India is an emerging economy in the world, which has immense intellectual human potential. Government rules are very lenient for investments and the rules are easy going to benefit public at large. India allows 100% Foreign Direct Investment (FDI) and being an emerging nation with wide population, the amount of FDI inflow keeps on increasing every year.
Doorway in India for foreign companies:
Foreign companies, which commence business activities in India or invest in Indian businesses, need to comply with certain Indian laws. For example, while making investment in India, the foreign company has to abide by Indian laws and regulation, further more Foreign Exchange Management Act (FEMA). Post earning from business activities, the company also has to pay tax and comply with each law pertaining to them. Here we are discussing how to register a foreign company in India.
Foreign Company in India:
In this article, we will focus on registration of a company in India through foreign investment. This is the easiest way by which the foreign nationals and companies can enter Indian market as foreign direct investment up to 100% is allowed in private limited company or limited company, wherein no Central Government permission is required. In gist, opening a private limited company or a foreign company or a joint venture is cheapest, easiest and fastest for foreign nationals or foreign company.
Definition: As per section 2 (42) of Companies act 2013, “foreign company” is any company or body corporate which is situated outside India but;
- It has a registered place in India either by physical or electronic mode or owned by company itself or through representative, agent or manager.
- Does any kind of permitted business in India
To start a Private Company (here subsidiary of foreign company) in India, a minimum of two people and a place of business in India are required. A private limited company in India must have a minimum of two directors and a minimum of two shareholders. As per section 149 (3) of companies act 2013, it is compulsory that to register a private limited company, at least one director has to be Indian citizen and Resident.
Further, to register the Indian subsidiary of foreign company, an authorized representative must be appointed by the company, who shall be responsible for registration process and all the communication with the MCA in this regards.
A place of business in India is required to serve as the registered office of the Company. The city in which the registered office address of the company will be setup will also determine the legal jurisdiction applicable for the company.
Registration of private limited company:
As per section 380 of Companies Act, 2013 it is evitable for every foreign company to submit following documents within 30 days to RoC, once it has established its place of business in India.
- Memorandum and Article of Association.*
- Full address of registered address or place of business
- List of Directors and Secretary
- Name and address of person (Authorized Representative) who shall receive legal documents on behalf of company
- Details of opening and closing of a place of business in India on earlier occasion
- The list of directors of the companies in India, who have ever been convicted or debarred from formation of companies and management in India or abroad
If any alteration is to be made, it should be intimated within 30 days to registrar of registration.
- *Memorandum of Association (MoA): Memorandum is a legal document that describes the relationship of shareholder and company in addition to the main objective of a company registered. It is accessible to general public as company’s name, physical address of registered office, names of shareholders and the distribution of shares is mentioned in MoA.
- *Article of Association (AoA): It is rulebook of company, which is in accordance with MoA. This document contains internal detailed governing aspects of the company’s operations, like shares, conduct of companies meetings, and role and powers are mentioned in this.
Here it is important to know that the identity of company and its director is different.
Certificate of Incorporation:
Certificate of Incorporation is a legal document that is issued by Ministry of Corporate affairs once a company is successfully registered with them. It authenticates that now the company is registered with registrar of companies too. It brings the company into existence as a legal person. It marks the birth of the company, and the date mentioned on it is conclusive, even if wrong.
Therefore, it is conclusive evidence that all the requirements under the Act in respect of registration and matters precedent and incidental thereto have been complied with and that the association is a company authorized to be registered and duly registered.
Post Registration acquiescence:
Once the company gets it Certificate of Incorporation, the company should open a bank account in name of company to deposit capital funds of company and should apply for registration which are necessary so the operation of company is hassle free.
Accounts of foreign company:
As per section 381 of Companies Act, 2013, Accounts should be prepared as per the Indian business operations, every year profit and loss statement and balance sheet is to prepared and submit it to registrar. The accounts submitted should be in English and if not in English then certified translation should be annexed or attached.
Penalty of Contravention:
As per section 392 of Companies Act, 2013, even foreign company is not barred from punishment, as everybody is equal in eyes of law. If the foreign company breaches any provision, fine will not be less than INR 1 lakh which may extend to INR 3 lakh. If offence is repeated fine of INR 50 thousand may be charged per day and if they still breaches the provisions every officer in default will be imprisoned for 6 months or with fine of minimum INR 25 thousand and which shall extend to INR 5 lakh or might be punished with both.
So to conclude India is considered to be the most attractive place with premier population which consists around 30% of young population which attracts more foreign companies also icing on cake is 100% investment is allowed. The foreign company registered in India has to abide by all rules and regulation laid by respective laws as applicable to it.