How to Start Business in India: The A-Z of Company Formation in India-Part 2

At MBG Corporate Services - a leading market entry consulting firm for business setup in India – we bring you this comprehensive, in-depth two-part series on how to start a business in India vis-à-vis the procedure of Company formation in India. In Part 1, we covered why business setup in India and the available options and types of company registration in India. In Part 2 here we cover the company registration in India process.

As covered in Part 1, a foreign business looking to a business setup in India with direct investment has the option of a Private Limited Company formation in India or a Public Limited Company as a Wholly Owned Subsidiary (WOS) or as a Joint Venture company (JVC) with an Indian party.

To operate without direct investment and in a more limited way without separate legal entity status, it can be set up as a Representative Office or Liaison Office, where it cannot earn any business income,  or as a Branch Office, where it can do business and earn income.

The procedure of Company Formation in India:

The formation process and procedures vary according to the specific types of company registration in India. These are as follows

Private Limited Company

A Private Limited Company formation in India involves the following steps

• Obtaining the Directors Identification Number (DIN) and Digital Signature Certificate of the First Directors in the proposed WOS/JVC in India
• Obtaining approval for the proposed name of the company from the CRC, Office of Registrar of Companies (ROC)
• Drafting Board Resolutions and Power of Attorneys in favor of authorized signatories (signing, notarization, attestation) and drafting the Memorandum and Article of the Association
• ROC registration (submission of MOA, AOA, and other relevant documents) and payment of registration fees to the government treasury.
• Receipt of Certificate of Incorporation of the WOS as a company from the ROC.

It takes around one week from the date of filing of documents to receive the Certification of Incorporation from the office of the ROC. The final discretion lies with the office of the ROC.

Private Limited Company formation in India requires the following pre-establishment compliances:

• No approvals are required in the automatic route
• DIPP approval must be obtained in the approval route through the submission of the application and the prescribed documents
• Registration with the office of Central Registration Centre, Office of Registrar of Companies

Once established, the company must meet compliances such as :

• Obtaining Statutory registrations
• Regular filing of corporate Income Tax, Withholding Tax, and Goods and Services Tax
• Expatriate taxation
• Regular board meetings and maintenance of Minutes Books/Resolutions/Share Certificates etc.
• Annual filing compliances i.e., filing /submission of prescribed forms along with Indian accounts, audit,s and certifications
• Filing of annual returns on foreign assets and liabilities with the Reserve Bank of India (RBI) 

Branch Office, Liaison Office

The procedure for setup of a Branch Office or Liaison Office is as follows:

1. Checking for regulatory requirements: Check whether the activities of the parent company fall under the automatic route or the approval route
2. Appointment of AD bank: Appoint one Authorized Dealer (AD), i.e., an AD Category-I bank identified by the applicant foreign company to pursue banking relations in India
3. Submission of application: The applicant foreign company needs to submit Form FNC along with the required documents to the appointed AD Cat.-I bank
4. Document assessment by AD: Due diligence by the AD to assess and forward documents to the RBI for issuance of a Unique Identification Number (UIN)
5. Delegation of power to the AD: RBI’s power of approval for the Branch Office or Liaison Office is delegated to the AD after obtaining UIN from the RBI.

Project Office

A Business Setup in India with a Project Office needs the following compliances:

• Pre setup:
  • Intimation to AD for setting up and undertaking proposed business activities
  • Registration with the office of the ROC
• Post setup
  • For entities from Bangladesh, Sri Lanka, Afghanistan, Iran, China, Hong Kong, Macau, or Pakistan - submission of the report to the Director General of Police of the concerned state within 5 days of establishing
  • Annual Corporate Income Tax filing
  • Transfer Pricing documentation and certification, if applicable
  • Quarterly and annual Withholding Tax filings and monthly payments of withholding tax
  • Expatriate Taxation –filing of annual returns.
  • Regular filing and deposit of Goods and Service Tax, if applicable
  • Annual ROC compliance i.e., filing of audited Indian and global accounts
  • Annual RBI compliance i.e., filing of annual Activity Certificate with the AD Cat-I bank.

Statutory tax registrations:

• Permanent Account Number (PAN)
• Tax Deduction and Collection Account Number (TAN)
• Importer – Exporter Code (IEC)
• Registration under the Shops and Establishment Act
• Goods & Services Tax registration number (GSTIN)

For a Branch Office Liaison Office or Project Office to fold up its business set up in India, a request for closure must be made to the AD Cat-I bank. The closure application should include the following documents:

• Copy of the AD Bank or RBI’s permission/ approval from the sectoral regulator(s) for setup
• Copy of Intimation letter filed with AD Bank/RBI
• Auditor's certificate:
  • Computation of remittable amount supported by a statement of assets and liabilities
  • confirming that all liabilities in India including arrears of gratuity and other benefits to employees, etc. of the office have been either fully met or provided for
  • confirming that no income accruing from sources outside India (including proceeds of exports) has remained unrepatriated to India
• Confirmation of no legal proceedings in any court in India and no legal impediment to the remittance from the applicant or its parent company
• Certificate of cessation from the Registrar of Companies

How MBG helps you achieve a successful Business Setup in India

Company formation in India procedure can be long and time-consuming. That is where we at MBG Corporate Services come in with our market-leading know-how of not only how to start a business in India but also thrive in this booming but challenging environment.

MBG Corporate Services is one of the leading consulting and setup service providers for market entry and company formation in India. Whether Branch, Liaison Project Office, or Private Limited Company formation in India, we have the experience and the expertise. Whether it is advice on India business strategy or on-ground execution of company formation in India procedure, we have the teams.

We deliver a comprehensive A-to-Z suite of services for company incorporation in India. These operations include each stage of the process :

Pre-setup: Market Entry Services

• Market Feasibility Study: Comprehensive Input into
  • Demographic assessment and trend analysis
  • Market size and potential
  • Customer and Competition Analysis
  • Product mix strategy
  • Price build-up
  • Regulatory and legal environment
• Evaluation of Market Entry strategies: Assessment, advice, and eventual execution of
  • High-quality advice on the right business and legal structure between BO/LO/PO, and Pvt ltd company registration in India (and whether WOS or JV within that)
  • Mergers & Acquisitions/ Joint Venture support and search
  • Importer/Exporter/distributor/supplier search

Business Setup in India: Entity Establishment Services

Covering every aspect of business setup covered in the previous section including all procedures across all types of company registration in India –

• Private Limited Companies, Public Companies, Wholly Owned Subsidiaries, Joint Venture companies,
  • Checking name availability, trademark search
  • Drafting of necessary documents for submission to the office of the ROC
• Setting up of Branch, Project, or Liaison Office (LO/ BO/PO) with required permissions from Authorized Dealer (AD) Bank/Reserve Bank of India

Post setup: Cross-domain consultancy for the operational business setup in India

Our India entry strategy consulting practice brings together experts across domains to ensure your business operates successfully after company incorporation in India. These include Strategy, Tax, Legal, Risk Management, M&A, and other related domains to ensure the best ‘hard skills’ solutions for entry. On top of this are the at-home ‘soft skills’ of cultural familiarity and professional networks around the various corridors and rooms involved in company incorporation in India.

For more information, please email us with your specific business requirements at [email protected]

or contact us at +91 88601-90008

Also Read:- Procedure for Foreign Company Registration in India