Introduction
Incorporation process


Introduction

The Indian market provides various global opportunities and is readily accessible in terms of raw materials, labour, research areas, a hassle-free legal code, the environment, infrastructure and tax benefits, among other things. The government has been active in eliminating the legal impediments to foreign direct investment in India, so as to enable foreign players to explore the Indian markets and contribute to the transformation of India from a developing country into a developed country.

The Companies Act 1956 regulates the establishment of various forms of entity in India through the registrar of companies. Private limited companies enjoy certain privileges and exemptions in comparison with other forms of organisation. Setting up such a company provides an easy and quick route into the Indian market.

The process of incorporating a private limited company in India and the timeframes involved are laid out below.

Incorporation process

Step 1: Obtain digital signature certificates for directors of proposed company
A minimum of two individuals must be identified to be appointed as directors of the proposed company and they must each obtain a digital signature certificate. A digital signature certificate is a form of signature used to sign electronic documents. It is issued by a certifying authority after the filing of a notarised digital signature certificate form and supporting documents by the proposed directors. Obtaining a digital signature certificate takes about one to two days, subject to receipt of the complete documentation.

Step 2: Obtain director identification numbers
The proposed directors must have director identification numbers. A director identification number is a unique identification number that is allotted to an individual for his or her lifetime and is required for the purpose of filing electronic forms with the registrar of companies. It is issued by the Ministry of Corporate Affairs after the provisional director identification number has been generated online. Obtaining a director identification number takes about five to seven days, subject to receipt of the complete documentation.

These two steps can be carried out simultaneously and must be completed before initiating Step 3. In addition, the documents to be filed for obtaining a digital signature certificate and a director identification number must be notarised in the applicant's home country.

Step 3: Check name availability by filing e-Form 1A online
Once digital signature certificates and director identification numbers have been obtained for the proposed directors, a minimum of four proposed company names (in order of preference) must be filed, along with other details, such as information about the promoters and directors and the company's main objectives. Such information must be filed with the registrar of companies through e-Form 1A in the Indian state in which the proposed company's registered office is to be situated. If the proposed names contain the name or part of the name of a foreign entity, a 'no objection' certificate from the foreign entity must be filed with e-Form 1A, having been apostilled or having received consular approval. Furthermore, if the promoters of the proposed company are a body corporate, a board resolution of the body corporate must be filed with e-Form 1A, having been apostilled or having received consular approval. Once e-Form 1A has been filed with the registrar of companies, it takes about five to seven days for the registrar to make available one of the proposed names, subject to any further clarification.

The 'no objection' certificate and the board resolution, if submitted with e-Form 1A, must be apostilled (if the country in which the document is being executed is part of the Hague Convention 1961) or approved by the Indian Embassy (if it is not). The registrar of companies fee for e-Form 1A is Rs500.

Step 4: Filing of other documents through e-Forms 1, 18 and 32
Once the name has been approved, the following documents must be filed in order to obtain a certificate of incorporation from the registrar of companies:

  • the memorandum of association and the articles of association of the proposed company, along with the subscriber's pages (apostilled or approved by consulate), the special power of attorney and the board resolution (if the promoters are a body corporate) through e-Form 1;
  • the address of the proposed company's registered office through e-Form 18; and
  • particulars of the proposed company's appointed directors through e-Form 32.

The subscriber's pages to the memorandum of association, the articles of association and the board resolution - where applicable - with e-Form 1 must be apostilled (if the country in which the document is being executed is part of the Hague Convention) or given consular approval by the Indian Embassy (if it is not). The filing of other documents through e-Forms 1, 18 and 32 must be completed within 60 days of the date on which the registrar of companies grants approval of the company name. The registrar fees for e-Forms 1, 18 and 32 will depend on the company's authorised capital.

Step 5: Obtain certificate of incorporation
It takes around five to seven days to obtain a certificate of incorporation after filing the documents in Step 4 above, subject to any further clarification sought by the registrar of companies.

Thus, it takes about three to four weeks to obtain a certificate of incorporation from the registrar of companies after the necessary documents have been filed in the state in which the proposed company's registered office is to be situated. This timeline is subject to any further clarification or documents sought by the registrar of companies pursuant to the filings made by the promoters and directors. A private company can commence business on receipt of its certificate of incorporation.

The establishment of a company in India is subject to Reserve Bank of India regulations and sectoral caps for different activities.

For further information on this topic please contact Rohit Jaiswal or Gunjan Gupta at Singhania & Partners LLP by telephone (+91 11 4153 1000), fax (+91 11 4153 1001) or email ([email protected] or [email protected]).