Setting Up Business in India

Foreign Investor can commence business in India as:

1. Indian Company*
  • Joint Venture
  • Wholly Owned Subsidiary

    JV/ Wholly Owned Subsidiary as (i) Private Limited or (ii) Public Limited Company, s.t. Companies Act, 2013

    2. Foreign Company**
    • Liaison Office

      To represent the parent company in India

    • Branch Office

      To undertake activities such as Export, Import, research, consultancy etc.

    • Project Office

      Activities as per contract to execute project

      3. Limited Liability Partnership
      • LLP

        Subject to provisions of LLP Act, 2008

        FDI permitted under automatic route in LLPs operating in sectors/ activities where 100% FDI is allowed, through the automatic route and there are no FDI-linked performance conditions***

        * Incorporation of a company in India is s.t. sectoral caps and requisite approvals

        **RBI guidelines regarding the establishment of LO/ BO/ PO. As per Companies Act 2013, only a resident Indian with PAN to be appointed for receiving notices in India for foreign company.

        ***For detailed definitions, clarifications/ exceptions, please refer to Consolidated FDI Policy

        Types of Permitted Business Establishments

        Different business establishment in India

        Min Members 2 7 1 2 Partners
        Max Member 200 Unlimited 1 No Limit
        Min Directors 2 3 1 2 Designated Partner
        Max Directors 15* 15* 15* NA
        Resident Director 1 Mandatory 1 Mandatory 1 Mandatory 1 Designated Partner
        Transfer of ownership Ownership can be transferred Ownership can be transferred Ownership can be transferred to nominee in the event of death of owner Ownership can be transferred
        Subscription of shares Public subscription not allowed Public subscription allowed Public subscription not allowed Public subscription not allowed
        Issue of Prospectus Not Mandatory **Mandatory Not Mandatory Not Mandatory
        Managerial Remuneration No limit for managerial personnel Shareholder approval is required, if remuneration payable is above limits NA Remuneration is based on LLP agreement
        Commencement of Business/ Operations Declaration to be filed prior to commencement Declaration to be filed prior to commencement Declaration to be filed prior to commencement Immediately after obtaining certificate of incorporation
        Legal Status Pvt Co is a separate legal entity registered under Companies Act, 2013. The Directors are liable for defaults made under the act Public Co is a separate legal entity registered under Companies Act, 2013. The Directors are liable for defaults made under the act OPC is a separate legal entity registered under Companies Act, 2013. The Directors are liable for defaults made under the act LLP is a separate legal entity registered under LLP Act, 2008. The Designated partners of LLP are liable for contraventions under the act
        Governing Act/ Law Companies Act, 2013 Companies Act, 2013 Companies Act, 2013 LLP Act, 2008
        Annual Statutory Filings Annual statement of accounts & annual return with ROC Annual statement of accounts & annual return with ROC Annual statement of accounts & annual return with ROC Annual statement of solvency & annual return with ROC
        Annual Filings & Audit IT return to be filed. Audit mandatory IT return to be filed. Audit mandatory IT return to be filed. Audit mandatory IT return to be filed. Audit mandatory in case turnover exceeds INR 40 lakhs or contribution exceeds INR 25 lakhs

        Note:

        Resident Director: Sec 149(3) - Every company should have at least one director who has stayed in India for a total period of not less than 182 days in the financial year.

        *Company may appoint more than fifteen directors after passing a special resolution, further provided that such class or classes of  companies as may be prescribed, shall have at least one woman director (Rule 3 of The Companies (Appointment and Qualification of Directors) Rules, 2014)

        **In case of public issue

        Commencing Business in india as LO/BO/PO

        Eligibility

        Liaison Office (LO)

        Profit making track record during the immediately preceding three financial years in the home country and net worth of not less than $ 50,000 or its equivalent.

        Branch Office (BO)

        Profit making track record during the immediately preceding five financial years in the home country and net worth of not less than $ 100,000 or its equivalent.

        Project Office (PO)

        Nil

        Permitted Activities

        LO

        LO can not undertake any commercial activity and acts as a channel of communication between the principal place of business or head office and entities in India. Its role is limited to collecting information about possible market opportunities and providing information about the company and its products to prospective Indian customers.  It can promote export/import from/to India and also facilitate technical/financial collaboration between the parent company and companies in India. It cannot earn any income in India.

          BO

          BO can be set up by foreign companies. The permitted activities include export/import of goods; rendering professional or consultancy services; carrying out research work, in which the parent company is engaged; promoting technical or financial collaborations between Indian companies and parent or overseas group company; representing  the parent company in India and acting as buying/selling agents in India; rendering services in information technology and development of software in India; rendering technical support to the products supplied by the parent/ group companies and foreign airline/shipping company.

          There is a general permission to non-resident companies for establishing BO in the Special Economic Zones (SEZs) to undertake manufacturing and service activities subject to: 

          • BOs are functioning in those sectors where 100% FDI is permitted
          • BOs comply with Chapter XXII of the Companies Act, 2013
          • BOs function on a stand-alone basis

          PO

          PO can be set up to execute specific projects in India and cannot undertake or carry on any activity other than the activity relating and incidental to the execution of the project.

          Remittance

          LO

          NA

          BO

          Permitted to remit profits net of applicable taxes and on submission of requisite documents.

          PO

          Intermittent remittances by companies pending winding-up permitted s.t. satisfaction of AD Category 1 bank.

          Validity

          LO

          Generally for 3 years
          *except in the case of NBFCs and those entities engaged in the construction and development sectors, for whom the validity period is two years only

          BO

          Nil

          PO

          As per the tenure of the project 

          Business Registration Process

            • Check availability of name / registered trademark for the incorporation of the company. Further to this, reserve name of the proposed company through online service RUN on MCA website. The name can also be applied through SPICe+. 

            • Obtain Digital Signature Certificate (DSC) for at least one proposed designated Directors of the Company. DIN for proposed Directors can only be applied for through form SPICe+.
            • Form INC 32 (SPICe+) are to be duly filled and submitted to RoC for the incorporation of the company. PAN and TAN are shall be auto-generated based on details filed in the SPICe+ form
            • Filing of electronic Memorandum of Association (eMoA - INC 33) in SPICe+ . For foreign subscribers physical MoA to be executed and attached
            • Filing of electronic Articles of Association  (eAoA- INC 34) in SPICe +. For foreign subscribers physical AoA to be executed and attached

            • SPICe+ upload and fee payment is confirmed by MCA

            • Central Registration Centre (CRC) verifies/ scrutinizes all the documents and forms and may suggest few changes to be made in the attachments or form itself. One needs to make necessary changes accordingly

            • Obtain the certificate of incorporation (CoI). CIN, PAN & TAN numbers are allotted at the time of registration
            • A company having share capital is required to file a declaration of receipt of subscription amount and verification of registered office within 182 days of incorporation and prior to commencement of business.

            Note : Notarization & Apostilling/legalization of documents mandatory in case of foreign subscribers / Directors. Some registrations would be applicable based on state in which the company is incorporating and nature of the business activity. *GSTIN, ESIC registration and EPFO registration may be obtained at the time of incorporation by filing AGILE form

            • Obtain class 2 or class 3  Digital Signature Certificate (DSC) for designated partners of LLP
            • For a quick search on already existing names of LLP a facility is provided by MCA  to check list of similar/closely resembling names of existing companies/LLPs. Trademark is also to be checked 
            • Filing the proposed name of LLP for approval from  the Registrar of Companies through RUN – LLP and can also be done through FiLLiP
            • FiLLiP is to be duly filled and submitted to RoC for incorporation of LLP. For Foreign LLP (FLLP) Form 27 is to be filed in and digitally signed by FLLP (DPIN must be obtained through FiLLiP.
            • Form 3 (Information with regard to LLP agreement and changes, if any made therein) to be filled within 30days of incorporation of LLP.

            Note : Some registrations would be applicable based on the state in which the company is incorporating and nature of the business activity. Any "defaulting LLP" is permitted to file belated documents, which were due for filing till 31st October 2019 in accordance with the provisions of the Scheme. Refer to the LLP Settlement Agreement 2020 for further updates. This scheme has come into force from 16 March 2020 and shall remain in force till 13 June 2020.

          Approval / Compliances

          • Central-level Compliances
          • State-level Compliances
          Categories
          Categories

          • 1Approval for proposed Company Name

            For LLP name search facility (of existing companies/ LLPs) is available on the MCA portal. The system will provide the list of similar/closely resembling names of existing companies/ LLPs based on the search criteria filled up. For registration of the name, RUN - LLP to be filed.

            The applicant must file e form RUN with the Central Registration Center (CRC), India for approval of name.

            The name reserved for the company shall be available for adoption of the name for a period of 20 days. In the case of laps of the said period, fresh approval needs to be taken from RUN or RUN - LLP is to be taken. For LLP name is reserved for 3 months. In case of change of name of the company, the reserved name is available for 60 days.

          • 2Consent to establish & operate

            Issue of Certificate of Incorporation by CRC - Once all the Forms are duly approved by CRC, the digitally signed “Certificate of Incorporation” is issued.

            In Case of LLP, LLP agreement is required to be signed and submitted to ROC within 30 days of incorporation of LLP.

            Once the Incorporation Certificate is received, LLP can start its operations. 

            A company having share capital is required to file a declaration of receipt of subscription amount and verification of registered office within 180 days of incorporation and prior to commencement of business.

          • 3Digital Signature Certificate (DSC) for proposed Directors

            DSC can be obtained by approaching  Certifying Authorities (CAs) with original supporting documents and self-attested copies  

            A licensed Certifying Authority (CA) issues the digital signature. Certifying Authority (CA) means a person who has been granted a license to issue a digital signature certificate under Section 24 of the Indian IT-Act 2000.

          • 4Filing of e-forms with CRC

            SPICe is duly filled and submitted to CRC for incorporation of the company.

            MCA form FiLLiP for LLP would be required 

            Form 27 is required for Foreign LLP (FLLP)
             

          • 5Finalization of supporting documents

            Filing of electronic Memorandum of Association (eMoA- INC 33) & Articles of Association  (eAoA- INC 34) 

            Payment of stamp duty/ filing fees.

            In case of foreign subscribers, physical MOA and AOA are to be filled in.
             

          • 6Grant for BIS License

            The applicant has to submit the application in the prescribed Form & Self Evaluation-cum-Verification Report along with prescribed documents and original test report(s) taxes) for considering grant of the license under Product Certification Scheme of BIS.

            List of products that mandatory require BIS license are listed in Annexure I.
             

          • 7Obtain Director Identification Number (DIN)

            DIN is a unique identification number issued by the Ministry of Corporate Affairs (MCA), for a designated partner of an existing LLP or a person intending to become a director of a company.

            DIN can be obtained by filing application Form DIR-3 online.

            All designated partners of the proposed LLP shall obtain “Designated Partner Identification Number (DPIN) / Director Identification Number (DIN)” through FiLLiP & proposed company through SPICe (if DIN is not available)

            Note – Application for DIN (for a person proposed to be appointed as a Director of an existing company or LLP) to be filed in Form DIR-3. Change in particulars to be intimated in Form DIR-6 within 30 days.

          • 8Obtain Permanent Account Number (PAN)

            PAN number shall be allotted based on the information filled in Form SPICe at the time of incorporation of a company.

          • 9Quality Marking Certificate

            Quality Marking certificate is provided by Quality Marking Centre of the State Government.

          • 10Registration for Tax Account Number (TAN)

            TAN number shall be allotted based on the information filled in Form SPICe at the time of incorporation of a company.

          • 11Verification of documents

            After payment of all fees & stamp duties, CRC scrutinizes all forms and may suggest changes in forms and/or attachments.

          • 1Approval for State Incentives (Optional)

            Apply for state government incentives/ customized package scheme for Mega projects as per state policies (Optional)

          • 2IEM/ EM Registration

            All industrial undertakings exempt from the requirements of industrial licensing, including existing units undertaking substantial expansion, are required to file information in the prescribed form for Industrial Entrepreneurs Memorandum (IEM), i.e. “Form IEM”, with the Secretariat of Industrial Assistance (SIA), Department for Promotion of Industry and Internal Trade (DPIIT), Government of India, and obtain an acknowledgement. No further approval is required.
            Optional for all Micro and small enterprises; Service sector medium enterprises; mandatory for manufacturing sector medium enterprises. 

            E-biz - Link 

          • 3MSME Registration

            Rule 

            MSME Registration is an optional registration under the MSMED Act that provides Micro, Small and Medium sized enterprises with a host of benefits and access to subsidies and schemes.

            MSME criteria

            Industries are categorized into manufacturing & service enterprises:

            MSME registration

            Guidelines:

            MSME can be registered by filling Udyog Aadhaar Memorandum. It is a 12 digit Aadhaar number allotted to MSME by DIC

            The Udyog Aadhaar Registration can be done online by individuals themselves in case they have an Aadhaar number. However, in all exceptional cases, including those of not having Aadhaar number, can still file Udyog Aadhaar Memorandum, in offline mode(i.e. on paper form), with the General Manager (GM) of the concerned District Industries Centre (DIC). Articles not covered under the MSMED Act 2006 for registration of Udyog Aadhaar Memorandum are listed in the link.

            A unit can apply for PRC for any item that does not require industrial license which means items listed in Schedule-III and items not listed in Schedule-I or Schedule-II of the licencing Exemption Notification. Units employing less than 50/100 workers with/without power can apply for registration even for those items included in Schedule-II. Once the unit commences production, it has to apply for permanent registration on the prescribed form.

          • 4Registering / categorization of unit in State

            For starting a manufacturing unit in any state, the first step for the company is to register themselves as MSME or Mega or Large Projects. The criteria to categorize a unit into MSME or Mega Project or Ultra Mega Project is defined the in respective industrial policies of states. This would benefit the units to apply for various incentives available under state government Policies/ Scheme in addition to other specific policies.

          Winding up of business

          • Prepare declaration of solvency and hold board meeting 

          • Obtain shareholders, creditors approval & appoint liquidator

          • Public notice inviting claims 

          • Intimate Statutory authorities and banker

          •  Submit preliminary report on verification of claims by liquidator 

          • Realise assets, discharge liabilities and repatriate funds if any

          •  Filing application for winding up

          • NCLT to pass dissolution order

          This page is updated as on January 30, 2020