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| Incorporating a Company |
| Incorporating the company involves the following steps, which can take about six to eight weeks. |
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Applying to the Registrar of Companies for approval of a name. Selection of names must be in accordance with the guidelines, and three choices are required to be given for clearance |
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Filing the Memorandum and Articles of Association giving the main objects, incidental objects, the authorised share capital of the company, and the names and particulars of the subscribers to the memorandum- minimum 2 in case of a private company, and 7 in case of a public company |
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In case a foreign company is a subscriber (as will be for joint ventures and subsidiaries) the following principal documents are needed to be authenticated by the Indian Embassy in the country of origin: |
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Certified/notarised English translation of parent company’s registration, memorandum and articles of association |
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Certified/notarised English translations of board resolutions required to be passed to subscribe to the capital of the Indian company, appointment of representative directors and signatories |
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Authentication of authorised signatures of the parent company signatories |
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In some cases, powers of attorney to an Indian authorised signatory on behalf of the parent company. |
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Based on the above documents, the Certificate of Incorporation is issued to the Indian Company, which may have subscription to its initial capital by the foreign investor/company. |
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| Private Company |
| A private company is a company formed by two or more members (but not more than fifty), which has articles- |
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Restricting the right to transfer its shares, if any |
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Limiting the member strength to fifty- excluding employees, employee-members, after ceasing to be employees |
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Prohibiting invitation to the public to subscribe for shares and debentures of the company. |
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| Public Company |
A Public company is one that is not a private company and is |
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Promoted by a minimum of seven members |
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Does not restrict the transfer of its shares |
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Invites the public to subscribe to the shares and debentures of the company. |
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| Private companies are exempt from several provisions of the Companies Act widely applicable to public companies, mainly relating to the following: |
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Issue of type of share capital, voting rights, shares disproportionate to holdings, etc |
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Financial assistance to purchase its own shares |
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Remuneration payable to managerial personnel |
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Powers of the Board of Directors |
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Loans to Directors |
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| Foreign investors are advised to check the Memorandum and Articles of Association thoroughly, and ascertain that: |
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The Articles embody all the mutual rights of the joint venture partners provided in the joint venture agreements; otherwise other shareholders and the JV company is not bound by the agreement conditions |
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Eligibility of a partner to nominate directors is strictly in relation to actual shareholding at any point of time, or as provided by the JV agreement; other wise disproportionate control may ensue in the venture |
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Blocking and special quorum rights of partners on important matters are specified in the articles |
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Provisions exist for sending and providing sufficient notice of all meetings to non-resident shareholders, including by email and fax, and for adopting resolutions by circulation as an option to convening board meetings |
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Procedures and conditions for exit of shareholders, sale and transfer rights of shares for under specific circumstances are clearly mentioned |
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| Foreign entities must seek detailed and adequate explanation for various unfamiliar clauses in the Articles before signing or accepting them. |
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ICREON