Guide to Company Incorporation & Regulatory Compliance in India

Given India’s developing market, many foreign companies consider this country the gold standard for expanding their businesses. However, for company formation in India, organizations must adhere to some incorporation and regulatory compliances set by the Indian Government.

Thus, before making their expansion plans, they must understand these regulations in order to avoid further hassles down the line.

Registration of Foreign Companies in India (Step-by-Step Guide)

When a foreign organization wishes to go ahead with company formation in India, it can be registered in the following ways:

Wholly Owned Subsidiary

One of the ways for a foreign company to set up its business in India is to make a 100% Foreign Direct Investment (FDI) in an Indian organization, thus making it the former’s wholly owned subsidiary.

To do this, a foreign entity must follow the given steps:

Step 1: Appoint two directors, one of whom must be an Indian resident.

Step 2: Ask the director to apply for a DSC (Digital Signature Certificate) and DIN (Director Identification Number).

Step 3: Draft the Article of Association (AOA) and Memorandum of Association (MOA).

Step 4: Ask the shareholders to subscribe to the Memorandum of Association.

Step 5: Reserve the business’s name by filling out the Part-A of the SPICe+ and the Part-B of the SPICe+ form by logging into the Ministry of Corporate Affairs portal.

Step 6: Submit all the necessary documents:

1. The company’s address proof
2. Indian director’s basic documents (identity proof, address proof, and PAN card)
3. Foreign director’s Passport, address proof, driving license, utility bills, or any Indian consulate-certified government license

Step 7: Submit the registration form and pay the fees.

After the step, the SPICe+ form and submitted documents will undergo verification by the Registrar of Companies (ROC). If everything is done correctly, the authorities will issue the company’s PAN number and Certificate of Incorporation.

Step 8: Then, the organization needs to open a bank account in India.

Step 9: Hereafter, when the subscription process of the company’s shares is complete, it must submit its share capital documents for FDI compliance.

Joint Venture

When a foreign organization tries to set up its business in India with two or more entities under a joint agreement or contract, it is called a joint venture. The steps to do it are as follows:

Step 1: Choose an Indian entity to enter into the joint agreement.

Step 2: Sign a Letter of Intent or a Memorandum of Understanding (MOU) stating the agreement’s basis.

Step 3: Thoroughly discuss and negotiate the contract’s terms with the local partner.

Step 4: Ensure that the joint agreement adheres to International and Indian laws.

Step 5: Check all contract details regarding holding and transferring of shares, dispute resolution terms, etc.

Branch Office

Foreign businesses that have a large business and profitability proof can choose to open a branch office in India. The steps to do it are as follows:

Step 1: File an application with the Reserve Bank of India via an Authorized Dealer Category 1 AD bank.

The documents submitted by the company are sent to the banker in its home country for verification. After receiving confirmation from their end, the process continues.

Step 2: Gain RBI’s approval for opening a branch office in India and register it with the ROC.

Step 3: Open a bank account in India, and apply for a PAN card and a Tax Deduction Account Number.

Step 4: Apply for Import Export Code and GST registration.

Project Office

When an Indian company gives a foreign organization the authority to execute projects on its behalf, the latter can open a project office. Here are the steps to register one:

Step 1: Legalise documents from the Indian Embassy.

Step 2: File an application with the RBI via the AD Bank.

Step 3: Get documents verified by a bank in the foreign entity’s home country.

Step 4: Attain approval from the RBI for establishing a project office and register it with the Registrar of Companies.

Step 5: Open a bank account and apply for a PAN card, Tax Deduction Number, other licenses, and other applicable registrations.

Liaison Office

Foreign organizations can register liaison offices to conduct all types of liaison activities in India. The registration procedure is as follows:

Step 1: Apply for the Authorized Signatory’s digital signature.

Step 2: File an application through the AD Bank to the Reserve Bank of India.

Step 3: Get KYC verification from a bank in the company’s home country.

Step 4: Wait for RBI’s approval and register the liaison office with the ROC.

Step 5: Open a bank account in India and apply for Tax Deduction Account Number and PAN card.

Step 6: Complete IEC and GST registration.

Regulatory Compliance for Foreign Companies in India

As per the Companies Act 2013, it is mandatory for foreign companies to adhere to several compliances for company formation in India. Some of them are as follows:

• Form FC-1

After establishing a place of business in India, a foreign firm needs to file Form FC-1 within 30 days. Along with it, they must submit an attested copy of RBI’s approval as per the Foreign Exchange Management Act.

• Form FC-3

Companies will also have to submit Form FC-3 which will contain the list of places where the foreign organization plans to run its business.

• Financial Statements

As per Schedule III of the Companies Act, foreign companies need to submit all their financial statements within 6 months before the financial year ends. Some of the necessary ones are as follows:

1. Associated party transactions
2. Reparation of profits
3. Transfer of funds

• Accounts Audit of Foreign Company

According to Indian laws, it is mandatory for a foreign company to get its accounts audited. This can be done by a Chartered Accountant or firm practicing in India.

• Authentication of Translated Documents

As per the law, all the documents that a foreign organization files with the ROC, need to be in English. In case these documents are translated into an Indian language, they will need authentication from a Notary of the company’s home country and an advocate practicing in India.

• Annual Returns

Within 60 days before the current financial year ends, foreign companies must file their annual returns in Form FC-4 and deliver them to the ROC.

Things to Keep in Mind Before Establishing a Company in India

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Before a foreign business plans the company formation in India, there are several aspects to be kept in mind. Some of them are as follows:

• Eligibility Criteria for Registering a Foreign Company in India

As mentioned above, there are several ways in which foreign businesses can register themselves in India. However, there are several underlying eligibility criteria that they must meet. So, before planning their move to India, organizations must conduct research on these requirements and based on them, make the appropriate decision.

• Documents Necessary for Company Registration

There are several legal compliances and documentation requirements when it comes to opening a company in India. Thus, foreign entities need to stay aware of them before making their expansion plans.

A smart practice in this regard is to partner up with Indian management consulting firms to gain assistance in this regard.

• Registration Costs and Other Formalities

Foreign companies also need to gain knowledge of the charges associated with company registration in India. Furthermore, there are also some post-incorporation formalities of which they need to be aware.

How Can Tecnova Help?

Taking care of all incorporation and regulatory compliances while working towards the Company Formation in India can be hectic for a foreign entity to do on its own. In this regard, opting for the services of a management consulting firm like Tecnova can be an excellent idea.

Tecnova has experts who are adept with all the legal compliances that a foreign firm needs to adhere to for registering their business in this country. In addition, their experts offer innovative entry strategies and tailor-made services that are highly beneficial for foreign businesses that are trying to enter and expand in the Indian market.

Reference

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Incorporation of a Company in India

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