What other approvals are required for foreign investor in India?
Generally, prior approval is required from the RBI before investing in India. Some categories of businesses are covered under automatic approval process. However, one has to apply for the same. There are some post-incorporation filing formalities after the remittance of capital from overseas to India and on issue of shares.
What are other formalities before or after incorporation?
- Obtaining Permanent Account Number (PAN) from Income Tax Department
- Obeying Shop and Establishments Act
- Registration for Import Export code from Director General of Foreign Trade
- Software Technologies Parks of India registration (STPI) if required
- RBI approval for foreign companies investing in India and FIPB approval, if required.
- The directors of an Indian company, both Indian and foreigner directors, are required to obtain Director Identification Number - DIN and Digital Signature Certificate - DSC
What are the requirements for issuing Sweat Equity in an India Company?
Can an Indian company can issue sweat equity? There are separate rules for sweat equity in a private company in India and a public company in India.
Sweat Equity in a private company in India
The provisions for issue of Sweat Equity are covered under Section 79A of the Companies Act. It provides that a company may issue sweat equity shares of a class of shares already issued if the following conditions are fulfilled:
- the issue of sweat equity shares in authorized by a special resolution passed by the company in the general meeting.
- The resolution specifies the number of shares, current market price, consideration, if any, and the class or classes of directors or employees to whom such equity shares are to be issued.
- not less than one year has, at the issue elapsed since the date on which the company was entitled to commence business.
- The sweat equity shares of a company whose equity shares are listed on a recognized stock exchange are issued in accordance with the regulations made by the Securities and Exchange Board of India in this behalf.
- In view of the above provisions, you can't issue Sweat Equity at the time of incorporation of your Company as one year has not elapsed since the date on which the company was entitled to commence business.
In addition to the above provision, other regulatory provisions are applicable for issuing sweat equity shares for a private company in India. Please feel free to Contact us for further information about sweat equity in an Indian company.
Sweat Equity in a public company in India
The aforesaid provisions regarding issuing of Sweat Equity under Section 79A of the Companies Act are applicable to a public company in India.The sweat equity shares of a company whose equity shares are listed on a recognized stock exchange are issued in accordance with the Securities and Exchange Board of India (Issue of Sweat Equity) Regulations, 2002. Please feel free to Contact us for further information about sweat equity in an Indian company.
What are the requirements for a Foreign company forming a subsidiary in India?
A foreign company planning to form a subsidiary in India, in addition to meeting all requirements of forming a company, is required to seek governmental approval before investing in India. Some approvals are automatic, - RBI Approvals - though application is required for those approvals. Special Permission - FIPB Approvals - could be obtained to invest over and above the regular percentage allowed. See our FDI in India Sector wise Guide for more information on various conditions of investing in India. Also see Withholding Tax Rates For Foreign Companies Doing Business In India Under The Tax Treaties & the Joint Ventures in India. Also see Entry Strategies in India for Foreign Investors
What are the requirements for a Foreign company opening a branch in India?
Foreign investors are required to seek governmental approval before investing in India. Some approvals are automatic, - RBI Approvals - though application is required for those approvals. Special Permission - FIPB Approvals - could be obtained to invest over and above the regular percentage allowed. See our FDI in India Sector wise Guide for more information on various conditions of investing in India. Also see Withholding Tax Rates For Foreign Companies Doing Business In India Under The Tax Treaties. Also see Entry Strategies in India for Foreign Investors
What are the requirements for a Foreign company forming a joint venture in India?
Foreign investors planning to form a joint venture in India are required to seek governmental approval before investing in India. Some approvals are automatic, - RBI Approvals - though application is required for those approvals. Special Permission - FIPB Approvals - could be obtained to invest over and above the regular percentage allowed. See Joint Ventures in India. Also see FDI in India Sector wise Guide for more information on various conditions of investing in India. Also see Withholding Tax Rates For Foreign Companies Doing Business In India Under The Tax Treaties. Also see Entry Strategies in India for Foreign Investors
What are the requirements for an American company planning to establish business in India?
An American or USA company planning to open business in India - subsidiary, branch, or joint venture - should meet all the requirements mentioned here. It is also required to seek governmental approval before investing in India. Some approvals are automatic, - RBI Approvals - though application is required for those approvals. Special Permission - FIPB Approvals - could be obtained to invest over and above the regular percentage allowed. See our FDI in India Sector wise Guide for more information on various conditions of investing in India. Also see Withholding Tax Rates For Foreign Companies Doing Business In India Under The Tax Treaties & the Joint Ventures in India. Also see Entry Strategies in India for Foreign Investors
What are the compliance requirements for Companies in India?
All the companies who are related cyber business are required to comply with the requirements of the law. In addition, all the Multinational Companies Doing Business in India and having cyber involvement are required to comply with the corporate and other laws of India including cyber law compliance.The cyber law mandates all companies to have an information technology security policy. This documents the architecture of the network, the roles and responsibility of employees, security parameters and authorization required for data access, among other things. Other compliances that are required include relate to retention and authentication of electronic records and security of data.Moreover, Indian Information Technology Act of 2000 provides for further personal liabilities. For example, Section 85(1) of the IT Act provides that where a person committing a contravention of any of the provisions of this Act or of any rule, direction or order made there under is a Company, every person who, at the time the contravention was committed, was in charge of, and was responsible to, the company for the conduct of business of the company as well as the company, shall be guilty of the contravention and shall be liable to be proceeded against and punished accordingly.All the Indian companies and all foreign companies doing business in India, either directly or indirectly, should comply with this law.
What are the Requirements for a Private Limited Company?
A Registered Business Name: This must be followed by the word ‘Limited' or ‘Ltd'. The Companies Registration Office exercises some control over the choice of name, it cannot be identical (or very similar to) the name of an existing company. It won't be considered if it is offensive or illegal and the use of certain words in a company (for example, `Institute', `National') can only be used in certain circumstances. The company name must be displayed in a conspicuous place at every office, or other premises where the company carries out business.
A Registered Office: This need not necessarily be the same address as the business is conducted from. Quite frequently the address used for the registered office is that of the firm's solicitor or accountant. This is the address, through, where all official correspondence will go.
Shareholders: There must be a minimum of two shareholders (also described as `members' or `subscribers'). A private company can have up to fifty shareholders.
Share Capital: The company must be formed with a stated, nominal share capital divided into shares of fixed amounts. Small companies are frequently formed with a nominal share capital of Rs.100.
Memorandum of Association: The memorandum is the company's charter. It states the company's name; the situation of its registered office; its share capital; the fact that liability is limited and, most importantly, the object for which the company has been formed. In theory, the company can only operate in the areas mentioned in the objects clause but in practice the clause is drawn to cover as wide an area as possible, and anyway a 75 per cent majority of the members of the company can change the objects whenever they like. Nevertheless, it is worth bearing in mind that directors of the company will incur personal liability if the company engages in a type of business which is not authorised by the objects clause. The memorandum must be signed by at least three shareholders.
Articles of Association: The document contains the internal regulations of the company, the relationship of the company to its shareholders and the relationship between the individual shareholders. Many companies don't bother to draw up their own articles but adopt (sometimes with some modifications) articles set out in the Companies Act.
Certificate of Incorporation: This is the document, which the registrar of companies issues to you once he has approved your choice of name and your memorandum. When you receive this document your company legally exists and is ready to trade.
Auditors: Every company must appoint a qualified auditor. The auditor's duty is to report to the treasurer whether or not the books of the company have been properly kept, and that the balance sheet and profit and loss account presents (or doesn't present) a true and fair view of the company's affairs and complies with the Companies Act. Auditors are appointed or re-appointed at general meetings at which annual accounts are presented, and they hold office from the conclusion of the meeting until the next general meeting.
Accounts: The Companies Act lays down strict rules on accounting. Every company must maintain a set of records, which show the financial position at any one time with reasonable accuracy. The accounts comprise a profit and loss account and balance sheet with the auditors' and directors' reports appended. A new company's accounting reference period begins on its incorporation and runs until the following 31st March - unless the company notifies the registrar of companies otherwise. Within ten months of the end of an accounting reference period, an audited set of accounts must be laid before the shareholders at a general meeting and a set delivered to the registrar of companies.
Registers, etc.: In addition to the accounts books, companies are required to have: a register of members and share ledger; a register of directors and secretaries; a register of share transfers; a register of charges; a register of debenture holders; a book can be purchased to hold all of the above. This will be provided automatically if you buy a running concern.
Company Seal: All companies must have an engraved seal. This must be impressed on share certificates and must be used whenever the company has to execute a deed. Again, this is included in the ready-made company package.
A Registered Office: This need not necessarily be the same address as the business is conducted from. Quite frequently the address used for the registered office is that of the firm's solicitor or accountant. This is the address, through, where all official correspondence will go.
Shareholders: There must be a minimum of two shareholders (also described as `members' or `subscribers'). A private company can have up to fifty shareholders.
Share Capital: The company must be formed with a stated, nominal share capital divided into shares of fixed amounts. Small companies are frequently formed with a nominal share capital of Rs.100.
Memorandum of Association: The memorandum is the company's charter. It states the company's name; the situation of its registered office; its share capital; the fact that liability is limited and, most importantly, the object for which the company has been formed. In theory, the company can only operate in the areas mentioned in the objects clause but in practice the clause is drawn to cover as wide an area as possible, and anyway a 75 per cent majority of the members of the company can change the objects whenever they like. Nevertheless, it is worth bearing in mind that directors of the company will incur personal liability if the company engages in a type of business which is not authorised by the objects clause. The memorandum must be signed by at least three shareholders.
Articles of Association: The document contains the internal regulations of the company, the relationship of the company to its shareholders and the relationship between the individual shareholders. Many companies don't bother to draw up their own articles but adopt (sometimes with some modifications) articles set out in the Companies Act.
Certificate of Incorporation: This is the document, which the registrar of companies issues to you once he has approved your choice of name and your memorandum. When you receive this document your company legally exists and is ready to trade.
Auditors: Every company must appoint a qualified auditor. The auditor's duty is to report to the treasurer whether or not the books of the company have been properly kept, and that the balance sheet and profit and loss account presents (or doesn't present) a true and fair view of the company's affairs and complies with the Companies Act. Auditors are appointed or re-appointed at general meetings at which annual accounts are presented, and they hold office from the conclusion of the meeting until the next general meeting.
Accounts: The Companies Act lays down strict rules on accounting. Every company must maintain a set of records, which show the financial position at any one time with reasonable accuracy. The accounts comprise a profit and loss account and balance sheet with the auditors' and directors' reports appended. A new company's accounting reference period begins on its incorporation and runs until the following 31st March - unless the company notifies the registrar of companies otherwise. Within ten months of the end of an accounting reference period, an audited set of accounts must be laid before the shareholders at a general meeting and a set delivered to the registrar of companies.
Registers, etc.: In addition to the accounts books, companies are required to have: a register of members and share ledger; a register of directors and secretaries; a register of share transfers; a register of charges; a register of debenture holders; a book can be purchased to hold all of the above. This will be provided automatically if you buy a running concern.
Company Seal: All companies must have an engraved seal. This must be impressed on share certificates and must be used whenever the company has to execute a deed. Again, this is included in the ready-made company package.
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