FAQs - Company registration in India

1. What are the major types of Business Entities in India?

The following types of business entities are available in India:

2. Can a Foreign National invest in India?

Foreign investors can very well put up their company in India, subject to regulations and approvals from the authorities concerned. The approvals should be obtained from Reserve Bank of India or Foreign Investment Promotion Board (FIPB) in special cases.

3.Apart from Business Entities, What all a Foreign Investment Company can establish in India?

A foreign investment company can also establish its Liaison Office/Representative Office, Project Office and Branch Offices in India.

4. What is a Foreign Company?

Foreign Company is a company registered outside India, under a foreign law other than Indian law.

5. What is a Branch Office / Liaison office of a Foreign Company?

A Foreign Company can open a Branch / Liaison office in India subject to the approval of Reserve Bank of India. On receipt of the approval, such an office or Branch has to be registered with the office of Registrar of Companies by filing necessary documents.

6.In what all Positions a Foreign Director can be appointed?

A foreign national can be nominated and appointed to the positions of Women Director, Independent Director, Small Shareholders Director, Additional Director, Alternative and Nominee Director in Indian Companies by complying with the Companies Act, 2013. However, he cannot be appointed to the position of a Managing Director and Whole-time director. Any such appointment requires special permission from the Government of India.

7. What is the Prime Document a Foreign National could Produce for Registration Purposes in India?

A valid Passport is mandatory for a foreign national for registration purposes. His documents such as residence proof, identity proof etc have to be certified by the Indian Embassy or a notary in his home country.

8. What is a One Person Company?

One Person Company is a new form of business structure introduced in India in which a single person can put up a company having featured that of a private limited company. As per the act, OPC is a separate legal entity from its members, Offers limited liability protection to its shareholders has continuity of business and is easy to incorporate.

9. What is a Private Limited Company?

A Private Limited Company is owned by individuals having the advantage of a separate entity as the business assets are separated from personal assets. The minimal requirement to form a private limited company is 2 directors or members, the maximum number of directors are restricted to 200. The name of the company shall end with the words 'Private Limited'.

10. What is a Public Limited Company?

A Public company is owned by the public and can raise capital from the public directly through issues of shares. The minimum number of directors is 3 and the minimum number of shareholders is 7. There is no limit on the maximum number of shareholders. Registrations for these types of companies are mandatory and will have stock exchange regulations also.

11. What are Section 8 Companies?

Section 8 Company is otherwise known as Non-Profit Organizations in India, recognized under the Companies Act, 2013. These types of companies can be established for the promotion of commerce, arts, science, sports, education, research, social welfare, religion, charity, and protection of the environment or any such other object.

12. What is a Limited Liability concept?

Limited liability means the shareholders of the company are not personally liable for the liabilities of the company and his liability is limited to the unpaid amount of shares registered in his name.

13. What is the Minimum Number of Directors Required to Form a Company?

A number of directors required to establish a company in India as per the Companies Act of 2013 are different for different companies. For a One Person Company, the minimum director requirement is one; whereas a Private Limited Company requires two; for a Public Limited Company it is three. However, for a production company, it is five.

14. What is the Minimum Number of Subscribers Required for Registration of A Company?

A number of subscribers or shareholders required to establish a company in India as per the Companies Act of 2013 are described as below:

Minimum no. of subscribers for One Person Company is one. However, for a Private Limited Company, it is two and Public Limited Company requires seven; whereas a producer company requires at least ten subscribers.

15. Can a Foreign National/Company be a Director/Shareholder in any Private Limited Company in India?

Yes. Any foreign national or a Non-resident Indian can become a director or can hold the share of a private limited company in India. Holding shares of a private limited company in India by foreign nationals/companies will be subject to the FDI Guidelines of India. It is also mandatory that at least one director on the Board of Directors of a private limited company in India must be a Resident in India.

16. Who should register the DSC on MCA portal?

Directors, Manager and Secretary of the Company and practising professionals i.e. CA, CS & CWA should register their DSC on MCA portal. Only one-time registration is required.

17. What is the Significance of a Digital Signature?

The Information Technology Act, 2000 has provisions to use the DSC on the documents submitted in electronic form. Using DSC ensures the security and authenticity of the documents filed electronically. As such, all filings done by the companies/LLPs under the MCA21 e-Governance programme are required to be filed using DSC by the person authorized to sign the documents.

18. What if DSC is not registered in the MCA portal?

By the introduction of Role Check, the system will not recognize the role of the person digitally signing the eForm and any such digital signatures affixed on the eForm other than the director, manager, secretary or practising professional, will not be accepted on the MCA portal.

19. What to do on expiry of a DSC?

On expiry of a DSC, one has to contact the Certification Agency for renewal of the same. Upon renewal, a new DSC is issued with a new validity period. The new DSC has to be updated at wherever the old one was applied.

20. Is Director Identification Number (DIN) a pre-requisite to apply for DSC?

No, A Director Identification Number is not at all mandatory to have a DSC.

21. What is the legal validity of a Digital Signature?

Digital Signatures are legally admissible in a Court of Law, as provided under the provisions of IT Act, 2000.

22. What are the procedures for a Foreign National to register a DSC in MCA portal?

Similarly, as of a Resident Director, the foreign directors are required to obtain Digital Signature Certificate from an Indian Certifying Authority. The process of registration of DSC is same as applicable to others.

23. Why do directors require DIN?

As per Sections 2 (1) (d) of Companies(Appointment and Qualification of Directors) Rules, 2014, it is mandatory for Directors of a company to obtain Director Identification Number (DIN)

24. Is PAN mandatory for obtaining DIN?

Yes, it is mandatory for all Indian Directors to obtain PAN. However, exceptions are there for foreign directors. MCA has issued a circular whereby Income tax PAN has been made mandatory, and thereby all existing Directors are expected to provide their Income tax details or to update their details as per Income tax PAN Database in case the same is not matching in the DIN database.

25. What is a Digital Document and how can a physical document be converted to a digital document?

An electronic document is the electronic equivalent of the physical/paper document. A physical document is converted into an electronic document through scanning. It can then be attached to an e-form. One can also convert the softcopy of a document to the PDF format for using it as an attachment to the e-form.

26. How to apply a Company Name in India?

The Company name can be applied online in the MCA portal by filing Form INC-1 along with appropriate payment and attaching the digital signature of the applicant proposing to incorporate the company.

27. What is the Validity Period of the Name Approved?

Upon expiry of 60days from the date of filing of Form INC-1, the approved name shall be lapsed and will be available for other applicants. Please note that there shall not be any provision for renewal of the name. The company should incorporate within 60 days of the receipt of name approval.

28. What does the term ‘Role Check’ mean?

In order to verify that the digital signatures affixed on the eForm belong to the signatory of the company and/ or of a practising professional, the Role Check functionality has been implemented effective from July 1, 2007.

29. What is the Memorandum of Association (MoA) & Articles of Association (AoA)?

Both MoA & AoA act as an important source of information for various shareholders and other stakeholders associated with a Company. MoA includes the name, aims, objectives, registered office address, the clause regarding limited liability, minimum paid-up capital and share capital of the company. An Article of Association defines the rules and regulations made by the company for its administration and day to day management.

30. For Which Forms are an E-mail ID Mandatory?

The email ID is required for the purpose of communication with the company/ applicant. It has been made as a mandatory field for the following e-forms:

EForm INC-1 (email of applicant), eForm INC-22 (email of the Indian company), eForm FC-1 (email of the Foreign company), eForm CHG-1 (email of charge holder), eForm CHG-9 (email of charge holder)

31. Can a Foreign National be Allowed to Form a One Person Company?

No. As per the Act, Only Indian born citizens can form a One Person Company. Non-resident Indians or individuals who do not reside in India for over 182 days cannot incorporate an OPC.

32. In Which All Business Entities can a Foreign National be a Director?

The foreign national or NRI can be a director or partner of a Private Limited Company, a Public Limited Company and a Limited Liability Partnership

33. What is the ESOP?

As per the Companies Act 2013, a private company can issue Employee Stock Option (ESOPs) to their employees in view of motivating them to work harder. Only a company of Private Limited in nature can issue such stock, no LLPs are bound to do any such.

34. What is the Central Registration Centre and for What is it Constituted?

Central Registration Centre (CRC) is constituted by the Central Government for the processing and disposal of applications for reservation of names. The functions of the CRC involves processing of the applications for reservation of name in the prescribed format and fee, scrutiny of Names to check if it conforms with the naming guideline.

35. What is Authorized Capital and What Should be the Minimum Authorized Capital for Registering My Company?

Authorised Capital or Registered Capital is the maximum ceiling limit of the capital up to which a Company can issue shares and collect money from its shareholders. The authorised capital can also be enhanced by passing a resolution at a meeting of the shareholders.

The minimum authorised capital of a Private Limited Company is Rs. 1 lakh and for a public limited company it is Rs. 5Lakhs

36. What is the Difference between Authorized Capital and Paid-Up Capital?

Authorized Capital is the maximum value of the shares the company is legally authorized to issue to the shareholders, whereas Paid-up Capital is the value of shares actually paid or invested by the shareholders of the company. Both Authorized and Paid-up Capital are required to be specified in the Capital Clause of the Memorandum of Association (MOA) of a company, at the time of incorporation of the company.

37. What is a Start-up?

An initiative put forward by the Government of India to encourage entrepreneurship in the country is the Startup India Initiative. The new program envisages revolution in India’s consumer industry with creative ideas and products promoting ‘Make in India’ policy of the government. On the last year budget, the start-ups were exempted from a three year tax on capital gains.

38. In which all Business Structures a Start-up can be formed?

The most popular structures to form Start-up in India are Private Limited Company and Limited Liability Partners. A wide acknowledgement is also being seen for One Person Company type start-ups. As far as a foreign company is concerned, it I better to start a start-up as an LLP or Private Ltd.

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