Position of Corporate Laws in India

Company Law is a base of Corporate law in India. Company law was governed by Companies Act 1956 but now it is governed by Companies Act 2013. The act is further amended by various circular and notification through Ministry of Corporate Affairs(MCA). Corporate Law consist of Companies Act, 2013, Foreign Exchange Management Act,1999 (FEMA), Securitization and Reconstruction of Financial Assets or SARFESI Act 2002, Securities Contracts (Regulation) Act and many other Act. These all Acts are governed by Security Exchange Board of India, Reserve Bank of India, MCA, and Department of Industrial Promotion.

In India a foreign Company can do business in various ways and they are as follow:

By setting a Liaison office – It means a place of business to act as a channel of communication between the principal place of business (Foreign Company) or Head Office by and entities in India but which does not allow this office for any commercial, trading, industrial activity, directly or indirectly, and maintains the same out of inward remittances received from abroad through normal banking channel.

By setting up a Branch Office – Foreign Companies engaged in manufacturing or trading activities are allowed to set up branch offices in India with specific approval of the Reserve Bank of India (RBI). Such Branch Offices are permitted to represent the parent companies and undertaking the limited activities in India. RBI has given general permission to foreign companies for establishing branch in Special Economic Zones to undertake manufacturing and service activities.

By setting up a Project office – RBI has granted general permission to foreign companies to establish Project Offices in India, if they have secured a contract from an Indian company to execute a project in India.

By incorporating a Subsidiary of the foreign Company – A subsidiary company is the representative of foreign company and the same can be registered through the below mentioned process.

How to setup a company in India?

First the investor must think that what kind of Company is required as there are various types of Company for his/her business:

Private Company – Private Companies are those companies whose articles of association restrict the transferability of shares. A private company requires minimum of 2 members and maximum of 200 the same can be started.

Public Company – Public Companies are those Company whose ownership is distributed amongst general public shareholders via the free trade of shares on different stock exchanges.The minimum number of members needed to form a Public Company is at least 7 members and maximum is unlimited.

One Person Company – A one-person company is a company that has only one person as to its member. Members can be more.

Nidhi Company - A Nidhi company is a type of company in the Indian non-banking finance sector (NBFC).The core business of this type of company is borrowing and lending money between their members.

Government Company – Government Company is a company or an organization in which at least 51% of the share capital is held by the central government or the state government or partly by both central and state government.

Registering a company in India is a simple four step process. Basic requirement for the incorporation are as follows:

  • A Digital Signature Certificate (DSC)
  • A Director Identification Number (DIN)
  • Registration on the Ministry of Corporate Affairs Portal or New user registration
  • Memorandum of Association and Articles of Association.
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