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 noticesin India for foreign company.

        ***For detailed definitions, clarifications/ exceptions, please refer to Consolidated FDI Policy, effective from August 28,2017, Amendment to FDI policy in Jan 2018

        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)

        Commencing Business in india as LO/BO/PO

        Eligibility

        Liaison Office (LO)

        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

        Branch Office (BO)

        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.

        Project Office (PO)

        Nil

        Permitted Activities

        LO

        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
           

        BO

        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.

        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

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

        BO

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

        PO

        Nil

        Validity

        LO

        Nil

        BO

        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

        PO

        As per the tenure of the project 

        Business Registration Process

          • Check availability of name / registered trademark for incorporation of the company 

          • 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 proposed 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 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) & Articles of Association  (eAoA- INC 34) in SPICe . For foreign subscribers physical MoA and AoA to be executed and attached

          • SPICe uploaded and fee payment is confirmed by MCA

          • RoC 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. 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

          • 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.

        Approval / Compliances

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

        • 1Approval for proposed Company Name

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

          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 (DPIN)” 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 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 INC 32 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.

        • 1Authorization for hazardous waste

          Application to State Pollution Control Boards for Collection/ Reception/ Treatment/ Transport/ Storage and Disposal of Hazardous waste.

        • 2Building Completion certificate

          A completion certification (CC) is a critical and mandatory legal document that a builder should obtain from Application to Town and Country Planning , or Local municipality , development authority or agricultural department  or other local bodies such as Nagar Nigam or Gram Panchayat as applicable) with plan, scrutiny fees  and land allotment copy.
           
          After the completion of a project, the local authority inspects and evaluates the premise against the approved building plan and awards the completion certificate, if all the rules are satisfied.

        • 3Central Excise Registration

          The application for registration is to be filed with the Superintendent of Central Excise having jurisdiction over the premises in respect whereof the registration is to be obtained.

          Note – Applicability of Excise is for liquor and petroleum based units.

        • 4Consent to operate

          Consent to operate is obtained from Pollution control board of the respective states. It is required in both pre-commissioning stage. It is subject to renewal from time to time.

        • 5Customs- Special Valuation Branch

          Special Valuation Branch (“SVB”) is a branch of the Custom House that specializes in investigating the transactions involving relationship between the supplier and the importer. The detailed working and functions of the branch can be accessed at link.

        • 6Employee Registration with ESIC

          Employees' State Insurance Corporation (ESIC) provides monetary and medical benefits to Employees in case of sickness, maternity and employment injury and to make provisions for related matters.
          Form 01 should be used by employers to register with ESIC.

        • 7Employer Registration with EPFO

          The Employees' Provident Fund Organization (EPFO) provides social security benefits to Employees of establishments on which the Employees’ Provident Fund and Miscellaneous Provisions Act 1952. 
          Online registration for EPFO can be done through link.

        • 8Final Fire Approval

          Final Fire approval needs to be taken by local state authority.

        • 9GST Registration

          Any business whose turnover exceeds the threshold limit of INR 20 lakhs (INR 10 lakhs for North Eastern and hill states) will have to register under GST. Businesses registered under any of the pre-GST laws: VAT, Excise/Service Tax have to register under GST by default.

          Any business can get registered under GST by applying via the GST Online Portal or at GST Seva Kendra set up by the Government of India. Fill Form-part A (PAN, Mobile and email id. The portal verifies your detail via OTP. Upload the document as per business type. Fill Form-part B using the  received number through OTP. Application reference number shall be received via mobile/ email. The GST officer verifies your application/ document. In case more information/ documents are asked through Form GST-REG-03 details have to be shared through Form GST-REG-04 within 7 working days. GST officer approves application and GSTIN within 7 working days.

        • 10Importer Exporter Code (IEC)

          Import Export (IE) Code is a registration required for persons importing or exporting goods and services from India. IE Code is issued by the Directorate General of Foreign Trade (DGFT), Ministry of Commerce and Industries, Government of India. IE Codes when issued can be used by the entity throughout its existence and doesn't require any renewal or filing.

           

          IE Code application must be made to the Directorate General of Foreign Trade along with the necessary supporting documents.

        • 11Power

          Application to State Electricity Distribution Company for sanction of power supply for low tension (LT), high tension (HT), or Extra High Tension connection as applicable.

        • 12Professional Tax Registration

          According to section 5 of the Profession Tax Act, every employer (not being an officer of the government is liable to pay tax and shall obtain a certificate of registration from the prescribed authority. 

          The company is required to apply in Form I to the registering authority.

        • 13Shops & Establishment Act

          Registration under Shop & Establishment is provided by state government.

        • 14Trademark/ Brand Registration

          Trademark registration provides legal right of exclusivity for the use of mark to the owner of the mark. Trademark registration involves multiple steps. A step by step guide for registration of trademark is detailed at link.

        • 15Water Connection

          State Industrial Development Corporations for approval for water connections; to State Industrial Promotion Boards (where applicable) where source of water is river/ canal/ dam; and to Central Ground Water Commission in case of ground water extraction.

        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 November 26, 2018