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Honorary Consulate of India, Atlanta




Forming a company in India

COMPANY FORMATION

A company in India is required to be incorporated under the provisions of the (Indian) Companies Act, 1956 (the "Act"). A company may be incorporated either as a private limited company or a public limited company. A private limited company is simpler and less time consuming to incorporate and enjoys a host of benefits/privileges including less stringent procedural formalities which are to be complied with as compared to a public limited company. The steps and procedure involved for incorporating a private limited company in India are being provided hereinbelow:

STEPS AND PROCEDURE FOR COMPANY FORMATION Name Approval: An application for name availability in the prescribed form i.e., Form 1A, is required to be filed with the Registrar of Companies ("RoC") in the State where a company is proposed to be incorporated. The preferred name would have to be provided in Form 1A along with three alternative names in order of preference. The other relevant particulars to be furnished in and along with Form 1A are as follows:

  1. No-objection Certificate: In case the proposed name includes any part of an existing company's name, a No-objection Certificate ("NOC") from the existing company will be required to be filed along with Form 1A. It must be declared in the NOC that the existing company has no objection to the proposed name of the new company. For example, in case the Indian company to be incorporated proposes to use the word(s) which form part of the name of the foreign company, the foreign company would be required to furnish the NOC to this effect.

    Note: It is pertinent to mention that some RoCs now require that a Board resolution of the foreign company be provided, instead of a NOC. The said Board resolution is required to be notarized in the country where the foreign company is situated and thereafter the same is required to be authenticated/attested by the Indian Embassy/Indian High Commission.

  2. Promoters: The Act provides that for a private limited company a minimum of two persons are required to act as the promoters and subscribers to the Memorandum of Association ("MoA") and Articles of Association ("AoA").

  3. Main Objects: The main objects of the company proposed to be incorporated are required to be enumerated in Form 1A. Once a name approval certificate has been issued by the RoC, the main objects would be required to be incorporated in the MoA.

  4. Authorized Capital: The authorized capital of the proposed company must also be indicated in Form 1A. In this regard, it may be noted that the minimum authorized capital required for a private limited company is Rs. 100,000/-. In the event the proposed name includes certain specified words such as 'India', 'Corporation', etc., the minimum authorized capital would have to be Rs. 500,000/-.

  5. Paid-up Capital: It is mandatory for a private limited company to be incorporated with a minimum paid-up capital of Rs. 100,000/- (Rupees one hundred thousand only).

Fee: A fee of Rs. 500/- for name approval must be submitted along with Form 1A.

Time Frame: The name approval process usually takes seven (7) working days from the date the prescribed Form 1A is filed with the RoC. The name approval is valid for a period of six (6) months within which the company must complete all registration formalities.

Drafting of MoA and AoA: The MoA and AoA can be prepared while the RoC is processing the prescribed Form 1A for name approval.

Filing of relevant documents with the RoC: For the registration of a company, the following documents are required to be filed with the RoC of the State in which the company is proposed to be incorporated, along with the necessary registration and filing fees:

Two copies of the MoA and the AoA, duly stamped and signed by two subscribers to the MoA, along with the prescribed registration fee.

Power of Attorney (the "PoA") signed by the subscribers and executed in favour of any person who would be authorized to fulfill all the formalities required in connection with the registration of the company with the RoC. The PoA is required to be on a non-judicial stamp paper of a value of Rs. 20/-.

Copy of the name approval letter issued by the RoC.

Receipt evidencing payment of the prescribed registration fee and filing fee of Rs. 4800/-. The said fee would be payable if the authorized capital is Rs. 100,000/-.

Note: With regard to the registration fee, it may be noted that the fee payable to the RoC is directly proportional to the authorized share capital of the company. The registration fees payable in case of a company with an authorised capital of Rs. 100,000 is Rs. 4000/-.

  1. Issuance of Certificate of Incorporation: Once the aforesaid registration documents have been filed, the RoC will scrutinize the said documents and upon satisfaction issue the Certificate of Incorporation.

    Time Frame : The Certificate of Incorporation is usually issued by the RoC within a period of ten (10) to fifteen (15) working days from date the MoA and AoA (along with the aforementioned documents) are filed with the RoC.
  2. Commencement of Business: A private limited company so registered can commence business from the date of incorporation indicated in the Certificate of Incorporation.
  3. Post Incorporation Filings: The following must be filed with the RoC within thirty (30) days of the incorporation of the company:

    * Declaration of compliance in Form 1 by certain designated persons such as an advocate or a chartered accountant stating that all legal requirements in connection with the incorporation of the company have been complied with.

    * Notice of location of the registered office of the company in Form 18.

    * Particulars of the directors of the company in Form 32 (in duplicate).