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FAQs on Company Formation in India

1. What are the types of Companies that can be registered in India?

-One Person Company (OPC)

-Private Limited Company

-Subsidiary of a Foreign Company

-Public Limited Company

-Limited Liability Partnership (LLP)

-Non-Profit Organizations (Sec. 8 Companies)

-Nidhi Company.

2. Can a Foreign National incorporate a Company in India?

A Foreign National can incorporate a company in India provided there must be another person who stays in India for a total period of not less than 182 days during the financial year who shall be counted as Resident Director.

3. Can a foreign national incorporate an OPC in India?

Yes. Effective 1st April 2021, Non-Resident individual who stays in India for more than 120 days can also setup an OPC.

“One Person Company” means a company which has only one person as a member.

4. What is the meaning of Authorized Capital and Paid-up Capital?

The Authorized Capital is the maximum value of the securities, which the company is legally authorized to issue to the shareholders. The authorized capital can be increased anytime with prior permission of the shareholders.

The Paid-up Capital is the amount of money actually paid/invested by the shareholders of the Company. The shareholders are required to deposit the amount towards the paid up share capital of the Company in the bank account of the Company within the period of 180 days from the date of incorporation.

5. What is the minimum capital required to register a company?

There is no minimum capital (Authorised or Paid up Capital) requirement for registering a company.

6. What will happen in case the proposed name of Indian Company is identical or too nearly resembles with the name of an existing Limited Liability Partnership or an existing Company?

The name shall be treated as an undesirable name and will be rejected.

7. What are the words for which approval of regulatory authority would be required?

A name shall generally be reserved if it includes the words like ‘Bank’, ‘Insurance’, ‘Banking’, ‘Venture Capital’ or ‘mutual fund’ or business activity including words like ‘Bank’, ‘Insurance’, ‘Banking’, ‘Venture Capital’ or ‘mutual funds’ or such similar words with the approval of regulatory authority, provided that the approval of regulatory authority may be obtained at the time of application for incorporation.

8. What are the words or expression, which can be used in the name of the company only after obtaining prior approval of Central Government?

The following words and combinations thereof cannot be used in the name of a company unless the prior approval of the Central Government is obtained –

> Board;

> Commission;

> Authority;

> Undertaking;

> National;

> Union;

> Central;

> Federal;

> Republic;

> President;

> Rashtrapati;

> Small Scale Industries;

> Khadi and Village Industries Corporation;

> Financial Corporation and the like;

> Municipal;

> Panchayat;

> Development Authority;

> Nation;

> Statute or Statutory;

> Corporation

> the use of word Scheme with the name of Government (s), State, Bharat or any Government authority or in any manner resembling with the schemes launched by Central, State or local Governments and authorities

> Bureau.

9. I would like to start a Software Services Company. Can I register such a Company?

Yes, you can register a Pvt Ltd Co. to start a business in India.

10. I am a non-resident and I am a director in a Company registered in USA. Can I start a business in India and retain 100% of ownership in the name of the Company located outside India?

Yes, you can incorporate an Indian Subsidiary of Foreign Company.

11. What is the meaning of Nominee shareholder in case of wholly owned subsidiary Company?

As per the provisions of Companies Act in India, there must be at-least 2 shareholders in any Indian Company, therefore there must be at least one additional shareholder in case of wholly owned subsidiary company who shall have only 1 share in order to fulfil the requirement of minimum 2 shareholders.

12. Does a second shareholder is mandatorily required to be an India National?

No, the second shareholder can be an Indian national or a foreign national.

13. What are the Identification documents required for a foreign director/Shareholder for incorporation of the Company in India?

> Copy of Passport

> Latest month bank statement/Utility Bill in the name of the applicant.

14. What are the documents required for a Foreign Company, which will act as a Shareholder in Indian Company?

> Certificate of Incorporation

> Article and Bye-Laws

> Latest month bank statement/Utility Bill in the name of the Company

> Details of the person who will be signing on behalf of the Company incorporated outside India.

15. Can 2nd shareholder and a person signing on behalf of the Foreign Holding Company be same?

No, if a person is signing being a shareholder, in that case he cannot sign the documents of Foreign Holding Company.

16. Whether the documents are required to be notarised and apostilled for incorporation of a company in case the subscriber/director is a foreign national?

The attestation requirement depends on the country in which registered office (in case of body corporate as a subscriber) /residence of the overseas subscriber and / or director is situated. The documents are required to be attested as follows:

a) Proof of Residence in a country which is part of the Common Wealth, by a notary public of that country;

b) Proof of Residence in a country which is party to The Hague Apostille Convention, 1961, attestation to be made by a notary public of the said country and duly apostilled in accordance with Hague Convention; or

c) Proof of Residence in a country outside the Commonwealth, and which is not party to Hague Convention, authenticated by a Diplomatic or Consular Officer empowered in this behalf under Section 3 of the Diplomatic and Consular Officers (Oaths and Fees) Act, 1948 (40 of 1948) i.e. attested by Public Notary and authenticated by Indian Embassy in the country of residence.

17. What is an apostille?

An Apostille is simply the name for a specialized certificate, issued by the Secretary of State. The Apostille is attached to your original document to verify the authenticity of the documents so that the same can be accepted in other countries who are members of The Hague Apostille Convention.

Moreover, the Countries which are not the part of The Hague Convention are required to get the documents consularized from the Indian Embassy situated in that of a particular Country.

18. If a foreign national who will be acting as Director and/or shareholder in Indian Company is currently in India, are the apostilled documents still required?

No, in case a foreign national is in India on valid Business Visa, then all the documents for him does not required to be notarized and apostilled and the company formation application will be filed based on Business Visa, as the place of signing of all the documents shall be within India.

19. Whether it is mandatory for every subscriber and/or director to obtain DSC at the time of incorporation?

Yes, it shall be mandatory for each one of them to obtain a DSC.

20. Whether it is mandatory for directors to obtain DIN at the time of incorporation?

Yes, it shall be mandatory for Directors to obtain a DIN.

21. Is it mandatory to obtain PAN & TAN and what is the meaning of PAN & TAN?

PAN: Permanent Account Number (PAN) is mandatory for any Company. It is issued in the name of the Company.

TAN: Every Company is required to obtain TAN (Tax Deduction Account No.) for correspondence related to TDS (Tax Deducted at Source).

22. When can the Bank account of Indian Company be opened?

The Company once incorporated, the promoters can proceed to open its bank account.

23. When the share capital taken under MOA be injected to Company’s Bank Account?

Once the bank account of Indian Company is opened, the subscribers shall put in the share capital money as subscribed under Memorandum at the time of incorporation and such share capital shall be injected within 180 days form the date of Incorporation of the Company.

24. Whether the ownership can be transferred from Indian national to foreign national?

Yes, is it possible to transfer the ownership rights in the existing company to a foreign national.

25. Is it mandatory for a foreign national to be present in India in order to take any decision?

No, Meetings of the Board can be held outside India as well.

Please feel free to get in touch if you have any queries.

We wish you luck for your business. Happy Working!


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Author: Divya Goel, ACS

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