This article has been written by Aksshay Sharma, from the Department of Laws, Panjab University, Chandigarh,. It deals with the steps involved in the incorporation of a private limited company in India for a foreign national. It includes details regarding navigating through the MCA website, uploading of forms, and conditions for notarization and Apostilization.

Introduction

The procedure for incorporation of a private limited company in India is regulated by the Companies Act, the Foreign Exchange Management Regulations, 2016, the Companies (Registration of Foreign Companies) Rules, 2014 and the Companies (Incorporation) Rules, 2014. A foreign national may incorporate a company in the same manner as an Indian national would do, under the Companies Act, 2013, subject to some conditions.

A foreign national entering the Indian market for the conduct of business is regarded as Foreign direct investment (FDI) in India. The ease of doing business and the percent Digital India initiative have simplified the incorporation process. The SPICe+ (Simplified Proforma for Incorporating a Company Electronically plus) system has integrated 10 services by 3 Central Government Ministries & Departments, (Ministry of Corporate Affairs, Ministry of Labour and Department of Revenue under the Ministry of Finance) and One State Government (Maharashtra). For a foreign nation to form a company in India, it must have at least 1 director as an Indian resident or company.

Meaning of a Foreign Private Limited Company

According to Section 2(42) of the Companies Act, 2013, a foreign company is a company or body corporate incorporated outside India which:

(a) Has a place of business in India whether by itself or through an agent, physically or through electronic mode; and

(b) Conduct any business activity in India in any other manner.

The word “limited” indicates that the liability of the promoters or shareholders is limited to the number of shares subscribed by them i.e. limited to the amount invested in the firm.

Apostilization (mandatory for foreign companies and directors)

An apostille is a certification provided under the Hague Convention of 1961 for authenticating documents for use in foreign countries. It also abolished the requirement of the legalization of foreign public documents. It simply certifies the authenticity of the signature on the document, other than those signed digitally. The sole function is to certify the authenticity of the signature of the document.

According to Rule 9 of the Companies (Registration of Foreign Companies) Rules, 2014. certification of a copy of charter, statutes, memorandum and articles or other instruments constituting or defining the constitution of a foreign company have to be certified to be a true copy by either a public notary or a government official or by an officer of the company, of the parent country of the company.

However, if the country is not part of the Hague convention (1961) then it has an additional requirement of certifying the documents by a diplomatic or consular official empowered under the Diplomatic (Oaths and Fees) Act from the concerned embassy.

Apostilization removes the requirement of certification by the diplomatic or consular official. The process of apostilization varies from country to country.

Routes/ways for incorporation

By incorporating a company in India

A foreign national can register a company in India for carrying out business by having at least one Indian citizen or company as their member/promoter/director.

He must hold at least 50 per cent share capital in such a foreign company as per Section 379 of the Companies Act, 2013. It can then incorporate a company in India under Section 7 of the Companies Act, 2013 with the same name as the parent company. Such incorporation is subject to the Companies Act, 2013. A foreign national cannot incorporate a company in India without at least 1 member/promoter/director as an Indian citizen or company. A director need not be a shareholder.

Alternatively, foreign nationals can also enter the Indian market by purchasing 100 per cent shares of an Indian private company i.e by having a wholly-owned subsidiary. In this way, it can utilize the operational setup of the company whose shares it has acquired.

By establishing a branch office or liaison office under the FEMA Act

This channel allows a foreign national to have a “place of business” in India if they do not have any commercial presence in India, under the Foreign Exchange Management Regulations, 2016 a foreign national can establish a company in India in 2 ways

1. Either through a branch office; or
2. Through a liaison officer.

Such branch or liaison offices can undertake certain activities including “Representing the parent company in India and acting as buying/ selling agent in India”.

Procedure for incorporating a Foreign National Private Limited Company in India

Step 1- Obtaining digital signature certificate

All work regarding incorporation for a private company is done through the SPICe+ service (web portal) available on the Ministry of corporate affairs website and thus for purposes of authentication and validation, a Digital Signature Certificate (DSC) is mandatory.

Under the Information technology Act, 2000, a DSC can be issued only by the “Certifying Authority”. The Controller of Certifying authority under the Ministry of Electronics and information technology gives a list.  

Step 2- Preparation of basic documents

Apart from basic documents required under Section 7 of the Companies Act, 2013 for incorporation of a company, the foreign company under Section 380 of the Companies Act, 2013 after the establishment of a place of business in India, has to send the following documents within 30 days to the Registrar of companies (RoC) for registration.

1. A certified copy of a document constituting or defining the constitution of the country, such as a charter or Memorandum of Association (MoU) and Articles of Association (AoA). Foreign companies cannot submit an eMoA (electronic Memorandum of Association) and eAoA( electronic Articles of Association), they have to mandatorily submit the physical copy which is notarised and apostilled as per the Hague Apostille Convention, 1961.
2. Full address of the registered office of the company, in India.
3. List of directors and subscribers of the company containing particulars prescribed under the Companies (Registration of Foreign Companies) Rules, 2014.
4. Name and address of the person who will accept service of summons, notice, or any document served, on behalf of the company. He has to be an Indian resident. 
5. Full address of the company in India which will be deemed to be its principal place of business in India.
6. Details of opening and closing of a place of business in India on earlier occasions.
7. Declarations that no director or authorized representatives have been convicted or debarred from forming a company in India or abroad.
8. Any other information. For instance, under Rule 16 of the Companies (Incorporation) Rules, 2014, certain particulars of every subscriber to the memorandum shall be filed with the Registrar at the time of incorporation.

Apart from the above-mentioned documents, certain other documents have to be submitted this includes:

1. Passport and residential proof of foreign nationals (those who will be Directors of the company).
2. Voter ID/DL/Aadhar and residential proof for Indian citizens (who shall be the director).
3. Copy of certificate of incorporation of the foreign body corporate and proof of registered office address in India.
4. A certified true copy of board resolution/consent by all the partners authorizing to subscribe to MOA. 

All these documents need to be notarized by a public notary in the country of the parent company of the company as well as apostatized if the country is part of the Hague convention. All documents and particulars are to be filled on-screen under the Part B registration process.

All these documents have to be certified by a public notary or a government official or by an officer of the company. If the country is not a part of the Hague convention (1961) it has to get the above documents apostilled by the concerned embassy.

Step 3- Initiation of incorporation through SPICe+

Incorporation/registration of a private company is done through the SPICe+ web portal under MCA services on the Ministry of corporate affairs website.SPICe+ provides on-screen foiling and real-time data validation.

About SPICe+ (Simplified Proforma for Incorporating Company electronically Plus)

SPICe+ has incorporated within itself many services which are required for incorporating a private limited company such as applying for a fresh PAN (Permanent account number), ESIC (Employees’ State Insurance Corporation registration), EPFO (Employee Provident Fund Organization, registration), and for Goods and Services Tax Identification Number (GSTIN) and for opening a bank account. These are necessary particulars for incorporating a private limited company in India, irrespective of domestic or foreign. The application (SPICe+) for incorporation of a company shall be accompanied by a linked e-forms like INC-35,(AGILE-PRO), FC-1 forms. It also has a facility to pay e-stamp duty( Stamp Duty electronically). 

It must be noted that MoA and AoA have to be drafted and uploaded within part B itself as foreign companies cannot opt for more and eAoA. Thus after registering for PAN and TAN, upload MoA and AoA, which is notarized and apostilled in the country of origin. Moreover, an NoC from the parent foreign company is required and a consent form of all Directors (Dir.12) under Rule 17 of the Companies (Incorporation) Rules, 2014, has to be uploaded under the “Optional attachments” option.

Even reservation of the name of the company can also be done through SPICe+. The SPICe+ consists of two parts:

Part A- Reservation of names for new companies

Under Part A, a new name for the Indian branch of the foreign company can be reserved. Part A also has an option to submit for a comprehensive name check by Central Registration Centre (CRC), this ensures that the name selected is unique and not in violation of the laws of India. A fee of INR 1000 has to be paid for confirmation of the name (name reservation).

As per the rules such an Indian company can have a name similar to that of the parent company, subject to certain conditions.

As per Rule 8 of the Companies (Incorporation) Rules,2014, if a foreign company incorporates its subsidiary company in India, then the original name of the holding company is allowed with the addition of the word ‘India’ , or name of any state or city at the end of the company’s name.

Furthermore, it has to indicate “PVT” for private and “LTD” Limited to indicate that it is a private limited company. For instance, Apple inc has its Indian company incorporated by the name of “APPLE INDIA PRIVATE LIMITED”.

Part B- other services and particulars required for the incorporation of a private company

Part B of SPICe+ offers the following services:

• Incorporation;
• DIN allotment;
• Mandatory issue of PAN;
• Mandatory issue of TAN;
• Mandatory issue of EPFO registration (Employees’ Provident Fund Organisation);
• Mandatory issue of ESIC registration (Employees State Insurance Corporation);
• Mandatory issue of Profession Tax registration(Maharashtra);
• Mandatory Opening of Bank Account for the company; and
• Allotment of GSTIN (if so applied for).

Even if directors do not possess any DIN (Director identification number), or Permanent Account Number (PAN), or Tax-Deduction Account Number (TAN) then they can apply for it in Part B itself, thereby integrating multiple procedures.

There will be a portion to type the main industrial activity code. The list of the code is accessed here.

Step 4- Filing up of AGIL-pro form

AGILE-pro is a multiple registration facility integrated within SPICe+ Part B form. Through this, a company can apply for a fresh PAN, EPFO registration, ESIC registration, and GSTIN, etc. If a company has such, then it only has to mention those details in the AGILE proform, otherwise, they can apply for it. The earlier AGILE form was a separate form to be filled separately, but now throughSPICe+ the system it has been integrated into it.

Once basic details under Part B of SPICe+ are complete, a person has to navigate to the SPICe+ option again and then click on “Existing application”. Find the name of your company and click on the “Application number”, then there will be an option to fill up the AGILE proform.

Step 5-Affixing digital signature certificate

Once both SPICe+ and AGILE pro-forms are filled and saved online, the company has to download it in PDF format and affix their DSC on the forms. The signed forms then are to be uploaded again to the Ministry of the corporate website under the upload eform service.

Step 6-Delivering FC-1 form (mandatory for foreign companies)

Once the place of business is established, an additional form along with certain other particulars has to be submitted to the Registrar of Companies, New Delhi. This is a mandatory procedure only for foreign companies.

Foreign companies under Rule 3 of the Companies (Registration of Foreign Companies) Rules, 2014, have to deliver form FC-1 to the Registrar of Companies within 30 days of the establishment of their business along with an attested copy of approval from the Reserve Bank of India under the Foreign Exchange Management Act or Regulations. It has to be digitally signed.

Step 7- Uploading of forms

Once DSC is affixed on forms- SPICe+, AGILE pro, and FC-1 they have to be uploaded on the MCA website. Navigate to MCA services and select upload eforms.

There will be an option to check the “linked form” should it be selected, this will enable a person to upload multiple forms at once. Once uploaded and submitted the registration process from the side of the government of India will initiate. 

Step 8- Scrutiny and issuance of Certificate of Incorporation ( to be done by Government of India) 

Once all steps have been undertaken and all forms submitted, the MCA will scrutinize all documents, and particularly, if everything is following the law, then it will issue a Certificate of incorporation in form INC-11 format.

Conclusion

Thus incorporation of a company by a foreign national in India is similar to that of incorporating an Indian private company, except that an additional form is required to be filed to the Registrar of Companies. Registrar of Companies for a foreign company is situated in New Delhi, India. After successful incorporation, a Certificate of Incorporation is issued along with FCRN- Foreign Company Registration Number.

References

• SPICe+ Forms
• https://governanceprofessional.wordpress.com/2019/10/10/overview-of-foreign-companies-under-the-indian-companies-act-2013-pcs-lalit-rajput/
• Classification And Registration Of Companies, Ministry of corporate affairs
• Compliance for Establishment of Branch office of Foreign Company
• FAQ’s for eform INC-35
• How to get Digital Signature Certificate