securities including Treasury Bills, non-convertible debentures/bonds issued by an Indian company subject to limits, if any, stipulated by SEBI in this regard.
The Investment in Government Securities/Treasury bills and Corporate debt is subject to a ceiling decided in consultation with the Government of India. Investment limit for the FIIs as a group in Government securities currently is USD 3.2 Billion. The limit for investment in Corporate debt is USD 1.5 billion. At present, the FIIs can also invest in Innovative instruments such as Upper Tier-II capital upto a limit of USD 500 million.
V - Foreign Venture Capital Investment
1. What are the regulations for Foreign Venture Capital Investment?
A SEBI registered Foreign Venture Capital Investor with general permission from the Reserve Bank of India can invest in a Venture Capital Fund or an Indian Venture Capital Undertaking, in the manner and subject to the terms and conditions specified in Schedule 6 of RBI Notification No. FEMA 20/2000-RB dated May 3, 2000 as amended from time to time.
VI - Procedure for opening Branch/Project/Liaison Office
1. How can foreign companies open Liaison/Project/Branch office in India?
Foreign company can set up Liaison/Branch Offices in India after obtaining approval from Reserve Bank of India. Reserve Bank of India has given general permission to foreign companies to establish Project Offices in India subject to certain conditions.
2. What is the procedure to be followed for obtaining Reserve Bank's approval for opening Liaison Office/Representative Office?
3. What is the procedure for setting up Project Office?
4. What is the procedure for setting up branch office?
Step 1. Get the DIN (Director Identification Number) & DSC (Digital Signature Certificate)
What is a Director Identification Number (DIN)?
Director Identification Number (DIN) is a unique identification number issued by the Ministry of Corporate Affairs (MCA), for an existing director or a person intending to become a director of a company.
Documents required for DIN Application
a) Address Proof: Copy of passport / driving license having pin code / electricity bill / telephone bill / Election card / Bank statement certified by Bank Manager (should not be older than 30 days), also PIN code must be mentioned on the address proof.
b) Identity Proof: Copy of PAN Card (Mandatory)
c) One Passport Size color photograph
d) Email Address (Mandatory field of DIN Application)
e) Mobile/Cell Number (Mandatory field of DIN Application)
f) Annexure DIN1 (Verification of an applicant) to be signed by an applicant
1. All the documents require “Self attestation”.
2. In case of Foreign national or NRI, passport copy is must and identity proof and address proof should be notarized by an Indian Consulate of home country.
3. While making DIN Application following details are mandatory :
First Name, Middle Name, Last Name, Details of father of an applicant (even in case of a married woman)
4. In case of a Married woman, copy of the Marriage Certificate is required (If DIN needs to be in the “Changed Name”)
What is a Digital Signature Certificate (DSC)?
Digital Signature Certificate (DSC) is the digital equivalent (i.e. electronic format) of physical or paper certificates. Examples of physical certificates are drivers’ license, passport. Certificates serve as proof of identity of an individual for a certain purpose; for example, a driver’s license identifies someone who can legally drive in a particular country. Likewise, a digital certificate can be presented electronically to prove your identity, to access information or services on the Internet or to sign certain documents digitally. Since MCA accepts electronic submission of Forms on its website the DSC is mandatory for all the users.
Documents required for obtaining DSC
a) Digital Signature Certificate application Form (duly signed by an applicant). An applicant is required to sign across the photo.
Download the DSC Application Form
b) All other documents are same as required for the DIN Application
Note : All the documents require “Self attestation”
Step 2. Search for the Company Name availability
The Promoters have to provide at least 6 names in the order of their preference/priority. The Promoters can themselves search for the available names by visiting the MCA Website: Check Name Availability
Promoters may also search for the Trademark using MCA Website Check Trademark (If they are going to apply for the Trademark, in future)
Step 3. Application for the Name availability
After drafting of Main Object of the proposed company, need to file e-Form 1A with Registrar of Companies for name availability. The Applicant needs to give 6 proposed names in preference/priority along with their meaning and significance of each word.
Note: The name availability guidelines issued by MCA should be followed.
Step 4. Drafting of Memorandum of Association (MOA) & Articles of Association (AOA)
What is a Memorandum of Association?
Memorandum of Association covers fundamental provisions of the company’s constitution. It covers main object and other objects of the company.
What is Articles of Association?
Articles of Association contain rules and regulations governing the internal management of the company. It is a binding contract between company and its members and members among themselves defining their rights and duties.
After name approval from ROC, the next step is to draft MOA & AOA. The subscribers need to specify Name, Address, and Occupation in their own handwriting & sign the subscription pages of MOA & AOA.
If one of the subscribers is a Foreign National or NRI, the subscription page where he/she is supposed to sign on the Memorandum and Articles of Association, should be notarized by an Indian Consulate of Home Country.
Step 5. Filing of e-forms with ROC (Registrar Of Companies)
Following Forms to be filed/uploaded on the MCA Website
a) Form1 (Incorporation document), along with MOA & AOA
b) Form 18 (For Notice of situation of the Registered office)
c) Form 32 (Notice of Directors with their personal details)
Step 6. Payment of ROC Fees & Stamp Duty
After filing of documents online, we need to make payment of ROC fees and Stamp Duty electronically which is based upon the Authorised Capital of the Company.
Please refer to the “Fee Calculator” link on the MCA Website for the ROC Fees.
In order to know the Total statutory fees, note down the fee for the following forms from the dropdown :
Form1A, Form1 (select option “Incorporation of other companies”), Form 18 (select option “Shifting of Registered Office within ROC”, even if it’s not a shifting), Form 32.
Click on the “Calculate Fee” to get the individual form fees & add up all the individual form fees and the “Stamp Duty”. Please refer to the “Stamp Duty” link on the MCA Website. Note : Stamp Duty varies as per the “State” in which the Company is to be registered.
Step 7. Verification of documents / forms by ROC
After payment of all stamp duties and ROC fees, ROC scrutinizes all the documents and forms. Now Form18 and Form32 are approved immediately through “STP” (Straight Through Process) and Form1 is scrutinized by ROC in detail. In case of any objections/queries raised by ROC, resubmission of forms may also require.
Step 8. Issue of Certificate of Incorporation by ROC
Once all the Forms are duly approved by ROC, the digitally signed “Certificate of Incorporation” is emailed to the Directors.
As part of the Green Initiative by the MCA (Ministry of Corporate Affairs), few Certificates including “Certificate of Incorporation” are now issued only in the electronic format i.e. softcopy (having digital signature of ROC Registrar). Once the Incorporation Certificate is received, Company can start it’s operations.
Statutory cost-ROC filing fees plus stamp duty= Rs 7000/- approximately
(please note-the above statutory cost of ROC is for Private limited Company having share capital of Rs 1 lakh and having 2 directors only.For any further increase in share capital, the ROC fees would vary.)
Our charges Rs 25000/-.
Total Rs 32000/-.
Please pay Rs 32000/- online by depositing the amount of Indian Rupees Rs 32000/- into our bank account as under-
FILERETURN.COM PRIVATE LIMITED, ACCOUNT NUMBER-0 3 5 6 0 5 0 0 0 9 8 5, ICICI BANK, TARDEO BRANCH,MUMBAI,INDIA.
Once we receive the payment, then we shall email you all the requirements needed by us and our representative shall call you. We shall complete all the formalities right from the application of name, making the Memorandum and Articles of Association and giving you the Certificate of Incorporation of your company.
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