Know Law Set up of a Private or Public company or a subsidiary in India

 Know Law

Labz Notification 7 of 2011

A written-cum-video initiative to know your corporate legal position as on date

 

Legal Queries???

Do you have a company? What is a company? Why a company? What are its advantages? How is a company better than a sole proprietorship or partnership firm? What are the liabilities attached with a company? What do you mean by limited liability company? Why to allocate legal cost in your budget to form a company when you start a business venture? Should I choose private limited or public limited company? Can a foreigner start a company in India with Dollars? Can a foreign company start its subsidiary in India without any Joint Venture partner? Is it mandatory to have an Indian citizen to start a company in India?

Solution…

Set up of a Private or Public company or a subsidiary in India

Company in India can be PRIVATE LIMITED OR PUBLIC LIMITED. The word ‘Limited’ denotes that the liability of person investing in the company is ‘Limited’ to the investment (the money put in to buy shares) made by the person.

Private Limited Company is the most common form of business organization. Such an entity can be formed by any two persons (from India or abroad) if it is a private limited company and seven persons in case of public limited comany. However, if the investment for such company (Minimum being Rs. 1,00,000/- for private & Rs. 5,00,000/- for public limited) is in foreign exchange or from foreign country, then the Foreign Direct Investment procedure needs to be complied with. Read More... 

Requirement under Indian laws on Set up of a Private or Public company or a subsidiary in India:

In India, there is a centralised legislation called The Companies Act, 1956 which regulates the formation of limited liability company and in case any foreigner is involved, though the procedure is same, there shall be compliance requirement under The Foreign Exchange Management Act (FEMA), 1999 while bringing the investment or technology into India which depends on the item of manufacture or nature of services.  Irrespective of any other document, the Memorandum & Articles of Association regulates the Indian Companies beyond any Joint Venture agreement or a Shareholders agreement.

Formation process is divided into 3, viz: Getting DIN (lifetime number for Directors) & DSC (digital signature); Approval of Name & Applying for Formation.  The process is fully made online where all scanned & filled-in documents can be exchanged over mails and even the Certificate will be generated online.

Myth buster on Set up of a Private or Public company or a subsidiary in India:

1. Myth buster on Set up of a Private Limited company: Too much of spending will be involved for start-ups if you wish to avail limited liability protection of personal assets while doing the business!!! The answer is a big NO.  There are merely legal costs and consultant’s cost involved; the minimum capital can be brought in by way of assets too; for instance 2 laptops of Rs.50,000/- each will be enough to start a private limited company as it becomes Rs.1,00,000/-.
2. Myth buster on Set up of a Public Limited Company: Only big industrial houses can start a public limited company!!! Any one with a vision can start a public limited company; though the compliance requirements are little more than a private limited company, it does not cost so much and in the process it would become a routine expenses like your rent or salary.  However, you would enjoy a bigger brand image in the market.
3. Myth buster on Set up of a Subsidiary: It is tedious task to set up a subsidiary company as it may involve too much of documentations & approvals!!! Any Indian company or Foreign Body corporate can start a wholly (100%) owned or substantially (>50%) owned company in India.  The process is almost same as starting a private or public limited company in India.  A mere procedural formality of nominees should be included to satisfy the number of persons as 2 or 7 would be an additional requirement.

Caution point on Set up of a Private or Public company or a subsidiary in India!!!

Collect your Share Certificates immediately on formation and check the statutory registers for your names in Members & Directors pages!!!

1. Caution point on Set up of a Private Limited company: Ensure your name is included as shareholder (subscriber) and director in the Memorandum & Articles of the company; also read through the documents in detail to avoid future confusions as it requires approval from substantial shareholders to alter at a later stage.  Further, annually check for the compliance updation to escape from penalties or actions.
2. Caution point on Set up of a Public Limited Company: If you are designated as a Managing Director or Whole time director during start-up, it may affect your existing employment terms and also your pay package will be regulated by the requirements of company law.  Further, ensure quarterly check for the compliance updation to escape from penalties or actions.
3. Caution point on Set up of a Subsidiary: Approval from Reserve Bank of India (RBI) and other sector specific approvals may be required before investing in India. Some categories of businesses (most of the manufacturing industries) are covered under automatic approval process. However, one has to specifically intimate for the same.  There are some post-incorporation filing formalities after the remittance of capital from overseas to India and on issue of shares as required under FEMA.

WATCH LAWLABZ VIDEO on Set up of a Private or Public company or a subsidiary in India (Click Here):

At Lawlabz, we offer 360^O Personalized VIRTUAL Corporate Solutions by offering COMPLETE online legal support for your organization since its set-up as your entrepreneurial venture, during its management as a corporate entity or a manufacturing industry and closure of unwanted company’s which are not having any significant business of its own.

Legally Yours,

Happy Consulting with www.lawlabz.com

For Private Circulation Only. The copyright of this notification is retained by Lawlabz. Notwithstanding anything contained herein, this notification does not amount to opinion or consultation of any nature. One Pager