A Non-Resident Indian, being an Indian citizen living abroad possesses many opportunities for investment in India. Being a stakeholder in the country’s development by bringing in relevant foreign exchange, the rights of an NRI is well protected by the state. While most investments of NRIs are directed towards traditional modes like real estate and gold, a good number of nonresidents is not opposed to exploring avenues of the corporate world. With faster, clear procedures and electronic submission of documents, NRIs are finding it beneficial to start businesses in India. Limited Liability Partnerships and Private Limited Company are the most sought after the business types by NRIs.
Private Limited Company
Private limited companies are viewed as particularly ideal for Non-Resident Indians due to the characteristics of its legal and capital requirements. An exciting feature is that a Private limited company can be started with as less as two shareholders. The highest limit may be two hundred shareholders. Agreements of a private limited company are much easier compared to that of a Public limited company. One of the directors requires to be a resident in India in order to register a company. They may as well be spouses or family members of the non-resident directors.
There is no necessity of prior approval from the Government or the Reserve Bank of India for managing foreign investments into a private limited company.
How to Register A Private Limited Company In India?
- Incorporation of Private Limited Companies is directed under the Companies Act, 2013.
- Most formalities for registering a private limited company can be accomplished online through the portal of the Ministry of Corporate Affairs.
- This is an extra benefit to NRIs who are eligible to register themselves as directors without nuisances.
- In order to complete the procedures given here, NRIs need to produce copies of passport and address proofs attested at their particular Indian Embassies, High Commissions or Consulates as the case may be.
Investment in shares and debentures by non-residents in Indian companies are regarded as the foreign direct investment(FDI) and regulated by the reserve bank of India(RBI) under Schedule I of Notification No. FEMA 20 /2000-RB.
- The Reserve Bank of India lays down exact procedures the type of industries in which investments may be made and the demands for licences in certain enterprises.
- NRIs are allowed to invest in shares, and convertible debentures under portfolio investment scheme described under Schedule III.
- The law for such purchases on non-repatriation basis is specified in Schedule IV.
- Before FEMA came into existence, FERA provided that resident foreigners and NRIs were not permitted to subscribe to Articles of Association and Memorandum without prior confirmation from the Reserve bank of India.
- After the repeal of FERA, all such requirements were dropped, allowing investments of foreigners in Indian companies.
Digital Signature (DSC)
A digital signature of the directors requires being created and registered since most forms are submitted electronically. Digital signatures are verified by agencies appointed under the Information Technology Act, 2000. They are received after paying fees online and can be rebuilt after the expiry of validity. On production of valid documents, Digital Signature can be made in 24 hours.
Director’s Identification Number (DIN)
Director’s Identification Number is a unique number allotted by the central government to a person designated as a director in a company. It is accomplished by applying under Form – DIR 3 under section 153 & 154 of the Companies Act, 2013. The form is digitally signed and requires to be attested by a Company Secretary after payment of requisite fees. DIN is obtained after the Government approves DSC.
Simplified Performa For Incorporating Company Electronically (SPICe)
- The Ministry of Corporate Affairs, in its initiative in Government Process Re-engineering (GPR), launched a groundbreaking initiative titled SPICe under form INC-32.
- This is an electronic form for incorporation.
- It gives for speedy incorporation services in line with the best global practices. SPICe offers an e-Articles of Association (form INC-34) and an electronic format of e-Memorandum of Association (form INC-33); both according to the Companies Act, 2013. Memorandum of Association would be registered as a linked electronic form unless it is for a Section 8 company.
- This form presents for pre-approval of company name before filing for incorporation.
- The form strengthens the government of India’s commitment to ease of doing business.
- Foreign subscribers to the Articles of Association and Memorandum will not be eligible to use the SPICe form.
- They would be needed to follow the conventional method of incorporation by filing separate forms for separate levels.
When the Certification of Incorporation is issued, the new company may apply for the following documents:
PAN and TAN
- A company is a separate legal entity.
- Hence, it requires having its own Permanent Account Number (PAN) for the objectives of determining Income tax liabilities.
- A Collection Account Number (TAN) and Tax Deduction number is used by companies that reduce TDS (Tax Deducted at Source) while making payments. TDS returns require being filed on a periodical basis after allocation of TAN.
Based on the kind of Industry, the company may apply for Service Tax registration and VAT registration after filling prescribed forms as well as payment of requisite fees.