India Company Registration Overview
India company registration is a useful way to take advantage of opportunities in the world’s 12th largest economy growing at an average 7% annually for the past 7 years.
The following information provides an overview of the Indian economy and its implications for India company formation.
India Company Registration Procedures
Investors forming a company in India might want to consider Special Economic Zone (SEZ) Enterprise. These are manufacturing clusters encouraged by local Governments across India to provide employment to local citizens. An SEZ Enterprise is an attractive entity for foreign investors because:
- It can be 100% foreign owned
- Obtain 100% tax exemption on export income for the first 10 years of manufacturing
- Benefits from a large pool of low cost local labour.
The process for incorporating in India is through the Ministry of Corporate Affairs, where companies are registered and administered, corporate compliance and disclosure requirements are monitored, and statutory audits by public accountants are regulated. The process is performed through Company law is outlined in the India Companies Act 1956 and company incorporation is controlled by the Registrar of Companies at the Ministry of Corporate Affairs (MCA).
Investors establishing a company in India are required to inject a minimum paid up capital of US$2,250 into the corporate bank account before completion of company incorporation; and submit audited financial statements and annual corporate tax return to the Income Tax Department. Foreign companies may wish to invest directly in Indian project. However companies wishing to do so require investment approval from the Foreign Investment Promotion Board (FIPB) of the Ministry of Finance, the shares in an Indian company can be 100% foreign-owned, and requires no approval during incorporation.
Each company must appoint at least two directors. Thereafter, an unlimited number of directors may be appointed. At least two shareholders, be they local, international, corporate or individual must also be appointed. Remember to appoint a local, resident company secretary and registered office. Take note that only individual company secretaries are allowed.
Advantages of India Company Registration
India business formations will enjoy an abundance of labor due to India’s impressive economic growth. The economy is service sector driven (in particular business process outsourcing, software development, tourism and financial services), is fueled by its large pool of skilled, educated workers with an excellent command of English as well as the wide availability of low cost, unskilled and semi-skilled workers to work in the agriculture and manufacturing sectors.
The Indian economy is going forward as the government is implementing a gradual easing of foreign investment restrictions in India, and India is a strategic location between the east and the west.
Disadvantages of India Company Formation
India is not an efficient global trading jurisdiction for entrepreneurs planning India business formation. Imports to and exports from India are restricted due to:
- Poor import/export infrastructure. To illustrate this, Indian ports can handle only 650 million tonnes of exports annually. In contrast, China’s ports can handle 5.6 billion tonnes of goods.
- Excessive bureaucracy
- Import tariffs
Furthermore, India maintains policies that restrict trade and hamper economic freedom. For example, India is rated the world’s 124th freest economy in the 2010 Index of Economic Freedom by The Heritage Foundation, which uses criteria such as freedoms enjoyed in business, trade, monetary, financial, investment and labour markets.
A Branch Office cannot undertake manufacturing activities – it must subcontract this activity to a local Indian manufacturer. Examples of Branch Office activities include consultancy services, acting as a sales agent for the foreign parent company and providing technical support for products supplied by the parent company.
Another key challenge facing international entrepreneurs setting up a business in India is recruiting suitable professional staff. This restricts the availability of educated, skilled labor available to foreign investors, particularly in the IT and pharmaceuticals sectors.