The Indian economy is going through a period of consistent high growth and the Government is improving the ease of doing business significantly. Many corporates globally are looking at setting up entities in India, for production, distribution or services outsourcing.
In order to register a private limited enterprise, the promoters must follow some crucial procedures and also keep in mind the pros and cons these decisions will bring in the near future of the company. So, in this article, we are going to discuss some key decisions that are needed to be undertaken for the formation of a private company or a Start-Up.
The process for registration of a company with and without overseas investors is different. Overseas shareholders need certain registrations and documents in India in addition to the standard requirements. There are also certification requirements around infusion of capital from an overseas entity which need to be met upfront.
The number of stakeholders and their respective stakes:
The norms state that you can register a private limited company with a minimum of 2 stakeholders with the number maxing out to 200. However, it is solely up to the shareholders to decide and fix their ratio and percentage of shareholding. It is compulsory for each stakeholder to own at least a single share in the company.
Directors and their residence:
According to the laws, a company must have a minimum of 2 working directors on its board of directors and a maximum of 15. Apart from the laws governing the number of required directors for the company, another rule states that at least one director must remain a permanent resident in India throughout the fiscal year.
There are additional documentation and registration requirements for overseas directors and these need to be met prior to appointment.
Authorized Capital vs. Funded capital
We usually advise clients to set up companies with an authorized capital that covers all future needs, rather than increase authorized capital in phases. The actual funding can be need-based and can be infused from time to time as long as the funded share capital remains below the authorized capital.
It’s important to know that the stamp duty and registration fee paid on incorporation of a company in India depends on multiple things, including the name, authorized capital, whether it is private or public, number of directors, state in which it is incorporated, etc.
For more information on incorporating a company in India, reach out to us as firstname.lastname@example.org or fill out the contact form at the top right of this page.