The most popular requests from overseas companies are how to do a Business setup in India and what are the types of company registration in India. On-the-ground company formation in India, both among domestic and international investors, is on the rise. There is a spurt in activities related not only to company registration in Delhi, Mumbai, and the other large cities but also increasingly the Tier 2/3 cities in India. This rush among global companies for a Business Setup in India is understandable.
As a fast-growing nation that also ranks as the world’s largest democracy, India is an intriguing market for overseas businesses and investors. In recent years, the country — which has a population of more than a billion — has seen a surge in economic growth and now ranks as the world’s fifth-largest economy by GDP. Indeed, India’s GDP growth is the highest in the world in the past decade, regularly achieving annual growth rates of between 6-7%. Interest in business setup and company formation in India has grown steadily accordingly. Correspondingly, government policies have also ensured ever greater ease of setting up business in India.
India – Land of unlimited opportunities
One of the world’s fastest-growing economies- India attracted the highest ever FDI inflow of $83.57 billion during the financial year 2021-22 and India’s real GDP is projected to grow at 9% in both 2021-22 and 2022-23 and at 7.1% in 2023-24. This projects India as the fastest-growing major economy in the world in all these three years.
The largest youth population in the world- The population of India is expected to rise from 121.1 cr to 152.2 cr during 2011-36 an increase of 25.7% in twenty- five years. India has its largest ever adolescent and youth population and it will continue to have one of the youngest populations in the world till 2030.
Rising global competitiveness- India jumps 79 positions from 142nd (2014) to 63rd (2019) in ‘The World Bank’s Ease of Doing Business Ranking 2020’. India ranks 68th on the Global Competitiveness Index 2018-19. Goods and Services Tax (GST), the biggest tax reform since independence, paves way for a common national market by integrating various indirect taxes.
Rising economic influence- Centre of global maritime trade to move from the Pacific to the Indian Ocean Region. India and China will be the largest manufacturing hubs of the world by 2030 with connectivity to Central Asia and Europe via the International North-South Transport Corridor (INSTC).
Company formation in India: Setting up or owning a company in India can broadly be achieved with the following options:
The following forms of business entities and types of company registration in India are available:
Within the above framework of the constitution of an entity, foreign investors intending to do business here have the following types of company registration in India:
What is a Private Limited Company?
A Private Limited Company is a Company that restricts the right to transfer its shares i.e. the shares of a Private Limited Company are not freely transferable under the Companies Act, 2013. It can have a maximum of 200 (Two Hundred) shareholders and it cannot invite the public the subscription to its shares or debentures. The liability of each shareholder is limited to the extent of the unpaid amount of the share’s face value The minimum number of shareholders is 2 (Two). Setting up of business via this route is generally adopted by small business concerns.
What is a Public Limited Company?
A Public Limited Company is a Company other than a private limited company. In this case, there is no restriction on the maximum number of shareholders, transfer of shares, and acceptance of public deposits. The liability of each shareholder is limited to the extent of the unpaid amount of the share’s face value. The minimum number of shareholders is 7 (Seven).
Wholly owned Subsidiary Company
Subsidiaries are a common feature of business houses and major businesses organize their operations in this way over the world.
The most common way that control of a subsidiary is achieved is through the ownership of shares in the subsidiary by the parent company. The shareholding gives the parent company the necessary votes to determine the composition of the Board of Directors of the subsidiary and in terms of control of its affairs. This gives rise to the common presumption that 50% plus one share is enough to create a subsidiary. Subsidiaries are separate, distinct legal entities for the purposes of taxation and regulation. A subsidiary company may also be a Private Limited Company.
Joint Venture Company
Joint ventures are the most preferred module of doing business in India. It is an arrangement between two or more business entities to achieve a specific objective(s). The JVs are advantageous as a risk-reducing mechanism in new-market penetration and in the pooling of resources for large projects. The Company incorporated in India having 100% foreign shareholding, is at par with domestic companies. There is no specific law regulating joint ventures in India and these are regulated by the companies acting in a manner similar to wholly owned subsidiaries.
Liaison offices as the word suggest is an office that facilitates close working relationships between the parent company situated abroad and the business parties in India. The other term for Liaison offices is Representative Office. Liaison offices have restrictions and cannot undertake any business activities in India and also cannot earn any income in India.
The liaison office can undertake only the following activities in India:
A branch office mirrors the function of a parent company. The offices are established to perform similar business operations as the foreign parent company at different locations in India. Branch offices can carry on substantially the same business as the parent company. They can carry out all the trading activities that a parent company does. The major restriction is carrying out manufacturing activities although the same can be subcontracted to Indian Manufacturers.
The RBI grants the parent company situated abroad to have project offices in India for representing the interests of the parent company executing projects in India but excludes Liaison Office.
The project office can only undertake the activity related and incidental to the project. The primary condition for opening a project office in India is that the parent company must have secured a contract from an Indian company.
Business Registration Process
Given the above types of company registration in India, the following is a flowchart of the business registration process.
You can directly reach out to us for your query related to “Setting up a Business in India“:
For more information, please email us with your specific business requirements at [email protected]
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Also read:- How to Start Business in India
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