Foreign Company Registration
Expand globally by setting up your foreign subsidiary in India with ease.
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A Foreign Company is a type of organization you can set up to run your business.
As such they need to be registered with the Ministry of Corporate Affairs (MCA) and are subject to relevant Rules and Regulations
Your Foreign Company with Targolegal
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Step 1
An application for Registration of Partnership firm to be send to the Registrar Of Firms
Step 2
A duly signed copy of the partnership deed must be filed with the Registrar.
Step 3
Deposit the required fees and stamp duties with the concerned authorities.
Step 4
Issuance of Certificate of Incorporation by the registrar on approval of the application form.
Your Foreign Company with Targolegal
Overview
Importance of Registration
Registration Conditions
Incorporation Process
Documents Required
What is a Foreign Company under the Companies Act 2013 ?
Sec 2(42) of the Companies Act, 2013 defines a foreign company as a body corporate or company that is incorporated outside India, which
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Has a business place in India, whether through an agent or by itself, either physically or through electronic mode; and
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Conducts any business activity in India in any other manner
What are the ways in which a foreign company can enter its business in India?
The first and the foremost decision to be taken up while setting up a business in India is choosing the legal form of structure in which the foreign company will run its operation. Choosing the right form of structure is the foundation of a business. Therefore, utmost care and caution have to be taken.
A brief note given below will help us understand the various types of set-ups and characteristics of the same.
Form of registration of a foreign company in India as a Subsidiary Company (Entry route for commercial operations)
1. Foreign nationals/ Foreign Companies can form a company in India through any of the entry strategy mentioned below (Indian Subsidiary Registration).
a) Subsidiaries including Wholly Owned Subsidiaries (100% Indian Subsidiary)
A subsidiary company in relation to any other company (that is to say the holding company), means a company in which the holding company—
(i) controls the composition of the Board of Directors; or
(ii) exercises or controls more than one-half of the total voting power either at its own or together with one or more of its subsidiary companies.
Further, the composition of a company's Board of Directors shall be deemed to be controlled by another company if that other company by exercise of some powers exercisable by it at its discretion can appoint or remove all or a majority of the directors.
b) Joint Ventures with other Indian Companies in case 100% FDI is not permitted
It means a joint arrangement whereby the parties that have joint control of the arrangement have rights to the net assets of the arrangement
In cases where 100% FDI is not permitted and the foreign company wishes to establish a company incorporated in India, and then in such cases, the foreign company can incorporate a company in India in the form of a Joint Venture, however, a valid joint venture agreement is required in such a case.
2. Form of Registration of a foreign company in India (Not having commercial operations in India)
a) Liaison Office/Representative Office
A Liaison Office is a place of business that acts as a channel of communication between the Head Office (or by whatever name called) and entities in India but which cannot undertake any commercial/ Industrial/ trading activity, directly or indirectly, and which maintains itself from the inward remittances received from abroad through normal banking channels
A Liaison Office is a place of business that acts as a channel of communication between the Head Office (or by whatever name called) and entities in India but which cannot undertake any commercial/ Industrial/ trading activity, directly or indirectly, and which maintains itself from the inward remittances received from abroad through normal banking channels.
b) Project Office
It is defined as a place of business in India to represent the interests of the foreign company executing a project in India.
It is established only for the purpose of conducting activities relating to and incidental to the execution of the project in India.
c) Branch Office
A branch office is basically an extension of a Company and in relation to a company, it means any establishment which is described as such.
Branch Offices in India are generally established in India for rendering services such as carrying out research work in which the parent company is engaged or for rendering services in IT and development of software in India etc.
Pre-Requisites for setting up Business in India
Once a company has decided the legal form of structure of its business in India , then the next step that is to be taken before initiating the procedural formalities of setting up its business is to know the pre-requisites for such a type of business structure.
For Foreign Entities setting up its business with the Objective of having Commercial Operations in India
The pre-requisites for incorporating a subsidiary in India are as follows:
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Minimum 2 individual directors, one of whom should be an Indian Resident
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Minimum 2 shareholders (may be individual or non-individual)
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One person authorised to sign on behalf of the foreign company
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Address proof of place of business in India where the company will be registered.
The pre-requisites for incorporating a private limited company in the form of a Joint Venture with other Indian Companies in case 100% FDI is not permitted are as follows:
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A Memorandum of Understanding and a Joint Venture Agreement between the foreign entity and the Indian Company
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The rest of the requirements are the same as in the case of a wholly owned subsidiary as mentioned above
For Entities setting up its business with the Objective of Not having Commercial Operations in India
A foreign entity can enter its business in India in the form of Branch Office, Liaison Office or Project Office in case it does not seek to generate revenue from its place of business established in India.
There are no pre-requisites as such for establishing a Branch Office, Liaison Office or Project Office under the Companies Act, 2013 and Rules thereunder. However, once such a place of business in India has been set up, it has to comply with various Indian Acts, Rules and Regulations.
To establish Branch Office and Liaison Office in India, Foreign Exchange Management (Establishment in India of Branch or Office or other Place of Business) Regulations, 2016 has to be adhered to, which requires prior approval of RBI before establishing such place of business in India. Approval from RBI is considered under two routes viz Reserve Bank Route or Government Route.
It further states that for availing approval from RBI following 2 criteria shall be satisfied:
For Branch Office —
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a profit-making track record during the immediately preceding five financial years in the home country and
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net worth of not less than USD 100,000 or its equivalent.
For Liaison Office —
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a profit-making track record during the immediately preceding three financial years in the home country and
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net worth of not less than USD 50,000 or its equivalent.
However, if not financially sound, then the Parent Company/ Group Company may submit a Letter of Comfort , subject to the condition that the parent company satisfies the prescribed criterion for net worth and profit.
Overview
Importance of Registration
Registration Conditions
Incorporation Process
Documents Required
Importance Of Registration
Advantages of Section 8 Company
Section 8 company advantages are not limited to giving internal satisfaction of helping people. From a financial standpoint, there are advantages that make going through the section 8 company registration process a strategic move:
i) There are many tax benefits:
As a non-profit organization, a Section 8 company organization gets several tax benefits. In fact, there are some provisions in which they are exempted from paying income tax.
ii) The share capital is minimal:
Unlike a limited company, a section 8 company doesn’t have to minimum share capital. It means that even if you don’t have any capital to put into your Section 8 Company, you can set it up.
iii) It doesn’t have to add suffix:
Section 8 Company doesn’t have to add “limited company” at the end of its name. It’s not required for this type of company to use any title either.
iv) Transferring the ownership is easy:
As the structure of this non-profit organization is same as the company, it’s easy to transfer its ownership within its members.
v) It is more trusted than other organizations:
Anyone can start a non-profit organization, but it’s the section 8 company that is seen credible by the government, and the people. Therefore, it’s almost certain that your NPO, once you register it as a Section 8 Company, would receive more donations.
As you can see, the benefits of setting up a section 8 company are many. But especially, it can make your charity organization more credible.
Requirement and Compliances Under Section- 8 Company Registration in India
Minimum Requirement
A Section 8 Company is a company to be incorporated by the Ministry of Corporate Affairs. Minimum two directors and two members are required to incorporate it.
No minimum share capital is required for section 8 company registration.
Charitable object
Section 8 companies are required to be incorporated with non-profit objectives. Any profit earned through a section 8 company will not be distributed among its members.
It will either be reinvested in the business or utilized with an objective of furtherance of its main objects, i.e. charitable purpose.
Management Team
Unlike other Trusts which are managed by the Trustees as per a Trust Deed, section 8 Companies are governed by the Board of the Director as per the MoA and AoA of the Section 8 Company.
Regulated Under Companies Act, 2013
Section 8 company also needs to follow the rules and regulation that are prescribed under the Companies Act, 2013. Maintaining Book of accounts, filing of returns as and when required.
Income tax
A company has to follow the provisions of Income Tax Act.
GST Registration
Every person or company who is indulged into providing goods and services whose aggregate turnover crosses Rs.40 lakhs in a year requires GST Registration.
Overview
Importance of Registration
Registration Conditions
Incorporation Process
Documents Required
Registration Conditions
Section 8 Company Registration Eligibility Criteria
Eligibility criteria for a Section 8 company registration are as follows:
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An Individual or HUF or limited Company is eligible to start a Section- 8 company registration in India.
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Two or more person who will act as a shareholder or Director of the company should fulfill all the requirements and compliances of the Section 8 Company registration.
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At least one of the directors shall be a resident of India. However, a firm may be a member of the company registered under this section.
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The objective should be the promotion of sports, social welfare, the advancement of science and art, education and financial assistance to lower income groups.
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The surplus generated must be used for meeting the principal objective of the section 8 company only.
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Founders, members, and directors of the company cannot draw any remuneration in any form of cash or kind.
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No profit should be distributed among the members and director of the company directly or indirectly
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The company should have the clear vision and project plan for the next three years.
Overview
Importance of Registration
Registration Conditions
Incorporation Process
Documents Required
Documents Required
What are the documents required for registration of is Foreign Company in India?
Depending upon the way a foreign company start a business in India, the documentation also varies. However, lets have look on documents required in each way of doing business as discussed in question no. 2.
Wholly owned subsidiary Company
Following documents are required for such foreign company registration in India:
1) Address proof of the office (In case of a rented property, the latest electricity bill)
2) For Indian citizen
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PAN card mandatory
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Address proof
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Photograph ID proof like an Aadhar card.
3) For foreign national
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Passport mandatory
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Address Proof
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Photograph ID Proof like any government license
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Documents submitted must be certified by the Indian Consular or consulate.
Joint Venture
In case of joint venture, well contract is drafted, hence the following points to be taken care of by parties involved: –
1) Dispute resolution agreements
2) Law Applicable
3) Holding shares
4) Transfer of shares
5) Board of Directors Non-Compete
6) Confidentiality, etc
Liaison Office or Representative Office
RBI prescribes the criteria for setting up a Liaison office or Representative Office in India, which are as follows:
1) It is essential to have a profit making record in the immediately preceding 3 financial years in the home country, and the net value should be more than USD 50,000.
2) In case, the above condition is not satisfied by the subsidiary company, a letter of comfort is to be submitted by the parent company which satisfies the above condition.
3) Specific approval of RBI under FEMA 1999 and Insurance Regulatory and Development Authority (IRDA) is required.
4) A designated Authorised Dealer Category–I Bank needs to forward an application for establishing an office to the RBI.
5) The office will be given a Unique Identification Number by RBI.
6) Along with the Application, English version of the Certificate of Incorporation/Registration or MOA & AOA (attested by the Indian Embassy/Notary Public), required documents should also be filed.
7) Latest Audited Balance Sheet of the applicant entity should also be filed in the Country of Registration.
Project Office
In case a foreign company wants to establishment office, and the foreign company has secured a contract from an Indian company to execute a project in India, prior permission from RBI is not needed, provided:
1) Funded directly by inward remittance from abroad or
2) Funded by a bilateral or multilateral International Financing Agency or
3) Cleared by an appropriate authority or
4) A company or entity in India provided that a contract has been granted Term Loan by a bank in India or a Public Financial Institution for the project.
Besides that, in case the above conditions are not met the foreign entity has to approach the RBI for the approval.
Branch Office
By opening a branch office, a Foreign company can conduct business activity in India with the prior approval of RBI, provided:
1) The company should be engaged in manufacturing or trading activities,
2) Profit in the immediately preceding five financial years is necessary,
3) The net worth of not less than USD 100,000 in its home country.
There are huge opportunities in India as a Foreign Company even in the E-commerce Sector where govt recently allow 100% FDI in the E-commerce Sector.
What are laws/ statutes governing the is Foreign Company in India?
Depending upon your business entity set up, The Companies, Act, 2013 and its related rules, Foreign Direct Investment (FDI) policy, Foreign Exchange Management Act (FEMA), 1999 governs the Foreign company business in India.
Overview
Importance of Registration
Registration Conditions
Incorporation Process
Documents Required
Incorporation Process
The procedure of establishment of business in India depends upon the type/form of registration in India.
The incorporation procedure in case of a subsidiary, wholly-owned subsidiary, an Indian company in the form of Joint Venture is the same , subject to different documents as applicable. The procedure for the same is discussed in detail in Part I of this Chapter.
In case, where a foreign company desires to set up its business in the form of Liaison Office/ Branch Office/ Project Office then the procedure as enlisted in Part II of this Chapter is to be followed. The various compliances under the Companies Act, 2013 which need to be adhered to as per Chapter XXII of the Act are elaborated therein.
For Foreign Entities setting up its business with the Objective of having Commercial Operations in India
In case a company wishes to operate in India by forming a subsidiary, wholly-owned subsidiary, or a Joint Venture Company then it needs to follow the procedure as mentioned below.
It is to be noted that if a foreign company wants to incorporate its subsidiary company in India, then the original name of the holding company may be allowed with the addition of the word “India” or name of any “Indian state or city”, subject to availability of the name and other conditions being satisfied.
Rule 8 of the Companies (Incorporation) Rules, 2014 shall be referred to, while selecting the name of the Indian company to be established.
STEP – I: Apply for Name Approval:
Before application for name approval, a foreign company has to choose the name on basis of the following:
a. foreign company can apply the same name (name in the foreign country) in India by using the word “India” in its name.
b. If a foreign company is having any Registered Trade Mark then it can use such a trademark for the Incorporation of Company in India.
c. Any other name as decided by the Foreign Company.
Once the name has been selected, the application for name approval has to be filed in web-based form SPICE+ Part A.
Section 380 states that every foreign company shall, within thirty days of the establishment of its place of business in India, deliver to the Registrar for registration-
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a certified copy of the charter, statutes or memorandum and articles, of the company or other instrument constituting or defining the constitution of the company and, if the instrument is not in the English language, a certified translation thereof in the English language;
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the full address of the registered or principal office of the company;
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a list of the directors and secretary of the company containing such particulars as prescribed under Rule 3;
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the name and address or the names and addresses of one or more persons resident in India authorised to accept on behalf of the company service of process and any notices or other documents required to be served on the company;
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the full address of the office of the company in India which is deemed to be its principal place of business in India;
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particulars of opening and closing of a place of business in India on earlier occasion or occasions;
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declaration that none of the directors of the company or the authorised representative in India has ever been convicted or debarred from formation of companies and management in India or abroad; and
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any other information as may be prescribed.
Further, every foreign company existing at the commencement of this Act shall, if it has not delivered to the Registrar before such commencement, the documents and particulars specified in sub-section (1) of section 592 of the Companies Act, 1956, continue to be subject to the obligation to deliver those documents and particulars in accordance with that Act.
Moreover, where any alteration is made or occurs in the documents delivered to the Registrar under this section, the foreign company shall, within thirty days of such alteration, deliver to the Registrar for registration, a return containing the particulars of the alteration in the prescribed form.
It is also required that a foreign company shall, within a period of thirty days of the establishment of its place of business in India, file with the registrar Form FC-1 with such fee as provided in Companies (Registration Offices and Fees) Rules, 2014 and with the documents required to be delivered for registration by a foreign company in accordance with the provisions of section 380(1) and the application shall also be supported with an attested copy of approval from the Reserve Bank of India under Foreign Exchange Management Act or Regulations, and also from other regulators, if any, approval is required by such foreign company to establish a place of business in India or a declaration from the authorised representative of such foreign company that no such approval is required.
And in case any alteration is made or occurs in the document delivered to the Registrar for registration under section 380(1), the foreign company shall file with the Registrar, a return in Form FC-2 along with the fee as provided in the Companies (Registration Offices and Fees) Rules, 2014 containing the particulars of the alteration, within a period of thirty days from the date on which the alteration was made or occurred.
Laws other than Companies Act governing Foreign Company in India
A foreign company as defined under the Companies Act, 2013 must comply with regulations and rules established under multiple legislations and order(s) such as mentioned below. A foreign company whether established for commercial or non-commercial operations has to adhere to various Indian Acts, Rules and Regulations. It is pertinent to note that the compliances differ on the type of legal structure of the entity.
• The Companies Act, 2013
• The Income Tax Act, 1961
• GST, 2017
• SEBI Rules and Regulations
• FEMA (Foreign Exchange Management Act), 1999
• RBI compliances etc.
(1). Every foreign company shall, within thirty days of establishment of its place of business in India, in addition to the particulars specified in subsection (1) of section 380 of the Act (i.e, Companies Act, 2013), also deliver to the Registrar for registration, a list of directors and Secretary of such company.
(2). The list of directors and secretary or equivalent (by whatever name called) of the foreign company shall contain the prescribed particulars, for each of the persons included in such list.
(3) A foreign company shall, within a period of thirty days of the establishment of its place of business in India, file with the registrar Form FC-1 with such fee as provided in Companies (Registration Offices and Fees) Rules, 2014 and with the documents required to be delivered for registration by a foreign company in accordance with the provisions of sub-section (1) of section 380 and the application shall also be supported with an attested copy of approval from the Reserve Bank of India under Foreign Exchange Management Act or Regulations, and also from other regulators, if any, approval is required by such foreign company to establish a place of business in India or a declaration from the authorized representative of such foreign company that no such approval is required.
(4) Where any alteration is made or occurs in the document delivered to the Registrar for registration under sub-section (1) of section 380, the foreign company shall file with the Registrar, a return in Form FC2 along with the fee as provided in the Companies (Registration Offices and Fees) Rules, 2014 containing the particulars of the alteration, within a period of thirty days from the date on which the alteration was made or occurred.
(5). Financial Statement of Foreign company
(1) Every foreign company shall prepare financial statement of its Indian business operations in accordance with Schedule III or as near thereto as may be possible for each financial year including-
(i) documents required to be annexed thereto in accordance with the provisions of Chapter IX of the Act i.e. Accounts of Companies ;
(ii) documents relating to copies of latest consolidated financial statements of the parent foreign company , as submitted by it to the prescribed authority in the country of its incorporation under the provisions of the lawfor the time being in force in that country:
Provided that where such documents are not in English language, there shall be annexed to it a certified translation thereof in the English language:
Provided further that where the Central Government has exempted or specified different documents for any foreign company or a class of foreign companies, then documents as specified shall be submitted;
(iii) Such other documents as may be required to be annexed or attached in accordance with sub-rule (2).
(2) Every foreign company shall, along with the financial statement required to be filed with the Registrar, attach thereto the following documents; namely:-
(a) Statement of related party transaction, which shall include-
(i) name of the person in India which shall be deemed to be the related party within the meaning of clause (76) of section 2 of the Act of the foreign company or of any subsidiary or holding company of such foreign company or of any firm in which such foreign company or its subsidiary or holding company is a partner;
(ii) nature of such relationship;
(iii) description and nature of transaction;
(iv) amount of such transaction during the year with opening .closing, highest and lowest balance during the year and provisions made (if any) in respect of such transactions;
(v) reason of such transaction;
(vi) material effect of such transaction on both the parties;
(vii) amount written off or written back in respect of dues from or to the related parties;
(viii) a declaration that such transactions were carried out at arms length basis; and
(ix) any other details of the transaction necessary to understand the financial impact;
(b) Statement of repatriation of profits which shall include-
(i) amount of profits repatriated during the year;
(ii) recipients of the repatriation;
(iii) form of repatriation;
(iv) dates of repatriation;
(v) details if repatriation made to a jurisdiction other than the residence of the beneficiary;
(vi) mode of repatriation; and
(vii) approval of the Reserve Bank of India or any other authority, if any.
(c) Statement oftransfer of funds (including dividends if any) which shall, in relation of any fund transfer between place of business offoreign company in India and any other related party of the foreign company outside India including its holding, subsidiary and associate company, include-
(i) date of such transfer;
(ii) amount of fund transferred or received;
(iii) mode of receipt or transfer of fund;
(iv) purpose of such receipt or transfer; and
(v) approval of Reserve Bank of India or any other authority, if any.
(3) The documents referred to in this rule shall be delivered to the Registrar within a period of six months of the close of the financial year of the foreign company to which the documents relate:
Provided that the Registrar may, for any special reason, and on application made in writing by the foreign company concerned, extend the said period by a period not exceeding three months.
(6). list of places of business of foreign company: Every foreign company shall file with the registrar , along with the
financial statement , in Form FC-3 with such fees as provided under companies (Registration office and Fees) Rules 2014, a list of all the places of business established by the foreign company India as on the date of balance sheet.
(7). Annual Return : Every foreign company shall prepare and file , within a period of sixty days from the last date of its financial year , to the registrar annual return in Form FC-4 along with such fees as provided in the companies (Registration offices and Fees) Rules, 2014 , containing the particulars as they stood on the close of the financial year.
(8) . If any foreign company ceases to have a place of business in India, it shall forthwith give notice of the fact to the registrar , and as from the date on which notice so given , the obligation of the company to deliver any document to the Registrar shall cease , provided it has no other place of business in india.
(9). Documents to be Annexed to Prospectus
The following documents shall be annexed to the prospectus, namely:-
(a) any consent to the issue of the prospectus required from any person as an expert;
(b) a copy of contracts for appointment of managing director or manager and in case of a contract not reduced into writing, a memorandum giving full particulars thereof;
(c) a copy of any other material contracts, not entered in the ordinary course of business, but entered within preceding two years;
(d) a copy of underwriting agreement; and
(e) a copy of power of attorney, if the prospectus is signed through a duly authorized agent of directors.
(12). Action for Improper Use or Description as Foreign Company
if any person or persons trade or carry on business in any manner under any name or title or description as a foreign company registered under the Act or the rules made thereunder, that person or each of those persons shall, unless duly registered as foreign company under the Act and rules made thereunder, shall be liable for investigation under section 210 of the Act and action consequent upon that investigation shall be taken against that person.
Compare your options before going for OPC registration
Every entrepreneur/promoter should take the pain to know about the pros and cons of these legal forms before going for partnership firm registration in Bangalore
Do I need a Registration?
What type of business names can I keep?
How risky is it for me?
To what extent is each member of the business liable?
Tell me the
minimum membership limit
Is foreign ownership allowed?
How much will I get taxed
What are my annual tax filing norms?
Is Annual Audit Required?
Can I convert my business into any other legal form??
Compulsory Conversion to
Private Limited Company Applicable?
SOLE PROPRIETORSHIP
No legal requirement to do- so.
Promoter can use any name that he likes, but avoiding names already trademarked is advisable.
Promoter will stand liable for the liabilities of the business. Because the business is not considered as a separate legal person/entity
Unlimited liability.
1 Person
NA
Individual income tax slab of the proprietor is the basis of taxation.
Only Income Tax must be filed on the basis on proprietor’s income.
Only income tax audit is applicable if the turnover exceeds limit of 2 Cr.
No
Yes. If turnover exceeds 2 cr
PARTNERSHIP
Yes. Register with Registration of Firms
Firm can use any name that he likes, but avoiding names already trademarked is advisable
Partners will stand liable for the liabilities of the business
Unlimited liability
2 People
No
Profits get taxed at 30% plus cess and surcharge. Is applicable
if profit exceeds 1 Cr
Only Income Tax must be filed for the income of firm and partners.
Only income tax audit is applicable if the turnover exceeds limit of 2 Cr
es, Partnership can be converted into a Private Limited Company or LLP.
NO
PRIVATE LIMITED
COMPANY
Yes, Ministry of Corporate Affairs registers Private limited company under the
Companies Act, 2013
Firstly, submit a set of names to Registrar of Companies, wait for approval from Registrar. Best practice is that the names submitted must be inoffensive, legal and not similar to any registered LLP’s
or companies
Private Limited Company is a separate legal person in the eyes of law, registered under Companies Act 2013. So, the shareholders are not responsible for business liabilities.
Liability is limited to his/her share capital contribution.
2 People
Yes
Profits get taxed at 25% plus cess and surcharge. Is applicable if profit exceeds 1 Cr
Every financial year Private
Limited Company must file Annual Accounts and Annual Return with the Registrar of Companies. Plus,Income
Tax must be filed separately.
Statutory audit is to be conducted irrespective of business transaction and turnover. Income tax audit is
applicable if turnover exceeds 2 Crs
Yes, Private Limited Company can be converted into a Public Company or LLP.
Even, Public Limited Company can be converted into a Private Limited Company.
NO
LIMITED LIABILITY PARTNERSHIP
Ministry of Corporate Affairs registers an LLP business
under the Limited Liability Partnership Act, 2008.
Firstly, submit a set of names to Registrar of Companies, wait for approval from Registrar. Best practice is that the names submitted must be inoffensive, legal and not similar to any registered LLP’s
or companies
“LLP” is a separate legal person in the eyes of law, registered under LLP Act 2008. So, the partners are not responsible for business’ liabilities.
Liable to the extent of their contribution (in money, in kind or in services extended)
to the LLP.
2 People
Yes
Profits get taxed at 30% plus cess and surcharge. Is applicable if profit exceeds 1 Cr
Every financial year Annual Statement of
Accounts &
Solvency and Annual Return with the Registrar.Plus, Income Tax must be filed separately.
Statutory audit is to be conducted if partners contribution exceeds 25 lakhs or turnover exceeds 40 lakhs. Income tax audit is applicable if turnover exceeds 2 Crs
Yes, Private Limited Company can be converted into a Public Company or LLP. Even, Public Limited Company can be converted into a Private Limited Company.
NO
ONE PERSON COMPANY (OPC)
Yes, Ministry of Corporate Affairs registers One Person Companies under the
Companies Act, 2013
Firstly, submit a set of names to Registrar of Companies, wait for approval from Registrar. Best practice is that the names submitted must be inoffensive, legal and not
similar to any registered LLP’s
or companies
OPC is a separate legal person in the eyes of law. So, the share holder is not responsible for business liabilities.
Liability is limited to his/her share capital contribution.
1 Person
NA
Profits get taxed at 25% plus cess and surcharge. Is applicable if profit exceeds 1 Cr.
Every financial year OPC
must file Annual Accounts and Annual Return with the Registrar of Companies. Plus, Income Tax must be filed separately
Statutory audit is to be conducted irrespective of business transaction and turnover. Income tax audit is applicable if turnover exceeds 2 Crs.
OPC could be converted into any legal form. But, it depends on the number of promoters, business operations, funding requirements and other factors. Limited Liability Partnership or Private Company is preferred by promoters when seeking
expansion of their OPC
NO
Do I need a Registration?
What type of business names can I keep?
How risky is it for me?
To what extent is each member of the business liable?
Tell me the
minimum membership limit
Is foreign ownership allowed?
How much will I get taxed
What are my annual tax filing norms?
Is Annual Audit Required?
Can I convert my business into any other legal form??
Compulsory Conversion to
Private Limited Company Applicable?
PRIVATE LIMITED
COMPANY
Yes, Ministry of Corporate Affairs registers Private limited company under the
Companies Act, 2013
Firstly, submit a set of names to Registrar of Companies, wait for approval from Registrar. Best practice is that the names submitted must be inoffensive, legal and not similar to any registered LLP’s
or companies
Private Limited Company is a separate legal person in the eyes of law, registered under Companies Act 2013. So, the shareholders are not responsible for business liabilities.
Liability is limited to his/her share capital contribution.
2 People
Yes
Profits get taxed at 25% plus cess and surcharge. Is applicable if profit exceeds 1 Cr
Every financial year Private
Limited Company must file Annual Accounts and Annual Return with the Registrar of Companies. Plus,Income
Tax must be filed separately.
Statutory audit is to be conducted irrespective of business transaction and turnover. Income tax audit is
applicable if turnover exceeds 2 Crs
Yes, Private Limited Company can be converted into a Public Company or LLP.
Even, Public Limited Company can be converted into a Private Limited Company.
NO
LIMITED LIABILITY PARTNERSHIP
Ministry of Corporate Affairs registers an LLP business
under the Limited Liability Partnership Act, 2008.
Firstly, submit a set of names to Registrar of Companies, wait for approval from Registrar. Best practice is that the names submitted must be inoffensive, legal and not similar to any registered LLP’s
or companies
“LLP” is a separate legal person in the eyes of law, registered under LLP Act 2008. So, the partners are not responsible for business’ liabilities.
Liable to the extent of their contribution (in money, in kind or in services extended)
to the LLP.
2 People
Yes
Profits get taxed at 30% plus cess and surcharge. Is applicable if profit exceeds 1 Cr
Every financial year Annual Statement of
Accounts &
Solvency and Annual Return with the Registrar.Plus, Income Tax must be filed separately.
Statutory audit is to be conducted if partners contribution exceeds 25 lakhs or turnover exceeds 40 lakhs. Income tax audit is applicable if turnover exceeds 2 Crs
Yes, Private Limited Company can be converted into a Public Company or LLP. Even, Public Limited Company can be converted into a Private Limited Company.
NO
PARTNERSHIP
Yes. Register with Registration of Firms
Firm can use any name that he likes, but avoiding names already trademarked is advisable
Partners will stand liable for the liabilities of the business
Unlimited liability
2 People
No
Profits get taxed at 30% plus cess and surcharge. Is applicable
if profit exceeds 1 Cr
Only Income Tax must be filed for the income of firm and partners.
Only income tax audit is applicable if the turnover exceeds limit of 2 Cr
es, Partnership can be converted into a Private Limited Company or LLP.
NO
Do I need a Registration?
What type of business names can I keep?
How risky is it for me?
To what extent is each member of the business liable?
Tell me the
minimum membership limit
Is foreign ownership allowed?
How much will I get taxed
What are my annual tax filing norms?
Is Annual Audit Required?
Can I convert my business into any other legal form??
Compulsory Conversion to
Private Limited Company Applicable?
ONE PERSON COMPANY (OPC)
Yes, Ministry of Corporate Affairs registers One Person Companies under the
Companies Act, 2013
Firstly, submit a set of names to Registrar of Companies, wait for approval from Registrar. Best practice is that the names submitted must be inoffensive, legal and not
similar to any registered LLP’s
or companies
OPC is a separate legal person in the eyes of law. So, the share holder is not responsible for business liabilities.
Liability is limited to his/her share capital contribution.
1 Person
NA
Profits get taxed at 25% plus cess and surcharge. Is applicable if profit exceeds 1 Cr.
Every financial year OPC
must file Annual Accounts and Annual Return with the Registrar of Companies. Plus, Income Tax must be filed separately
Statutory audit is to be conducted irrespective of business transaction and turnover. Income tax audit is applicable if turnover exceeds 2 Crs.
OPC could be converted into any legal form. But, it depends on the number of promoters, business operations, funding requirements and other factors. Limited Liability Partnership or Private Company is preferred by promoters when seeking
expansion of their OPC
NO
SOLE PROPRIETORSHIP
No legal requirement to do- so.
Promoter can use any name that he likes, but avoiding names already trademarked is advisable.
Promoter will stand liable for the liabilities of the business. Because the business is not considered as a separate legal person/entity
Unlimited liability.
1 Person
NA
Individual income tax slab of the proprietor is the basis of taxation.
Only Income Tax must be filed on the basis on proprietor’s income.
Only income tax audit is applicable if the turnover exceeds limit of 2 Cr.
No
Yes. If turnover exceeds 2 cr
FAQ
1.What is a Foreign Company as per Companies Act, 2013?
A “Foreign Company" means any company or body corporate incorporated outside India which a) has a place of business in India whether by itself or through an agent, physically or through electronic mode; and b) conducts any business activity in India in any other manner.
2.What is meant by the term “electronic mode” in relation to a foreign company?
The term “electronic mode" means carrying out electronically based, whether the main server is installed in India or not, including, but not limited to -
i. business to business and business to consumer transactions, data interchange and other digital supply transactions;
ii. offering to accept deposits or inviting deposits or accepting deposits or subscriptions in securities, in India or from citizens of India;
iii. financial settlements, web-based marketing, advisory and transactional services, database services and products, supply chain management;
iv. online services such as telemarketing, telecommuting, telemedicine, education and information research; and
v. all related data communication services,
whether conducted by email, mobile devices, social media, cloud computing, document management, voice or data transmission or otherwise;
3. What is meant by the term “director” in relation to a foreign company?
The expression “director”, in relation to a foreign company, includes any person in accordance with whose directions or instructions the Board of Directors of the company is accustomed to act.
4. Whether setting up of a share transfer office will also be considered as a place of business in India?
Yes, the expression “place of business” includes a share transfer or registration office.
5. What are the types of companies in which a foreign company can be incorporated in India?
The Foreign Company can be incorporated in India in either of the ways:
a) Incorporating in India as “Subsidiary” or “Wholly-owned Subsidiary” or
b) Register a foreign incorporated company as a Liaison Office/Branch Office/Project Office in India
6. Where a company which is incorporated outside India and paidup share capital is held by more than 50% of the Indian Nationals, would it still be called a Foreign Company?
In such a situation where not less than fifty per cent. of the paid-up share capital, whether equity or preference or partly equity and partly preference, of a foreign company is held by one or more citizens of India or by one or more companies or bodies corporate incorporated in India, or by one or more citizens of India and one or more companies or bodies corporate incorporated in India, whether singly or in the aggregate, then such company has to comply with the provisions of chapter XXII along with such other provisions of the Companies Act, 2013 as are applicable to a Company which is incorporated in India.
7. What are the statutory requirements of a foreign company upon establishment of its place of business in India relating to the delivery of any documents/information to the Registrar of Companies?
The Foreign Company within 30 days of the establishment of its place of business in India has to submit e-form FC-1 which is available at MCA’s official website i.e. www.mca.gov.in Technical Guide on Incorporation of Foreign Companies in India 70
8. What are the various information/documents that are required to be submitted while filing e-form FC-1?
The list of documents and information that are required while submitting the e-form FC-1 is as listed below:
a) Certified copy of the charter, statutes, or memorandum and articles of the company or other instrument constituting or defining the constitution of the company (Mandatory).
b) List of directors and secretary of the foreign company (Mandatory).
c) Power of attorney or board resolution in favor of the authorized representative(s) (Mandatory).
d) Reserve bank of India approval letter (It is mandatory to attach an attested copy of such approval).
e) Copy of permission letter of other Authority(s)/Regulator(s), if any is required to be attached.
f) declaration that none of the directors of the company or the authorised representative in India has ever been convicted or debarred from formation of companies and management in India or abroad;
g) the full address of the registered or principal office of the company;
h) the full address of the office of the company in India which is deemed to be its principal place of business in India;
i) particulars of opening and closing of a place of business in India on earlier occasion or occasions;
9. What are the details of the Directors/Secretary that are required to be furnished in e-form FC-1?
The following details of each person who has been listed as Director or Secretary or Equivalent (by whatever name called) of the Foreign Company are required:
a) personal name and surname in full;
b) any former name or names and surname or surnames in full
c) father’s name or mother’s name and spouse’s name;
d) date of birth;
e) residential address;
f) nationality;
g) if the present nationality is not the nationality of origin, his nationality of origin;
h) passport number, date of issue and country of issue; (if a person holds more than one passport then details of all passports to be given)
i) income-tax permanent account number (PAN, if applicable
j) occupation, if any
k) whether directorship in any other Indian company, (Director Identification Number (DIN), Name and Corporate Identity Number (CIN) of the company in case of holding directorship);
l) other directorship or directorships held by him;
m) Membership Number (for Secretary only); and
n) e-mail ID
10. What if there is any change in the particulars filed under FC-1?
Where any alteration is made or occurs in the documents or particulars filed under FC-1, the foreign company shall within 30 days of such alteration file an e-form FC-2 which is available at MCA's official website.
11. What are the provisions governing the maintenance of books of accounts/records in India by a Foreign Company, if any?
Every foreign company has to mandatorily prepare a financial statement of its Indian business operations in accordance with Schedule III or as near thereto as may be possible for each financial year including:
• Documents as per provisions of chapter IX “Accounts of Companies
• Copies of Consolidated Financial Statement of the parent foreign Co. (In English language/if not in English then its certified translation in English)
• Statement of Related Party Transaction
• Statement of Repatriation of Profit
• Statement of Transfer of Funds
• E-form FC-3 containing a list of all the places of business established by the foreign company in India as on the date of balance sheet.
(all the above docs need to be filed to ROC within a period of six months of the close of the financial year of the foreign company to which the documents relate
12. When is the audit of the financial statement of Indian business operation of the foreign company mandatory under the law and who is eligible to audit the same?
It is mandatory for Every Foreign Company to get its accounts pertaining to the Indian business operations, audited by practicing Chartered Accountant in India or a firm or limited liability partnership of practicing chartered accountants. Explanation- the expressions "Chartered Accountant", "Firm" and limited liability partnership shall have the meanings respectively assigned to them under the Act and Limited Liability Partnership Act, 2008 (6 of 2009) respectively. Further, the provisions of Chapter X i.e. Audit and Auditors and rules made thereunder, as far as applicable, shall apply, mutatis mutandis, to the foreign company.
13. Whether the audit report of a Foreign Company should include the matters stated under Companies (Auditor's Report) Order, 2020?
MCA has notified Companies (Auditor's Report) Order, 2020 which is applicable for every report made by the auditor for financial years commencing on or after 1st April 2021 9 . The Order applies to every company including a foreign company as defined in clause (42) of section 2 of the Companies Act, 2013 subject to exceptions as prescribed.
14. What is FC-4 and when is it to be filed?
FC-4 is an e-form which is available at the MCA official website. It is a web-based form for filing Annual Return. Every foreign company has to prepare and file this form to the Registrar along with such fee as provided in the Companies (Registration Offices and Fees) Rules, 2014 containing the particulars as they stood on the close of the financial year. This form has to be filed within a period of sixty days from the last day of its financial year.
15. In case any documents are physically required to be submitted to Registrar, then under whose jurisdiction, it has to be submitted?
Any document which any foreign company is required to del iver to the Registrar shall be delivered to the Registrar having jurisdiction over New Delhi
16. What does the provision of Display of Name, etc of a foreign company indicates?
As per the provision of the Companies Act, 2013, every foreign company shall on the outside of every office or place where it carries on business in India shall display the name of the company, the country in which it is incorporate and if the liability of the members of the company is limited, cause notice of that fact in letters easily legible in English characters, and also in the characters of the language or one of the languages in general use in the locality in which the office or place is situated; The same shall be displayed in all business letters, billheads and letter paper, in all notices, and other official publications of the company in legible English characters.
17. What are the other statutory provisions that are applicable to Foreign Companies which has established its place of business in India?
The foreign company shall along with the specific provisions as stated in Chapter XXII of the Companies Act, shall adhere to the following provisions
a) Provisions of Section 71 relating to Debenture Issue
b) Provisions of Section 92 and 135 relating to Annual Return and CSR respectively (subject to such modifications as may be prescribed)
c) Provisions of Section 128 to the extent of requiring it to keep at its principal place of business in India, the books of account referred to in that section, with respect to monies received and spent, sales and purchases made, and assets and liabilities, in the course of or in relation to its business in India.
d) Provisions of Chapter VI relating to charges on properties which are created or acquired by any foreign company
e) Provisions of Chapter XIV relating to Inspection, Inquiry and Investigation of the Indian Business of a Foreign Company
18. Whether CSR spent is mandatory for a foreign company?
As per the Companies (Corporate Social Responsibility Policy) Rules, 2014 every company including its holding or subsidiary, and a foreign company defined under clause (42) of section 2 of the Companies Act, 2013 having its branch office or project office in India, which fulfills the criteria specified in sub-section (1) of section 135 should comply with the provisions of section 135 of the Act and Companies (Corporate Social Responsibility Policy) Rules, 2014. Section 135(5) interalia prescribes the time period for spending on CSR projects (including ongoing projects) and Section 135(6) prescribes the time limit for transfer of unspent amount to a Fund prescribed under Schedule VII. Accordingly, a foreign company would need to comply with the requirements relating to CSR spent as stated above.
19. Can a Foreign Company which has established its place of business in India, raise money through the Indian Market, if yes, what are the legal requirements?
Yes, the Foreign Company (FC) can raise money through the Indian Market through the issue of debentures or Indian Depository Receipts. If the FC is raising money through the issue of debentures then it has to follow the requirement of section 71 of the Companies Act 2013 and if the FC is raising money through the issue of IDRs, then provision of Sec 390 of the Companies Act 2013 shall be followed.
20. What are the legal requirements in case the foreign company ceases to have a place of business in India?
If any foreign company ceases to have a place of business in India, it shall give notice of the fact to the Registrar, and as from the date on which notice is so given, the obligation of the company to deliver any document to the Registrar shall cease, provided it has no other place of business in India.
21. Whether foreign subscriber is required to visit India for incorporation of a subsidiary company?
The Foreign subscriber is required to visit India and should possess a valid Business Visa for incorporation of a company. However, in case, Person is of Indian Origin or Overseas Citizen of India, the requirement of a Business Visa shall not be applicable.
22. Can the entire Board of Directors of a subsidiary company be comprised of foreign national director?
No, the Companies Act, 2013 requires that every company shall have at least one director who stays in India for a total period of not less than one hundred and eighty-two days during the financial year. However, in case of a newly incorporated company, this requirement shall apply proportionately at the end of the financial year in which it is incorporated.
23. Whether the subsidiary company can apply for the same name as its foreign holding company?
Yes, if a foreign company is incorporating its subsidiary company in India, then the original name of the holding company as it is may be allowed with the addition of the word “India” or name of any “Indian State or City”, if otherwise available. The guidelines for the desirable names are given at http://www.mca.gov.in/Ministry/pdf/AmendmentRules_08052019.pdf
24. What are the various information and documents that are required to incorporate a company in India?
The following information cum documents are required to be furnished while incorporating a company in India through e-form SPICE+
a) Memorandum of Association – eMOA
b) Articles of Association – eAOA*
c) Declaration by first subscribers and Directors
d) Proof of office address
e) Copy of utility bills as permitted by MCA
f) Copy of the certificate of incorporation and resolution passed by the company
g) Resolution passed by Promoter Company
h) Proof of identity and residential address of subscribers, nominee and applicants
i) Resolution of unregistered companies in case of chapter XXI (Part 1) companies
j) Where the subscriber to the memorandum is a body corporate, the memorandum and articles of association shall be signed by a director, officer or employee of the body corporate duly authorized in this behalf by a resolution of the board of directors and where the subscriber is a LLP, it shall be signed by a partner of the LLP duly authorized by a resolution approved by all the partners of the LLP:
k) a declaration in the prescribed form by a chartered accountant (or an advocate, cost accountant or company secretary) in practice, who is engaged in the formation of the company,
l) a declaration by a person named in the articles as a director, manager or secretary of the company, that all the requirements of this Act and the Rules made thereunder in respect of registration and matters precedent or incidental thereto have been complied with;
m) a declaration from each of the subscribers to the memorandum and from all the first directors, if any, in the articles that he is not convicted of any offence in connection with the promotion, formation or management of any company, or that he has not been found guilty of any fraud or misfeasance or any breach of duty to any company under this Act or any previous company law during the preceding five years and that all the documents filed with the Registrar for registration of the company contain information that is correct and complete and true to the best of his knowledge and belief; ─
n) the address for correspondence till its registered office is established;
o) name, including surname or family name, residential address, nationality and such other particulars of every subscriber to the memorandum along with proof of identity, as may be prescribed, and in the case of a subscriber being a body corporate, such particulars as may be prescribed;
p) the particulars of the first directors of the company, their names, including surnames or family names, the Director Identification Number, residential address, nationality and such other particulars including proof of identity as may be prescribed;
q) and the particulars of the interests of the first directors of the company in other firms or bodies corporate along with their consent to act as directors of the company in such form and manner as may be prescribed
25. Is it mandatory to have a Registered Office at the time of Incorporation?
No, it is not mandatory to have a registered office at the time of incorporation since the Companies Act, 2013 provision states that a Company shall have its registered office within 30 days of its incorporation.
26. Is the Reserve Bank of India also involved in registering business of Foreign Companies in India?
Yes, as generally remittance of foreign currency is involved, the Reserve Bank of India regulates them through Foreign Direct Investment (FDI) policy, Foreign Exchange Management Act (FEMA), 1999 etc.
27.How to register a Foreign Company in India?
Registration or incorporation for any of ways of doing business in India by foreign company as stated in question no. 2 varies. The professionals are involved in this matter as there are various important aspects which are kept in mind while starting the business, who explain all the pros and cons of how to enter in India and which mode is more beneficial for different type of business.
28. What are the Compliances related to Foreign Company in India after the Incorporation?
Now this question again depends upon the business entity set up compliances also varies.
Let us discuss them point wise.
Wholly Owned Company/ Subsidiary Company
All the Compliances required under the Companies Act, 2013
FEMA Compliances as per FEMA Act
DGFT (Director General of Foreign Trade) compliances
Annual Compliances under GST Act
Tax filing under the Income Tax Act, 1961
And other specific regulatory act, regulations depending upon the business type of company.
Joint Venture
29. What is the penalty for Non-Compliances by Foreign Company if it fails to file the forms required to file?
Depending upon the non-Compliance and its related penal provision, penalty, fine or other fees are levied upon the foreign company.
30. What if Foreign Company stops doing business in India?
A foreign company doing business in India can also close down its business like an Indian company. However, its process varies little.
A) A wholly owned company or subsidiary can go for winding up or striking of the name of the company from the register of companies as per the Companies Act, 2013 as well as Reserve Bank of India.
Liaison Office/ Project Office/ Branch Office are closed in two (2) steps file application of closure of Liaison Office with ROC in E-form FC-3 and then Filing application for closure of Liaison Office with RBI through designated AD Category – I bank and remittance of proceeds abroad and closure of bank account in India.
Once ROC closure has taken place, the application for winding up/closure of Liaison Office may be submitted along with the following documents with designated AD Category – I bank:
Copy of the Reserve Bank’s approval for establishing the LO.
Auditor’s certificate : Along with a statement of assets and liabilities of the applicant and indicating the manner of disposal of assets and the manner how the remittable amount has been generated;
Confirming that all liabilities in India including arrears of gratuity and other benefits to employees, etc. of the office have been fulfilled.
Confirming that no income accruing from sources outside India (including proceeds of exports) has remained un-repatriated to India.
Confirmation from the applicant/parent company that no legal proceedings in any Court in India are pending against the LO.
A report from the Registrar of Companies (ROC) regarding compliance with the provisions of the Companies Act, 2013.
The designated AD Category – I banks will confirm that the LO had done their respective compliances.
Any other document/s, required by Reserve Bank of India/AD Category-I bank while granting approval.
Designated AD Category-I bank may allow remittance of winding up proceeds in respect of offices of banks and insurance companies, after obtaining copies of permission of closure from the sectorial regulators (like IRDA etc.) along with the documents mentioned above.
The designated AD Category – I bank will report to the Reserve Bank (the Regional Office concerned for LOs), along with a declaration stating that all the necessary documents submitted by the LO have been scrutinized and found to be in order for closure of Liaison Office.
31. Our company operates outside India. Can we start the business in India and retain 100% ownership?
Yes. We call it an Indian Subsidiary company of Foreign Parent Company of yours. Indian laws allow foreign parent companies to retain 100% ownership when they subscribe the shares to the Indian norms and obtain proper foreign company registration online. This is called a subsidiary brand, and you can still incorporate works outside of India, just by having a place of business in India.
32. Do we need an Indian citizen in the Board of Directors?
Yes Every company to be registered in India must have at least one Indian resident individual as a director. This means the director should have stayed in India for at least 182 days in the previous fiscal year. Nurturelabz will help you with this, should you need any assistance.
33. Is it fine if we do not wish to allot shares with an Indian resident director?
Yes. It is fine if you do not wish to allot shares with an Indian resident director since there is no rule that a director must also be the shareholder of the company. You can retain complete ownership of the brand, even if you are a foreign-based company.
34. What is an Apostille?
An Apostille is a specialized international attestation that is usually attached with other legal files and is issued by the Secretary of the State. This gives the documents a sense of credibility and authenticity; it also makes the formats acceptable in all 92 countries of the globe that fall under The Hague Convention of October 5, 1961.
35. What are the documents required to start and register a company in India?
List of major documents are as follows :
-
Photograph of all the Directors and shareholders.
-
PAN Card of all the Indian Directors and shareholders.
-
Apostille ID Proof of all the Directors (Driving License/Passport/Voter ID).
-
Electricity Bill or any other utility bill for the address proof of the Registered Office.
36. Can an NRI function as the director of an Indian Company?
Yes. As per the Companies Act 2013 a foreign national or non-resident Indian can function as the director of an Indian company. However, an NRI cannot start a One Person Company or Proprietorship in India.
37. What are the documents required by a foreign director for the incorporation of an Indian company?
For foreign company registration in India, you need to possess the below mentioned documents:-
-
Copy of passport
-
Driving Licence/National ID Card
Telephone bill/ Electricity bill/Bank statement/Any utility bill, these bills should not be older than two months.