incorporation private limited company in india

IncorporationPrivate LimitedCompany in india

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Contents

INTRODUCTION

ESTABLISHMENT REQUIREMENTS

DOCUMENT REQUIREMENTS

FDI RELATED RBI FILINGS

BANK ACCOUNT OPENING

SUMMARY OF STEPS

COST

ABOUT GPZ

THE LEADERSHIP TEAM

Gajra Pai & Zhu Limited

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INTRODUCTION

Private Limited Company is the most prevalent and popular type of corporate legal entity in India. The Ministry of Corporate Affairs (MCA) is the Government body that regulates corporate affairs in India. Incorporation of a Private Limited Company is done by filing the relevant forms with the Registrar of Companies (ROC) of the respective jurisdiction via the MCA portal.

Once all relevant documents are submitted, it takes 6 - 8 weeks to incorporate a Private Limited Company in India. Sometimes, due to administrative and legal obstacles, the process can be delayed.

6 - 8 WEEKS

REASONS TO INCORPORATE A PRIVATE LIMITED COMPANY

LimitedLiability

Foreign Promoters

Borrowing Capacity

EasyTransferability

The liability of each Shareholder is limited to

the extent of unpaid capital they are required to bring in. Further, they have no

personal liability to creditors for the company’s debts.

Foreign nationals are allowed to be Directors of the

company. Foreign nationals and foreign corporate

entities are allowed to be Shareholders.

The company can raise capital by issue of equity

shares, preference shares, debentures, and raise funding

easily by way of loans and advances from banks and other financial institutions.

Ownership of the business can be transferred easily from an individual or a

company to another by way of transfer of shares.

Incorporation of a Private Limited Company in India

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DIRECTORS AND SHAREHOLDERS

DIRECTORS

There must be a minimum of 2 Directors to incorporate a Private Limited Company in india.

Number of Directors cannot fall below 2 during the entire lifetime of the company.

There must be at least 1 Resident Director on the Board of Directors.

A foreign national can also be a Resident Director.

RESIDENT DIRECTOR

A Resident Director has been defined as one who has stayed in India for at least 182 days in the previous calendar year, however the duration need not be continuous. It is mandatory that the Resident Director has a Permanent Account Number (PAN).

SHAREHOLDERS / INVESTORS

There must be a minimum of 2 Shareholders to incorporate a Private Limited Company in India.

Number of Shareholders cannot fall below 2 during the entire lifetime of the company.

Shareholders can be individuals or companies. A Shareholder and Director can be the same person.

There is no limit on the proportion of shares that each Shareholder can hold.

CHANGE OF DIRECTOR

A Director can resign from the directorship by submitting a resignation letter to the company. The Board can propose and appoint another individual as Director. Once the Board passes a resolution to that effect, the same needs to be filed with the ROC.

DSC AND DIN

DIGITAL SIGNATURE CERTIFICATE (DSC)

All Directors of the company are required to have a Digital Signature Certificate (DSC).

DSC is an electronic format of a physical or paper certificate, issued in the form of a USB token with 1-2 years validity. It is a statutory requirement for affixing the Director’s signatures during Government submissions.

DIRECTOR IDENTIFICATION NUMBER (DIN)

All Directors of the company are required to have a Director Identification Number (DIN).

DIN is a unique 8 digit number that is required for any existing or proposed Director of a company.

NON-EXECUTIVE DIRECTORS

Not all Directors need to be Managing Directors. A Non-Executive Director is only responsible for signing certain company documents, and does not participate in the day to day affairs of the business.

In case the company does not have a Resident Director, GPZ can provide a Non-Executive Resident Director.

ESTABLISHMENT REQUIREMENTS


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CAPITAL

MINIMUM CAPITAL

The initial Authorised Capital of the company is mentioned in the Memorandum of Association (MOA) and it is advised to have at least ₹100,000. There is no upper limit on Authorised Capital.

The minimum Paid-Up Capital is ₹10 by each shareholder. It is suggested to have at least ₹100,000 as Paid-Up Capital, as it would enable completion of bank account opening and other post-incorporation formalities without any delay.

APPROPRIATE AMOUNT OF CAPITAL

The Authorised Capital can be based on the operating cost of the company for the first 6 months. This includes setting up expenses, staffing, manufacturing costs, etc.

Large Authorised Capital means that more stamp duty is required at the time of registration. When the Paid-Up Capital is more than ₹50 million, the company needs to appoint a full-time Company Secretary.

STAMP DUTY

Stamp Duty is the Government legal fees paid for incorporation and registration of capital. It is based on:

I. The state/province of registration

II. The amount of Authorised Capital

INCREASE OF AUTHORISED CAPITAL

The Authorised Capital can be increased by the company at anytime with approval of the Shareholders, and by paying an additional fee to the ROC. GPZ would require 7 working days to make preparations for increase of Authorised Capital. It further takes 14-21 working days for the ROC to approve the same.

Authorised Capital vs. Paid-Up Capital

Authorised Capital is the maximum amount of capital for which shares can be issued by the company.

Authorised Capital can be increased at a later stage with the consent of the Shareholders.

Paid-Up Capital is the actual amount paid by the Shareholders for shares issued by the company.

Paid-Up Capital cannot exceed Authorised Capital.


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BOARD MEETINGS

The company must hold at least 4 Board Meetings in a financial year.

The Board Meeting of a Private Limited Company can be held anywhere in the world.

COMPANY MEETINGS

ANNUAL GENERAL MEETING

Annual General Meeting (AGM) should be held once every financial year, before 30th September each year.

AGM of a Private Limited Company can be held anywhere in India.

COMPANY NAME

The proposed company name and a list of two alternative names must be provided. Once the proposed name is approved for availability by the MCA, the incorporation documents should be submitted to the Government within 20 days from the date of approval.

COMPANY ADDRESS

REGISTERED OFFICE

Every company must have an office address registered with the Government in the city it plans to start its business and incorporate the company. This address is required for all Government registrations, obtaining permits, opening a bank account and receiving official communication.

WORKING ADDRESS VS. REGISTERED ADDRESS

The company working address need not be same as the Registered Office address.

It is suggested that it be in the same city for ease of communication and registration.

CHANGE OF COMPANY DETAILS

The company name, address and business objective can be changed by the company anytime with approval of the Shareholders, and by paying an additional fee to the ROC. GPZ would require 10 working days to make preparations for the change. It further takes 21-30 working days for the ROC to approve the same.

BUSINESS OBJECTIVE

The purpose of the company must be clearly mentioned in the incorporation papers. This must include all business activities the company plans to have at present and in the future.

In case the company does not have a readily available address, GPZ can provide a Registered Office in the city of choice.


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INVESTING COMPANY

In case of company shareholding, a notarised and apostilled copy of the following charter documents of the investing company need to be submitted.

1. Certificate of Incorporation (COI)

2. Memorandum of Association (MOA)

3. Articles of Association (AOA)

4. Any other charter documents as per the local laws of the foreign company

5. Board Resolution for approving investment in the Indian subsidiary, and authorising a representative to act as the subscriber.

6. KYC documents of the authorised signatory appointed on behalf of the Investing company.

REGISTERED OFFICE

The following documents need to be submitted as proof of Registered Office address of the company:

1. Copy of lease agreement of the proposed Registered Office

2. Copy of previous month’s utility bill of the proposed Registered Office, in the name of the lessor

3. NOC from the landlord to use the premises for business license registration

4. Board Resolution, in case the lessor is a company

KYC DOCUMENTS

KYC documents of all Directors, Shareholders, and authorised representatives (in case of investing companies) need to be submitted.

• All the Charter documents and KYC documents of foreign companies or citizens have to be notarised by a notary public and apostilled by the local Indian Embassy or Consulate in the home country. GPZ would require the original notarised and apostilled documents for incorporation.

• In case the Charter documents and KYC documents of foreign citizens are in any other language other than English, certified English transcripts of the same have to be provided, as well.

• In case the Foreign Director is making a trip India to sign the incorporation documents, Business Visa copy with valid Indian Visa stamp during the time of signing of incorporation documents should be provided.

IDENTITY PROOF PERMANENT RESIDENCE ADDRESS PROOF

RESIDENT PAN Card*• Aadhaar Card*, and• Mobile / Telephone / Electricity bill / Bank statement certified by the Bank

manager (any one)

FOREIGNER Passport*• Mobile / Telephone / Electricity bill / Bank statement certified by the Bank

manager (any one)

In case the registered office is taken from GPZ, we will arrange for the same.

DOCUMENT REQUIREMENTS


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COMMON DOCUMENTS REQUIRED

• Company Documents (to be certified by a Director of the company, along with company seal)

1. Certificate of Incorporation (CoI)

2. Memorandum of Association (MoA)

3. Articles of Association (AoA)

4. PAN Card

5. Board Resolution for opening current account on company letterhead

6. Current list of Directors

7. Current Ultimate Beneficial Ownership (UBO) Shareholding pattern (as per bank’s format)

8. In case the address for bank account opening is different from that mentioned in the CoI, address proof for the same is required

• KYC documents of all Directors and Authorised Signatories (to be certified, along with appropriate seal)

Refer to KYC Documents section of Documents Required for company incorporation (Page 05)

• Bank Documents (to be filled and signed along with appropriate seal)

1. Account Opening Form

2. FATCA Form or FATCA Declaration (as applicable)

3. Other bank forms and documents as per bank regulations

This is only a suggestive list of documents commonly required by banks for current account opening. Additional bank and case specific documents are usually required.

It is advised to select a banker prior to submission of incorporation documents, in order to avoid delays later. Please speak with a member of our team for a complete list of documents that would be required for your company.

GPZ’s bank account opening services includes:

• Advice on suitable banking partner

• Reference to bank to expedite process

• Coordination between Client and bank

• Assistance in preparation of documents

BANK ACCOUNT OPENING


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Once the company bank account is opened, the initial Paid-Up Capital is to be brought in by the Shareholders, as mentioned in the incorporation documents.

In case the investor is a foreign company or individual, the share capital will be treated as Foreign Direct Investment (FDI) and will be brought in directly from the overseas bank of the investor to the bank account of the company via RBI channel. Once the funds are transferred, the following steps will follow.

In case the investor is an Indian company or individual, RBI reporting is not applicable.

STEPS DESCRIPTION TIME LIMIT

Issue of Inward Disposal Instruction

Letter issued by the company to the Indian bank stating the details of the investment.

GPZ would take 2 working days to prepare the document, once all relevant details are submitted by the Client.

Procurement of Foreign Inward Remittance Certificate (FIRC)

FIRC is a document that acts as proof of a foreign transfer to India, used by companies to report FDI inflows to RBI.

To be submitted immediately after the transfer is received by the Indian company’s bank account.

(This will be issued by the remitter’s bank to the company’s Indian bank)

Procurement of 6-point Know Your Customer (KYC)

KYC is a document that acts an authentication of the remitter

Advanced Remittance Form (ARF)

ARF is a form that is filed with the regional office of the RBI, as an intimation that funds have been received

To be completed within 30 days of receipt of funds.

Issue of sharesShare certificates are to be issued to the Shareholders of the company

To be completed within 60 days of receipt of funds.

Submission of Form FC-GPR

Form FC-GPR is submitted by the company to the RBI for reporting the issue of eligible instruments to the overseas investor against the FDI inflow

To be completed within 30 days of share allotment.

FDI RELATED RBI FILINGS

DraftingMOA and AOA

Company name application

DSC application

Company incorporation

DIN application

Obtaining COI,PAN and TAN

IEC applicationGST application

RBI filing for first shareallotment via FDI

Opening abank account

Transfer of initial capital by shareholders

SUMMARY OF STEPS

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Company legally to Sign contracts

Company fully operational


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Note:

• The services mentioned can be selected based on the Client’s requirements.

• Costs might differ in certain cases. Please speak with a member of our team to receive a detailed proposal for your company with costs and timeline.

STEPS DESCRIPTION

Digital Signature Certification (DSC) and Director Identification Number (DIN) application

$315

Company name application $315

Drafting Articles of Association (AOA) and Memorandum of Association (MOA)

$945Preparation of relevant documents for company incorporation

Company incorporation and obtaining Certificate of Incorporation (COI)

Obtaining National Tax Registration (PAN)$470

Obtaining Withholding Tax ID (TAN)

Opening a bank account $315

Obtaining Import Export Code (IEC) $395

Reserve Bank of India (RBI) filings related to Foreign Direct Investment (FDI) for first share issue (FIRC, ARF, FC-GPR and equivalent paperwork)

$1,180 onwards

Registered Office Service $785/6 months onwards

Resident Director Service $785/6 months onwards

General Consulting with a Director $125/hour

General Consulting with a Compliance Manager $55/hour

COST


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Gajra Pai & Zhu is an international consulting firm that specializes in Market Entry Consulting. We work as your partner to bring your products/services to India. Our focus is on sales growth and making compliance easy through our Business Support Services. Our local experts and international team focus on delivering practical, bold, and long-lasting results.

GPZ partners with your company to provide continuous assistance, guiding you through the first 1000 days of establishment. GPZ is therefore able to commit to increasing your probability of success and speed of execution in India.

We believe that each client has unique needs and priorities and thus deserves personal attention. GPZ’s expertise is in providing a comprehensive solution to perfectly fit your business goals.

If the prospect of establishing your presence in the Indian market attracts your interest, enlisting GPZ’s guidance will serve you with the fundamental strategic advice and requisite business support.

ABOUT GPZ


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THE LEADERSHIP TEAM

Varun GajraManaging Director

Varun started his first company when he was 14 and has first-hand experience in Manufacturing, Financial Markets and Consulting. He has significant international experience in financial, legal and compliance environments over the last 15 years. He worked with JP Morgan Chase and HDFC Standard Life Insurance before founding GPZ.

Celeste Zhu Executive Director

Celeste has spent a significant amount of time across India and South East Asia working with companies in different verticals. She has an in-depth understanding of the Indian, Chinese and Belgian business environment and has assisted in setting up manufacturing units for a number of clients. Celeste can speak Chinese, English, and Tamil.

Giriraj Pai VernekarExecutive Director

Giriraj is a Policy Consultant, specializing in the areas of Aerospace, Defense and Security related matters. He has also served in the Government, as Special Assistant to the Honorable Chief Minister of Goa, during 2012-2015, during which he observed and participated in policymaking.

Matthieu LecompteDirector

Matthieu is a lawyer and a member of the Belgian Bar Association. He has an excellent track record working in contract law, negotiation, immigration law, construction, liability, public law and public procurement. Matthieu practices in two languages - Dutch and French and is fluent in English and German. Matthieu is based in Ghent.

Tom HertsensDirector

Tom works in a senior management role in the technology sector at a major Fortune 100 company. With over 20 years of experience, Tom has expertise in commercial as well as management functions and has built an excellent international network. Tom is based in Ghent.

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