Registering a company in India

resized.jpgBiotech companies in India have witnessed a huge growth over the past decade, and the future is bright with the emerging economic and liberalization policies. Growth in the customer base has drastically supported aggressive investments in the biotech sector. Indian biotech industry is expected to be valued at $75 billion -$90 billion by 2020. The high demand for biotech products has also allowed foreign companies to set up bases and reap great profits. Public-private partnerships and strong support from Indian government have boosted the biotech industry to greater heights. You can read many market survey reports and studies carried out by different companies about the opportunities in India, but you’ll need to plan thoroughly and read comprehensively about India and Indian culture before exploring opportunities in the subcontinent. Obviously, it is easy to register a company in India for an Indian citizen, compared to a foreigner. But it can be done, and I’m going to concentrate on the official procedures that are required for starting (interchangeably used for registering or founding) a company in India.

Background preparation: If you are an Indian citizen, then you can register about six to seven types of business entities in India, namely, Private Limited Company (limited by shares), Public Limited Company (limited by shares), Public Company (with unlimited liabilities), Company limited by guarantee, Partnership firm, Sole Proprietorship firm and co-operatives as producer company. Non-Indians (foreigners) are allowed to register private limited company (with 100% equities), private limited company (joint venture with Indians) and public limited company (with minimum of one shareholder and director of Indian citizen). You have to decide which business entity fulfils business requirements. Private limited company is preferred by almost all foreigners (individuals or entrepreneurs), because it has minimal agreement constraints, and it’s the best choice if you do not have any intentions to raise public funds.

For non-Indian citizens, I advise availing the services of a company secretary or chartered accountant – someone competent or authorized to register the company in the specific state or Union Territories of India. All the official procedures will be carried out by them, and it is easy for you to manage him or her as a “single point of contact.” The service charges of such consultants differ from state to state. In Karnataka state, it ranges between $700 and $900 and they will complete all the formalities within a week or ten days. The Companies Act (1956) is one of the governing laws for the registration of companies in India. All registered companies are under the Ministry of Corporate Affairs by means of office of Registrars of Companies (ROC). The guidelines, statutory requirements and official procedures are the same throughout the nation except different official languages and stamp duties in different states and Union Territories. The administration, company names, registry of records, transactions and forms in ROC are carried out in English language through the respective regional directors.

Registration of company name: Registering your company name is the first step in the pre-registration of company or company incorporation in ROC. The process of company registration begins with filling out application Form No.1A, available in the ROC office of the state. You have to submit the filled-in Form No.1A to ROC office by payment of prescribed fees. Pre-requisite for this submission is the address proof of the Registered Office of the proposed company, and name and signature of one of the promoters (director or subscriber). “Promoter” means a person or persons who have control over the affairs of the company directly or indirectly, whether as a shareholder, director or otherwise, and includes any person or persons named as promoters in any offer document or document by reason of his acting in the professional capacity. You have to rent a house or business office, because you might require a “lease agreement” or “rent agreement” as “address proof” of the promoter (director or shareholder). You have the option to propose a panel of three to five company names quite distinct from each other for consideration.

ROC staff will search the proposed names for availability or any resemblance with other company names in India. ROC staff will let you know if they find it difficult to approve names that might create confusion in the minds of the public and harm the interest of the promoters. You will be given up to two opportunities for re-submission of the new panel of company names against the fee paid in the first instance for name availability after the original application is filled. Within a day or two, the name will be allotted for a company. If the name is not adopted 60 days after it is allowed, you may apply for extension for retention of such name for further period of 30 days on payment of 50% of the fees prescribed for the application at the initial stage. The name allowed shall lapse after expiry of sixty or ninety days, as the case may be, from the date it is allowed first. If you agree to the allotted name, the “name allotment certificate” will be issued to you. This is called pre-registration process.

After the “name allotment certificate” is obtained from the ROC, you have to prepare the Memorandum of Association (MOA) and Articles of Association (AOA) for the proposed company. The format and description are almost similar to other countries of the world. MOA mainly covers the primary, auxiliary and other business activities of the proposed firm. AOA incorporates the guidelines for the standard operations and conduct of the proposed company along with the certified share capital, first directors or founding directors, the names and addresses of first directors and so on. Private limited company must have two directors and two share holders; and in case of a public limited company, there should be three directors and seven share holders.

We shall discuss more about the documentation stage of the company registration in the next article. 

Prashanth Bagali