Incorporation of Company/LLP in India

April 2023

Incorporation of

Company/LLP in India

FAQs

MUMBAI SILICON VALLEY BANGALORE

DMS Code: 21543.1

Provided upon request only

FAQs

Incorporation of Company/LLP in India

About Swift

Swift India Corporate Services LLP (“Swift”) established in the year 2005, is an afﬁliate entity of

Nishith Desai Associates, a preeminent India centric law ﬁrm. We are a premier and boutique ﬁrm

specialized in meeting with the global standard corporate governance aspirations of our clients doing

business in India. Our team comprises of professionals with a proliﬁc corporate, legal and secretarial

compliance background. We aim to provide pragmatic and business-oriented solutions in governance

and compliance matters, through a unique holistic approach that blends our expertise and decades of

experience in compliance and regulatory areas.

What we do

Our team of qualiﬁed professionals assist and guide the clients in understanding and implementing the

Indian centric governance and compliance requirements while operating in India. At Swift, we take pride

in servicing our clients and ensuring that they always remain compliant. As of March 31, 2023, we have

incorporated over 285 companies and Limited Liability Partnerships (“LLPs”) and have won the title of

“Overall Company Formation Firm of the Year - Start Up” as awarded by Acquisition International Magazine.

We are currently engaged in providing corporate governance and compliance services to over 100 com-

panies/LLPs, majority of which are foreign owned entities.

Our team of skilled and qualiﬁed professionals ensure unparalleled turnaround times and maintain con-

ﬁdentiality and integrity in delivering highest quality of services. We provide end to end solutions that are

client centric as well as dynamic, within the framework of legislation. As the name suggests, we swiftly

ensure that you are in business!!

As an afﬁliate of Nishith Desai Associates (“NDA”), we draw from the beneﬁt of the incredible expertise

of the NDA team, and are able to cater to client-speciﬁc requirements in corporate transactions like

Mergers & Acquisitions, Joint Ventures, Private Equity Investment and Capital Markets and also in other

practice areas such as Fund Formation, Human Resources Law (Employment and Labour), Intellectual

Property etc. Please refer to NDA’s website at http://www.nishithdesai.com/ for the services offered by

them.

Disclaimer

This FAQ is a copyright of Swift. These FAQs are general in nature and based on the laws, rules and

regulations as on April 2023. No reader should act based on any statement contained herein without

seeking professional advice. The authors and Swift expressly disclaim all and any liability to any person

who has read this FAQs, or otherwise, in respect of anything, and of any consequences of anything done,

or omitted to be done by any such person in reliance upon the contents of this FAQs.

Contact

For any help or assistance please email us on -

[email protected]

Or visit us at www.swiftindiallp.com

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Executive Summary

India has established itself as one of the fastest growing economies in the world, attracting signiﬁcant

inbound investment and becoming a prime destination for foreign direct investment (FDI). The Indian

government has implemented various measures to promote ease of doing business in the country,

including opening up new sectors for FDI, increasing sectoral limits for existing sectors, and simplifying

FDI policies.

If you are interested in setting up a business in India and have questions about forming a Company or

LLP, this booklet provides basic answers to common queries. It is intended to serve as a broad guide to

help you make informed decisions about starting and running your business in India. However, please

note that the information provided here is generic in nature and should not be construed as legal advice

on any speciﬁc queries. Indian laws and regulations are subject to change, so it is recommended that you

seek professional advice and guidance to ensure compliance with all applicable laws and regulations.

It is important to take into account tax implications and other relevant regulations before making any

decisions regarding the formation of a business entity in India. We are happy to provide any further

information, clariﬁcation or advice you may require.

FAQs

Incorporation of Company/LLP in India

Contents

1. WHAT ARE THE DIFFERENT FORMS OF ENTITIES FOR

DOING BUSINESS IN INDIA? 01

I. LLP 01

II. Indian subsidiary company either as — Private Limited

Company or Public Limited Company. 01

III. Liaison Ofﬁce 01

IV. Branch Ofﬁce 01

V. Project Ofﬁce 02

VI. Partnership 02

VII. Trust 02

2. WHAT ARE THE LAWS APPLICABLE FOR DOING

BUSINESS IN INDIA THROUGH COMPANY/LLP? 03

I. The Companies Act, 2013 (“CA 2013”) 03

II. The Limited Liability Partnership Act, 2008 (“LLP Act”) 03

III. Foreign Exchange Management Act, 1999 (“FEMA”) 03

IV. Income Tax Act, 1961 (IT Act) 03

V. Goods and Services Tax Act, 2017 (GST) 04

VI. Sector speciﬁc legislations 04

VII. Central and State speciﬁc labor and other related laws 04

3. HOW TO INCORPORATE A COMPANY? 05

I. Introduction — Private limited company/Public limited company 05

II. Directors 09

III. Shareholders 14

IV. Incorporation Process 15

V. Post-incorporation Compliances 19

4. HOW TO INCORPORATE LLP 20

I. Introduction 20

II. Partners & Designated Partner (“DP”) 20

III. Incorporation 22

IV. Applicability of FEMA for LLP 24

V. Initial post-incorporation compliances applicable to LLP 24

5. CONCLUSION 25

Provided upon request only

Incorporation of Company/LLP in India

FAQs

1. What Are The Different Forms of Entities for

Doing Business in India?

I. LLP

A corporate business vehicle that enables professional expertise and entrepreneurial initiative to combine

and operate in ﬂexible, innovative and efﬁcient manner. LLP is a body corporate and a legal person

separate from its partners. Earlier, Foreign Direct Investment (“FDI”) in LLP’s was permitted only through

the government approval route and LLP’s were also not allowed to make downstream investments. However,

FDI is now permitted under automatic route in LLPs operating in sectors/activities where 100% FDI is

allowed through automatic route and there are no FDI – linked performance conditions.

In addition to the above, LLPs receiving FDI are also allowed to make downstream investment in other

companies/LLPs operating in those sectors where 100% FDI is permitted through automatic route.

II. Indian subsidiary company either as — Private Limited

Company or Public Limited Company.

a. Private Limited Company: A private limited company is the most popular form of business

entity used by the foreign investors in India. A private limited company has certain distinguishing

characteristics. There are various requirements for forming a private limited company in India which

are further discussed in this document.

b. Public Limited Company: A public limited company is deﬁned as a company which is not a

private limited company (but includes a private limited company which is subsidiary of a public

limited company). A public limited company shall have minimum of 7(seven) members (no limit on

maximum number of members), free transferability of securities and may invite public to subscribe

to its securities. A public limited company may also list its securities on a recognized stock

exchange by way of an Initial Public offering (“IPO”).

III. Liaison Ofﬁce

Setting up a liaison ofﬁce in a sector in which 100% FDI is allowed under the automatic route requires

the prior consent of the AD. For the remaining sectors, RBI grants its approval after consultation with the

Ministry of Finance.

A liaison ofﬁce acts as a representative of the parent foreign company in India. However,a liaison ofﬁce

cannot undertake any commercial activities and must maintain itself from the remittances received

from its parent foreign company. The approval for setting up a liaison ofﬁce is generally valid for 3 years

and can be extended by making an application to AD before the date of expiry of validity. It is an option

usually preferred by foreign companies that wish to explore business opportunities in India.

IV. Branch Ofﬁce

Similar to a liaison ofﬁce, the branch ofﬁce of a foreign company in India must be set up with the prior

consent of the AD0 for sectors under which 100% FDI is permissible under automatic route, with

approval under other sectors accorded after consultation with Ministry of Finance. It can represent the

Provided upon request only

foreign parent company in India and act as its buying or selling agent in India. However, a branch ofﬁce

cannot carry out any retail, manufacturing or processing activities. The branch ofﬁce is permitted to remit

surplus revenues to its foreign parent company subject to the taxes applicable. Operations of a branch

ofﬁce are restricted due to limitation on the activities that it can undertake. The tax on branch ofﬁces is

40% plus applicable surcharges and the education cess. It is an option that is useful for companies that

intend to undertake research and development activities in India.

V. Project Ofﬁce

A foreign company, subject to obtaining approval from the AD, may set up a project ofﬁce in India under

the automatic route subject to certain conditions being fulﬁlled including existence of a contract with an

Indian company to execute a project in India. A project ofﬁce is permitted to operate a bank account in

India and may remit surplus revenue from the project to the foreign parent company. The tax on project

ofﬁces is 40% plus applicable surcharges and the education cess. Project ofﬁces are generally preferred

by companies engaged in onetime turnkey or installation projects

VI. Partnership

A partnership is a relationship created between persons who have agreed to share the proﬁts of a busi-

ness carried on by all of them, or any of them acting for all of them. A partnership is not a legal entity

independent of its partners. The partners own the business assets together and are personally liable for

business debts and taxes. In the absence of a partnership agreement, each partner has an equal right

to participate in the management and control of the business and the proﬁts / losses are shared equally

amongst the partners. Any partner can bind the ﬁrm and the ﬁrm is liable for all the liabilities incurred by

any partner on behalf of the ﬁrm. Investment by foreign entities is permitted in Indian partnership ﬁrms

subject to prior approval of RBI.

VII. Trust

A trust arises when one person (the “trustee”) holds legal title to property but is under an equitable duty

to deal with the property for the beneﬁt of some other person or class of persons called beneﬁciaries.

Like a partnership, a business trust is not regarded as a legal entity. The trust, as such, does not incur

rights or liabilities. The beneﬁciaries do not generally obtain rights against or incur liabilities to third

parties because of the transactions or actions undertaken by the trustee in exercising its powers and

carrying out its duties as a trustee. If the trustee of a business trust is a corporation, the participants

may effectively limit their liability to the assets of the corporate trustee and the assets held by the

corporation on trust for the beneﬁciaries. A foreign resident may only be the beneﬁciary of a trust,

which is set up as a venture capital fund and only after receiving the prior consent of the concerned

department of Government of India.

Note: For different forms of incorporated and to be incorporated entities for doing business in India

please refer to our research paper on “Doing Business in India” in the web link

1. http://www.nishithdesai.com/ﬁleadmin/user_upload/pdfs/Research_Papers/Doing-Business-in-India-P2.pdf

Incorporation of Company/LLP in India

FAQs

2. What are The Laws Applicable for Doing

Business in India Through Company/LLP?

I. The Companies Act, 2013 (“CA 2013”)

Companies in India are regulated and governed by the provisions of the CA 2013 and rules made

thereunder as amended from time to time. The authority that oversees companies and their compliances

is the Registrar of Companies (“RoC”). CA 2013 facilitates incorporation of companies and regulates

management operational and administration functions.

II. The Limited Liability Partnership Act, 2008 (“LLP Act”)

The LLPs in India are regulated and governed by the provisions of LLP Act and the rules made thereunder

as amended from time to time. The LLP Act contains provisions for the formation and regulation of LLPs

and matters connected therewith or incidental thereto. The LLP Act speciﬁcally relates to the incorpora-

tion of LLPs in India. The authority that oversees LLP and its compliances is the RoC.

III. Foreign Exchange Management Act, 1999 (“FEMA”)

FDI in business entities such as company or LLP is regulated in India by FEMA. While 100% FDI is allowed

in many of the sectors under the automatic route, however there are few restricted sectors in which FDI is

not allowed under the automatic route and requires prior approval of Government of India (“GoI”).

FDI in sectors/activities to the extent permitted under automatic route does not require any prior

approval either by the GoI or Reserve Bank of India (“RBI”). The investors are only required to intimate

and ﬁle documents, disclosing the investment with the concerned regional ofﬁce of RBI within 30 (thirty)

days of issue of shares to foreign investors. FEMA also provides list of negative sectors, where FDI is

either totally prohibited or may require a prior approval of the GoI or concerned Ministry.

IV. Income Tax Act, 1961 (IT Act)

Any person investing or doing business in India should consider various direct (income) and indirect

(consumption) taxes which are levied and collected by the Central Government and the State Governments

respectively. Corporate houses, be it domestic or foreign, are required to pay taxes in India under the IT Act.

The various taxes levied by the Government includes:

a. Corporate tax levied on both domestic as well as foreign companies. It is levied on the proﬁts of the

company as per applicable tax rate;

b. Dividend distribution tax is tax paid by corporates on the dividend that they distribute to their

shareholders. However, the Finance Act, 2020 abolished DDT. Accordingly, from April 1, 2020,

dividends declared by an Indian company would be subject to tax in the hands of the recipient at

applicable rates, as income from ‘other sources’. For resident shareholders, the Private limited

company is required to withhold tax at the rate of 10% (plus surcharge and cess). For non-resident

shareholders, subject to tax treaty relief, the rate of tax is 20% (plus surcharge and cess). The

same amount is to be withheld by the Private limited company at the time of payment.;

Provided upon request only

c. Capital gain tax is paid on gains made on transfer of capital assets. The capital gain tax may be

short term or long term depending upon the period of holding capital asset.

d. Indirect taxes levied like Goods and Service Tax (“GST”), Excise Duty, Customs Duty/Octroi or any

applicable taxes based on the business of the entity.

Investments into India are often structured through holding companies in various jurisdictions for number

of strategic and tax reasons. For instance, Investors from the United States of America (“USA”) investing

directly into India may face difﬁculties in claiming credit of Indian capital gains tax on securities against

tax applicable in the USA taxes, due to the conﬂict in source rules between the USA and India. In such a

case, the risk of double taxation may be avoided by invest¬ing through an intermediary holding company.

Hence, anyone interested in investing in India should consider various tax treaties and regulations

amongst the country of origin and India, if any.

V. Goods and Services Tax Act, 2017 (GST)

The GST regime is comprised of three major pillars: the Central Goods and Services Tax Act, 2017

(“CGST Act”) which provides for the taxing powers of the Central Government, individual State / Union

Territory Goods and Services Tax Acts (“SGST Act” and “UTGST Act” respectively) which provide for

the taxing powers of each State / Union Territory, and the Integrated Goods and Services Tax Act, 2017

(“IGST Act”), which grants exclusive rights to the Centre to tax inter-state commerce.

VI. Sector speciﬁc legislations

Depending upon the business activity of the entity, various sector speciﬁc laws may become applicable.

Accordingly, the entity will be required to obtain necessary local and business registrations from the

sector speciﬁc regulator in addition to the compliance with the above-mentioned laws. Example: Foreign

Trade Policy read with the hand-book of procedures if the company is into exports and/or imports of

goods/services.

VII. Central and State speciﬁc labor and other related laws

Employment laws in India do not stem from any single legislation. There are several national and state

level laws governing subjects ranging from conditions of employment to social security, health, safety,

welfare, trade unions, industrial and labour disputes, etc.

Separately, in the bid to promote ease of doing business in India, reducing red-tapism of labour

inspectors and improving working conditions of workers and ease of compliance for employers through

use of technology, the Indian government has codiﬁed 29 national labour statutes into four labour codes:

i. The Code on Wages, 2019 (“Wages Code”)

ii. The Industrial Relations Code, 2020 (“IR Code”)

iii. The Code on Social Security, 2020 (“SS Code”)

iv. The Occuptional Safety, Health and Working Conditions Code, 2020 (“OSH Code”).

These four labour codes have been enacted, although a separate notiﬁcation is awaited on their effective

date.

Incorporation of Company/LLP in India

FAQs

3. How to Incorporate a Company?

I. Introduction — Private limited company/Public limited

company

A. What is a private limited company?

Private limited company is an entity, in which the shares are closely held by group of persons or by group

entities. Private limited company requires minimum of 2 (two) members and 2 (two) directors

, one of

whom should be a resident director . It restricts/prohibits 3 (three) key aspects in its articles and they are:

a. Restriction on number of members to 200 (two hundred) (excluding the present and former

employees of the company who hold shares);

b. Restriction on transfer of shares; and

c. Prohibition on offering securities to public.

B. Does private limited company enjoy any privileges or exemptions

from compliances of various provisions of the CA 2013?

Yes, a private limited company, enjoys certain privileges and exemptions when compared to a public

limited company with regard to compliances of certain provisions of the CA 2013. Some of the privileges

enjoyed by a private limited company are:

a. Certain exemptions are granted with respect to borrowing monies from members up to aggregate

limit of paid-up share capital & free-reserves

b. The articles of association of the private limited company may override certain provisions of CA

2013 with respect to conducting shareholders meeting

c. Directors can vote on a contract in which they are interested upon disclosing their interest

d. It is exempted from ﬁling of certain board resolutions with RoC

e. Certain provision related to remuneration of managing director and whole time-director and the

terms and conditions of appointment are not applicable to private limited companies

f. The transactions entered with Holding, Subsidiary, Associate Company of a private limited company

does not fall within the purview of the related party transactions

g. Private limited company can grant loans/guarantee/security to a director and person in whom he is

interested subject to the fulﬁlment of the certain conditions

2. Refer Sec 149(3) of the Companies Act which mandates the requirement of at least one resident director

3. Refer Sec 73(2)(a) to (e) read with https://www.mca.gov.in/Ministry/pdf/Exemptions_to_private_companies_05062015.pdf

4. Refer Sec 101 to 107 & 109 read with https://www.mca.gov.in/Ministry/pdf/Exemptions_to_private_companies_05062015.pdf

5. Refer Sec 179 read with rule 8 of Companies (Meeting of Board & its power) Rules, 2014 and https://www.mca.gov.in/Ministry/pdf/

Exemptions_to_private_companies_05062015.pdf

6. Refer Sec 196 and https://www.mca.gov.in/Ministry/pdf/Exemptions_to_private_companies_05062015.pdf

7. Refer Sec 2(76) and 188 of the Companies Act and https://www.mca.gov.in/Ministry/pdf/Exemptions_to_private_

companies_05062015.pdf

8. Refer Sec 188 of the Companies Act and https://www.mca.gov.in/Ministry/pdf/Exemptions_to_private_companies_05062015.pdf

Provided upon request only

h. The restrictions on the powers of the board with respect to borrowings exceeding paid up capital &

free reserves and the sell/lease/dispose off undertaking does not apply to private limited compa-

nies and the same can be approved only by way of the board’s approval

i. For rights issue, certain provisions of the section which deals with the time limits has been relaxed.

Thus, reducing the overall time to complete the rights issue process.

j. The candidature is not required for the appointment of director in a general meeting.

C. What is Public Limited Company?

A public limited company is a company, which is not a private limited company. Public limited company

requires minimum 7 (seven) members and 3 (three) directors. Further, its securities are freely transfer-

able subject to certain contractual restrictions between the members, if any. A public limited company

can issue and allot shares to any number of persons. However, if the offering exceeds certain number of

persons at a time, then it should offer it by way of public offering.

D. What are the requirements for incorporation of private limited

company?

a. Identify the initial subscribers (minimum two) to the proposed entity;

Note: Press Note 3 under the Exchange Control Regulations in India (PN3): As per PN3 dated April 17, 2020,

the FDI (Foreign Direct Investment) policy in India has been amended to restrict any FDI being made from

Bangladesh, China (including Hongkong/Macao/Taiwan), Pakistan, Nepal, Myanmar, Bhutan and Afghani-

stan (“Neighboring Countries”) or where the beneﬁcial owner of an investment into India is situated in or is

a citizen of any Neighboring Countries (“Neighboring Country Investments”). If proposed Private limited

company is likely to receive FDI from any such Neighboring Country Investments at the time of incorporation,

it shall require a prior approval of the Indian Government regardless of the sector/activities the investment

is being proposed. Hence, from the perspective of initial shareholding structure of a Private limited company

proposed to be set up, please conﬁrm whether any of the proposed shareholders of Private limited company

trigger any of the above directly or indirectly as it would need a prior approval of the Indian Government.

b. Identify individuals who give consent and act as ﬁrst directors of the company (minimum two);

c. Identify one director who should be a resident of India;

d. Obtain Digital Signature Certiﬁcate (“DSC”) for proposed directors of the company;

e. Obtain DSC for identiﬁed subscribers of the company (to be obtained wherever the subscribers are

Indian residents.)

f. Conduct name and trademark search for the proposed names and ensure the proposed names are

not identical or undesirable with existing names available for incorporation#. Post availability ﬁnal-

ize two 2 names for the proposed Indian company;

g. Provide the objects and the proposed business actions;

h. Finalize the Authorized Share Capital (“ASC”) and the Paid-up Share Capital (“PSC”) requirement of

the company;

9. Refer Sec 180 of the Companies Act and https://www.mca.gov.in/Ministry/pdf/Exemptions_to_private_companies_05062015.pdf

10. Refer Sec 62(1)(a) &62(2) of the Companies Act and https://www.mca.gov.in/Ministry/pdf/Exemptions_to_private_compa-

nies_05062015.pdf

11. Refer Sec 160 of the Companies Act and https://www.mca.gov.in/Ministry/pdf/Exemptions_to_private_companies_05062015.pdf

Incorporation of Company/LLP in India

FAQs

i. Identify the place of the registered ofﬁce of the company. (Please note that the registered ofﬁce of

the company should be a physical ofﬁce space where the employees shall be stationed for carrying

out the business operations. There is no concept of virtual ofﬁce with post box facility in India);

j. Finalize Memorandum and Articles of association (By-laws), along with other necessary documents

and pay stamp duty on all the documents as may be required;

k. Create a Director Business User Login ID on MCA V3 portal and Associating the DSC of the direc-

tors from the Individual login before ﬁling incorporation application Web form SPICE+;

l. Filing of integrated web form SPICE+ for reservation of name (PART A) and incorporation of company

(PART B) along with applicable fee, which may either be approved or rejected subject to two re-sub-

mission opportunity as the case may be by the Registrar, Central Registration Centre (“CRC”).

m. Once the form is approved, following additional facility / registrations will be existing in the name of

Company which shall be applied with incorporation application under PART B –

§ Director Identiﬁcation Number (“DIN”) for applicant directors (subject to maximum of three);

§ Permanent Account Number (“PAN”);

§ Tax Deduction Account Number (“TAN”);

§ Goods and service tax (“GST”) (if required) (Optional);

§ Employees Provident Fund Organization Registration (“EPFO”) (Mandatory);

§ Employee State Insurance Corporation Registration (“ESIC”) (Mandatory);

§ Profession Tax Registrations (Mandatory for the State of Maharashtra, Karnataka and West Bengal);

§ Shops and Establishment Registration (Optional) (Currently available for the State of Delhi only);

and

§ Opening of bank account of the company.

n. Identify the bank with which the company intends to open its bank account

Note - Key features of SPICE+ are as below:

§

The proposed entity under incorporation may submit Part A for reserving a name ﬁrst and thereafter

submit Part B for incorporation & other services or ﬁle Part A and B together at one go for incorporat-

ing a new company and availing the bouquet of services as above.

§

Registration for EPFO and ESIC shall be mandatory for all new companies incorporated and no EPFO &

ESIC registration numbers shall be separately issued by the respective agencies.

§

Registration for Profession Tax shall also be mandatory for all new companies incorporated in the

State of Maharashtra, Karnataka and West Bengal.

§

Registration for Shops and Establishments is optional and can be availed only in the State of Delhi.

§

All new companies incorporated through SPICe+ would also be mandatorily required to apply for

opening the company’s Bank account through the said web form.

Provided upon request only

E. What are the charter documents with respect to a private limited

company?

Memorandum of Association (MoA) and Articles of Association (AoA) are the two charter documents of

private limited company

F. What is MoA?

MoA contains the objectives to be pursued by the company to operate and is considered as the supreme

document of the company which is submitted to the RoC at the time of incorporation of the company. The

purpose of this is to enable shareholders, creditors and others who deal with company to know its per-

mitted range of activities and the business that they intend to carry out.

G. What is AoA?

AoA is a document containing all the rules and regulations deﬁning the framework that governs a

company. It deﬁnes the responsibilities of the directors, and the means by which the shareholders exert

control over the Board of Directors. For a private limited company, its AoA must have following three

restrictions which are as follows.

a. Restricts number of members to 200 (two hundred) (excluding the present and former employees

of the company who holds shares);

b. Restricts transfer of shares; and

c. Prohibits offering securities to public.

H. Is there any requirement of minimum ASC and PSC for the

incorporation of private limited company in India?

Currently, there is no requirement of having minimum ASC and PSC for incorporation of Private Limited

Company in India. However, while determining the ASC and PSC, it is suggested to keep in mind the

immediate working capital requirements which the company would need for conducting its initial oper-

ations and before it starts generating the revenue in India and the requirement of minimum net owned

fund for certain categories of companies as raising of capital by way of issuance of shares is subject to

valuation (in case of entity with FDI) and allied compliances.

ASC is the maximum share capital allowed to be issued by the company. ASC can be further enhanced

after incorporation of the company, considering future fund requirements.

PSC is the amount which the shareholders will invest in the capital of the company.

I. What are the requirements for incorporation of public limited

company?

Except that there is a requirement of minimum 7 (seven) shareholders and minimum 3 (three) directors,

one of whom should be a resident director, all the requirements for the incorporation of a private limited

company are also applicable to a public limited company.

Incorporation of Company/LLP in India

FAQs

J. What are the charter documents with respect to a public limited

company?

In general, the charter documents of public limited company are same as of private limited company.

Except that the AoA of a public limited company shall not contain the restriction applicable to a private

limited company. Charter documents which are explained in 6 and 7 above are the charter documents

for the public companies.

II. Directors

A. Can a person resident outside India and citizen of other country

become a director of an Indian entity?

Yes, except for citizens of certain countries, any person, being a citizen of any other country can become

a director subject to obtaining DIN as mentioned below. However, where in cases the person seeking

appointment is a national of a country which shares a land border with India, necessary security clear-

ance from Ministry of Home Affairs, Government of India would be a pre-requisite.

B. Can a body corporate or company be a director of an Indian entity?

No. Except a natural person, CA 2013 does not allow any body corporate or a company to be a director.

C. What is a DSC?

Digital Signature is a digital code (in form of USB token) created for afﬁxing it on the digital documents

electronically. The Information Technology Act, 2000 in India has made provisions for use of digital

signatures on the documents submitted in electronic form to ensure security and authenticity of the

documents ﬁled electronically. DSC is a hardware in the form of USB token and is password protected

which can be changed by the DSC holder at any point of time. Password of DSC is accessible to only

those who have applied for DSC.

D. What is the use of DSC?

DSC is used for ﬁling documents and e-forms with the Ministry of Corporate Affairs (“MCA”) under the

CA 2013, tax returns and e-forms under different regulations as applicable to the entity. The ﬁlings with

many other Government authorities may also be carried out by electronic ﬁlings using DSC.

E. Who issues DSC in India?

The ofﬁce of Controller of Certifying Authorities (“CCA”), issues certiﬁcate to the certiﬁcation agencies

which are the trusted entities and are responsible to issue DSC to the end user. Upon submission of

application and identity and address proofs, it takes around 2-3 days for obtaining the DSC.

F. What is the process to obtain DSC?

§

Apply to a registered authority in India;

§

Submit following documents & information –

§

In case of Indian Nationals:

Provided upon request only

§ Proof of Identity - PAN is Mandatory for Indian National,

§ Proof of Identity- PAN is Mandatory for Indian National,

§ Proof of Residence - driving license, passport (if it has address) or Aadhaar or utility bill (not

older than 2 (two) months) like gas or electricity or bank statement;

§ Passport size color photograph (in JPEG format);

§ In case of Indian national, all the documents are required to be self-certiﬁed by the applicant.

§ Mobile number and email ID of an Individual for whom DSC needs to be obtained.

§

In case of Foreign Nationals:

§ Proof of Identity – Self-attested copy of Passport, Self-attested copy of VISA (If the proposed

individual is out of native country) and Self-attested copy of Resident Permit certiﬁcate (If

applicant is in India)

§ Proof of Residence - Attested copy of any other Government issued Address Proof, or driving

license or utility bill (not older than 2 (two) months) like gas or electricity or bank statement

§ Mobile Number and email ID of an Individual for whom DSC needs to be obtained.

§

Submit the scan copies of above documents to the authorities via email and Authority veriﬁes the

information and process the same.

§

Upon successful process, the applicant should do tele-veriﬁcation / email veriﬁcation and video-

veriﬁcation.

§

Only upon completion of the above veriﬁcations, the authority issues DSC to the end user

The above process is indicative in nature and requirement may change based on the nationality/

citizenship of the applicant and subject to change in process as may be amended from time to time

under applicable laws.

G. What is DIN?

DIN is a unique identiﬁcation number allotted to an individual, who is proposed to be appointed as

director of a company and it is compulsory for every individual intending to be a director to obtain this

number. Upon submission of necessary documents in e-form DIR 3, DIN would be allotted instantly

subject to submission of sufﬁcient and legible documents.

H. Can I use same DIN for being appointed as Designated Partner in LLP?

Yes, DIN can be used for being appointed as Designated Partner in any LLP. One individual can have only

one DIN and it is valid for lifetime.

I. How can I acquire DIN and what is its process?

§

Obtain DIN for a director in case of incorporation of new company

Any person proposed to become a ﬁrst director in a new company shall have to make an application

through e-form No. INC-32 (SPICe +). An application for allotment of DIN up to three (3) Directors,

shall be ﬁled in e-form No. INC-32 (SPICe +), with RoC, in case of proposed directors not having

approved DIN

12. Refer: Rule 38 of The Companies (Incorporation) Amendment Rules, 2018

Incorporation of Company/LLP in India

FAQs

§

Obtain DIN for director in an existing Company

Any person intending to become a director in an existing company and who does not have a valid DIN

shall make an application in e-form DIR-3 along with copies of identity and address proof , copy of

Board resolution proposing the appointment of such person as a director from the company in which

such person is intending to become a director and copy of security clearance certiﬁcate from Ministry

of Home affairs (if applicable)

J. What are the documents required for obtaining DIN?

DIN can be obtained by ﬁling the supporting documents as follows:

i. In case of Indian Nationals

a. ID Proof of the Applicant: PAN.

b. Address Proof of the Applicant: Any one of the following documents would sufﬁce as proof:

i. Utility Bill in the name of the applicant

ii. Driver’s License of the applicant

iii. Bank Statement in the name of the applicant.

ii. In case of Indian Nationals (at the time of Incorporation)

c. ID Proof of the Applicant: PAN

d. d. Address Proof of the Applicant: Any one of the following documents would sufﬁce as proof:

i. i. Electricity Bill in the name of the applicant (not older than two months)

ii. Telephone bill in the name of the applicant. (not older than two months).

iii. Bank Statement in the name of the applicant. (not older than two months)

All the above documents are required to be self-attested in case of an Indian resident.

iii. In case of Foreign Nationals

In addition to the documents mentioned above for Indian Nationals, following documents will be required

in case of Foreign National:

a. Certiﬁed copy of passport as an identity proof.

b. All supporting documents including photograph should be certiﬁed by the Indian Embassy or a

notary in the home country of the applicant. If a foreign director has a valid multiple-entry Indian

visa or Person of Indian Origin card or Overseas Citizen of India card, then the attestation could

also be done by Public Notary/Gazetted Ofﬁcer in India or practicing CA/CS /CWA.

In case any documents are not in English language then the same needs to be translated in English from

certiﬁed translator and such translated documents are also required to be notarized and apostilled /

legalized from home country.

Provided upon request only

K. Is there any requirement of veriﬁcation of Know Your Customer

(“KYC”) of a director

Yes, as per the amended rules, every individual who has been allotted a DIN as on 31st March of a

ﬁnancial year shall submit e-form DIR 3 KYC to the Central Government on or before 30th September of

immediate next ﬁnancial year. Hence, each individual possessing DIN needs to update his KYC details

annually within prescribed timelines for retaining his DIN in ‘Active’ status.

L. What are the supporting documents to ﬁle e-form DIR-3 KYC

i. In case of Indian Nationals

a. ID Proof of the Applicant: any one of, Passport, PAN, Driving license, Election (voter identity) card,

Ration card or Aadhaar Card. (If the applicant holds Aadhaar and Passport both, in that case both

the documents are mandatory);

b. Address Proof of the Applicant: Any one of the following documents would sufﬁce as proof:

i. Electricity or Telephone Bill in the name of the applicant

ii. Driver’s License of the applicant

iii. Bank Statement in the name of the applicant.

All the above documents are required to be self-attested in case of an Indian resident.

ii. In case of Foreign Nationals

In addition to the documents mentioned above for Indian Nationals, for Foreign National certiﬁed copy of

passport is required.

All supporting documents including photograph should be certiﬁed by the Indian Embassy or a notary in

the home country of the applicant. If a foreign director has a valid multiple-entry Indian visa or Person

of Indian Origin card or Overseas Citizen of India card, then the attestation could also be done by Public

Notary/Gazetted Ofﬁcer in India or practicing CA/CS / CWA.

In case any documents are not in English language then the same needs to be translated in English from

certiﬁed translator and such translated documents are also required to be notarized and apostilled /

legalized from home country.

M. What if the director fails to ﬁle his KYC?

In case the individual fails to ﬁle KYC with the MCA within prescribed timelines, then the DIN of the said

individual shall be de-activated. The de-activated DIN shall be re-activated only after e-form DIR-3-KYC is

ﬁled with ROC along with the fee as prescribed under law.

N. Does a director need to obtain DIN for each company where he may

be appointed as a director?

No. DIN is a unique number allotted to each individual who has applied for it. A person can be a director

/ designated partner in any number of companies or LLPs (subject to maximum number permissible in

CA 2013 or LLP Act) with same DIN. The CA 2013 does not allow a person to have more than one DIN

and if any person obtains more than one DIN, it is a punishable offence under the CA 2013 and shall

need to surrender his DIN.

Incorporation of Company/LLP in India

FAQs

O. What is the minimum and maximum number of directors required for

forming a private limited company?

There should be at least 3 (three) directors and maximum up to 15 (ﬁfteen) in a public limited company.

To appoint more than 15 (ﬁfteen) directors, approval of shareholders would be necessary.

P. What is the minimum and maximum number of directors required

for forming a Public Limited Company?

Yes, there should be at least 1 (one) director who stays in India for a period of not less than 182 (one

hundred and eighty-two) days during each ﬁnancial year. In case of a newly incorporated company, the

requirement shall apply proportionately at the end of the ﬁnancial year in which it is incorporated.

Q. Is there a requirement of having resident director for forming a

Private Limited Company and Public Limited Company?

There should be at least 1 (one) director who stays in India for a period of not less than 182 (One

hundred and eighty two) days during each ﬁnancial year. In case of a newly incorporated company, the

requirement shall apply proportionately at the end of the ﬁnancial year in which it is incorporated.

R. Are there any disqualiﬁcations for appointment of a director?

person is not

eligible for appointment as a director if

a. he is of unsound mind;

b. he is an undischarged insolvent;

c. he has applied to be adjudicated as an insolvent;

d. he has been convicted by a court of any offence involving moral turpitude and sentenced in respect

thereof to imprisonment for not less than 6 (six) months and a period of 5 (ﬁve) years has not

elapsed from the date of expiry of the sentence;

e. an order passed by the court or tribunal for disqualifying him for appointment as a director and the

same is in force till date;

f. he has not paid any calls in respect of any shares of the company held by him, either individually or

jointly, and 6 (six) months have elapsed from the last day ﬁxed for the payment of the call;

g. he has been convicted of the offence dealing with related party transactions

at any time during

the last preceding 5 (ﬁve) years;

h. if he does not hold valid DIN;

i. he has not complied with the provisions of number of directorships.

13. Refer: Section 149(3) of the Companies (Amendment) Act, 2017

14. Refer Sec 164 of the Companies Act, 2013

15. Refer section 188 of the Companies Act, 2013

Provided upon request only

In furtherance to the above, no person who is or has been already a director of a company shall be

eligible for appointment if-

a. such company in which he is a director has not ﬁled ﬁnancial statements or annual returns for any

continuous period of 3 (three) ﬁnancial years;

b. has failed to repay the deposits accepted by it or pay interest thereon or to redeem any debentures

on the due date or pay interest due thereon or pay any dividend declared and such failure to pay or

redeem continues for 1 (one) year or more.

III. Shareholders

A. What is the minimum and maximum number of shareholders

required for forming a private limited company?

There should be at least 2 (two) shareholders

with a maximum of 200 (two hundred) shareholders

(excluding the present and former employees of the company who hold shares) for forming a private lim-

ited company.

B. How can one become a shareholder of private limited company /

public limited company?

A person can become shareholder of a private limited company / public limited company by –

i. Subscribing to memorandum of association;

ii. iBy acquiring shares subsequently either, by direct purchase from company or transfer from existing

shareholders; and

iii. By holding shares and whose name is entered as a beneﬁcial owner in the records of a depository.

C. Can one own 100% shareholding of private limited company/public

limited company?

Yes, a body corporate can hold 100% shareholding of a company. This concept is popularly known as

Wholly owned subsidiary (“WoS”). However, for a Private Limited Company there should be at least 2

(two) (and for public limited company, at least 7 (seven) shareholders). Therefore, one person can hold

all the shares in his name except nominal amount of share(s). The nominal share(s) can be held by a

nominee shareholder. The holding of such shares as a nominee i.e. a registered holder requires proper

disclosure at the time of formation of a company and required to complete certain ﬁlings with the RoC,

post the incorporation of the company and the beneﬁcial interest in such nominal share(s) shall be

retained with the parent/majority shareholder.

16. Refer section 3(1)(b) of the Companies Act, 2013

Incorporation of Company/LLP in India

FAQs

D. What are the minimum and maximum shareholders for Public

Limited Company?

There should be at least 7 (seven) shareholders

and there is no limit for a maximum number of a

shareholder(s) for a Public Limited Company.

E What are the different classes of shares?

There are two kinds of shares as follows:

i. Equity shares; and

ii. Preference shares

F. Can the Company be incorporated with only preference share capital?

No, the Company cannot be incorporated with only preference share capital, as preference shares are

redeemable in nature which may tantamount to diminution of the share capital of the company in the

event of redemption of this share capital. Also, the feature of the Company being an artiﬁcial person and

having perpetual succession; equity share capital should always form part of the share capital of the

Company.

G. What is ASC and PSC?

i. ASC

: It means such capital as is authorized by the memorandum of a company to be the maxi-

mum amount of share capital of the company. The payment of the registration fees and the stamp

duty fees on the incorporation of the company depends upon the amount of the authorized share

capital.

ii. PSC

: It means such aggregate amount of money credited as paid-up as is equivalent to the

amount received as paid-up in respect of shares issued and includes any amount credited as

paid-up in respect of shares of the company, but does not include any other amount received in

respect of such shares, by whatever name called.

IV. Incorporation Process

Name Reservation and Incorporation Application

A. How to incorporate a company?

Two-step process is followed for incorporating a company in India -

a. File an application for reservation of name; and

b. Once the name is reserved, ﬁle a separate application under single form for obtaining DIN and ﬁling

incorporation documents.

1 7. Refer section 3(1)(b) of the Companies Act, 2013

18. Ref section 2(8) of the Companies Act, 2013

19. Refer section 2(64) of the Companies Act, 2013

Provided upon request only

B. How to apply for name for proposed Private Limited Company with

the Central Registration Centre (“CRC”)?

Name(s) of a company can be reserved through Web Form Part A of SPICe+. In case the applicant

wants to apply name, incorporation and other integrated services together, he can do so together by ﬁling

necessary information in Part A and Part B.

Through this e-form the applicant can propose two names for private limited company and upon approval

of the name from the RoC, the incorporation application is required to be applied for within 20 (twenty)

days from the date of approval of the name reservation application. The approval of name is sole discre-

tion of the CRC.

C. What are the documents required to be attached while reserving

name through PART A of SPICE+ WEB form?

As such no documents are required to ﬁle name reservation application. However, it is mandatory to

attach relevant documents and No Objection Certiﬁcates (“NOCs”) only when a name requires the

approval of a sectoral regulator or NoC, etc. in terms of Companies (Incorporation) Rules, 2014.

In case the name of the proposed company in similar to name of the parent company, then following doc-

uments are required.

a. In case of body corporates, certiﬁed true copy of board resolution approved by the body corporate

shareholders along with the charter documents of such body corporates;

b. NoC from the foreign body corporate, if the name is similar to that of the parent company;

c. If the proposed name is linked to a registered trademark, NoC from the trademark owner;

d. List of main objects.

Note: In case all the aforesaid documents are being executed outside India including identity and

address proofs of foreign nationals, the same needs to be notarized, apostilled/ consularized, in the

home country, as may be applicable.

Further, basis the main objects listed in the name application, one business code list has to be selected

as provided in the help kit.

D. How do I apply for a name if the proposed name includes the name of

a trademark?

In case the proposed name includes a reference of a registered trademark name, the consent of the

owner or applicant for registration of the trade mark along with KYC details (bearing signatures) of Trade-

mark owner should be attached the application in Part A of SPICE+. In case the TM owner is a body cor-

porate, the NOC should be provided in the form of a Board Resolution along with KYC documents.

E. What next after name reservation?

Once, the name has been approved, execute various Incorporation documents like MoA, AoA etc., and

ﬁle along with the e-form titled “SPICe+” for incorporating a company.

Incorporation of Company/LLP in India

FAQs

F. What is SPICe? What are its salient features?

SPICe+ stands for “Simpliﬁed Proforma for Incorporating Company Electronically+”. This is another

initiative by the MCA with speciﬁc objective of providing speedy incorporation related services within

stipulated time frames, which are in line with international best practices

SPICe+ is an integrated web form offering 10 (ten) services by 3 (three) Central Government Ministries &

Departments. (Ministry of Corporate Affairs, Ministry of Labor & Department of Revenue in the Ministry

of Finance) and One State Government (Maharashtra), thereby saving as many procedures, time and

cost for starting a business in India. SPICe+ is part of various initiatives and commitment of GoI towards

ease of doing business.

SPICe+ will be the sole, simpliﬁed and versatile form available for incorporation of companies in India. It

is a single application for-

a. Application for allotment of DIN for ﬁrst directors (not exceeding 3);

b. Incorporation application;

c. Obtaining PAN and TAN for the proposed entity;

d. Obtaining registration for EPFO and ESIC; Registration of Professional Tax (for the State of

Maharashtra);

e. Opening of bank account; and

f. Allotment of GSTIN (if so applied for).

If the applicant provides the details pertaining to its registered ofﬁce in the incorporation form, then it is

not required to ﬁle e-Form INC-22 separately for intimating the RoC about its registered ofﬁce.

G. Whether it is compulsory for the company to have a physical

registered ofﬁce?

Yes, the registered ofﬁce of the company should be a physical ofﬁce space where the employees shall

be stationed for carrying out the business operations and is available for physical inspection, veriﬁcation

and for obtaining registrations under the laws applicable to the company. There is no concept of virtual

ofﬁce in India. In the event if the authorities have reasonable cause to believe that the company is not

carrying on any business or operations, the authorities may cause a physical veriﬁcation of the regis-

tered ofﬁce of the company in such manner as may be prescribed. Further, pursuant to the amended

rules, if any default is found to be made in complying with the requirements as mentioned above RoC

may initiate action for the removal of the name of the company from the register of companies and has

power to strike-off a company if the address of registered ofﬁce address is found to be bogus or incom-

plete/improper address.

H. What are the documents required for ﬁling incorporation application

(e-form SPICe+) with the RoC?

Following documents are to be ﬁled on the MCA online portal along with the following documents:

a. Copy of MoA and AoA;

b. Resolution passed by promoter body corporates approving incorporation of subsidiary company;

Provided upon request only

c. In case the proposed name is similar to any existing/parent company, NoC in form of resolution

passed by such existing/parent company;

d. Declarations by ﬁrst directors & subscribers;

e. Proof of identity and residential address of the subscribers;

f. Disclosure of interest in other entities by the ﬁrst directors in prescribed form;

g. Declaration by representative of corporate promoters;

h. Undertaking on non-holding of PAN

i. If the subscriber does not have a DIN, identity and address proof of subscribers including those of

the witness;

j. Where the directors [including subscriber cum director, not exceeding 3 (three) in no’s] do not have

a DIN, identity and address proof of such director [including VISA copy (if any)];

k. Proof of ofﬁce address and utility bill of the registered ofﬁce of the company (not older than 2

months), including NoC from owner of the premises as required. Also in case of leased premises

or the rented premises the authorization from the owner and authorized occupant of the premises

along with proof of ownership or occupancy authorization is required to be submitted;

l. If the proposed name requires approval of the central government or is based on the registered

trademark the copy of approval received from the central government or from the owner of the

trademark (including certiﬁcate of trademark) respectively; and

m. Copy of any speciﬁc/in-principle approval obtained from any sectoral regulator.

I. Does the “ease of doing business in India” also allow to apply for

obtaining tax registration number (PAN, TAN and GST) at the time of

ﬁling for incorporation of a company?

Yes, as a part of scheme of ease of doing business in India, the company can simultaneously obtain

registration of PAN, TAN and GST (if so applied for) at the time of the ﬁling of the application for

incorporation of the company under e-form SPICe+. This reduces the time limit for starting business post

incorporation of the company by 15-20 days.

J. What is the sequence of uploading linked forms to SPICe+?

SPICe+----> eMOA [if applicable] ----> eAOA [if applicable] ----> URC-1[if applicable] ----> AGILE-PRO

[mandatory in all the cases] ----> INC-9 [if applicable]

K. How is approval process undertaken for incorporation?

Once e-form SPICe is processed and found complete and in order, Registrar at Central Registration

Center will register the incorporation application and issue following approvals:

a. Approve and allot the proposed name of the company;

b. Allot DIN for the proposed ﬁrst directors (not exceeding 3) not having DIN;

20. Every proposed foreign director who does not hold PAN in India at the time of making incorporation application shall submit a written

undertaking stating that he is not required to hold PAN under Income Tax law and that, he will apply for and update PAN details as soon

as it becomes applicable to him.

Incorporation of Company/LLP in India

FAQs

c. Corporate Identiﬁcation Number (“CIN”) will be generated and a Certiﬁcate of Incorporation (“COI”)

in form INC-11 is issued electronically which will also include the PAN and TAN of the company

d. Takes on record, appointment of ﬁrst directors;

e. Takes on record, registered ofﬁce address of the company

f. PAN & TAN is issued with COI. It also communicated to the applicant electronically.

g. GSTIN (if so applied for) is generated on approval;

h. ESIC, EPFO, Profession tax registration are generated on approval; and

i. Bank account as selected in the form will be opened in the name of company with the respective bank.

Once COI is issued by the RoC, it serves as an evidence of incorporation of the company.

L. What is the time frame for incorporating a company under SPICe+?

Excluding the time required in the documentation, ideally, it takes 3-4 working days’ to complete the

incorporation process and obtain CoI from the RoC. This also includes obtaining tax registration, ESIC,

EPFO, GSTIN (if applied), PAN and TAN, thereby reducing the time limit by 15-20 days’ post obtaining CoI.

M. Whether the CoI issued by the RoC will have any validity period?

The registration is permanent and is valid until the time, the company winds up its affairs on its own or is

being struck-off by the RoC.

N. Are the documents ﬁled on the MCA Portal http://mca.gov.in/ for

incorporation of company or LLP be available on the public domain?

While the incorporation application of company or LLP is not available in the public domain, the certain

basic details in form of Master data including details of directors details, registered ofﬁce address email

id for correspondence etc., shall be made available on the public domain of MCA.

V. Post-incorporation Compliances

A. What are the immediate post-incorporation compliances applicable

for a Private limited company?

The immediate post-incorporation compliances are as follows:

a. To hold ﬁrst Board meeting for initial corporate actions as required under the CA, 2013;

b. On receipt of FDI to undertake FEMA reporting actions and compliances with the RBI;

c. Issue duly stamped and executed share certiﬁcates to the initial subscribers within 60 (sixty) days

from the date of incorporation;

d. Appointment of Auditor within 30 (thirty) days of Incorporation.

e. Director to ﬁle a declaration of commencement of Business within a period of 180 (one hundred

and eighty) days from the date of incorporation of the company in e-form INC 20A with a proof

that every subscriber to the memorandum has paid the value of the shares as agreed for and the

photograph of registered ofﬁce address of the Company. (i.e external and internal premises of

registered ofﬁce of the Company)

Provided upon request only

4. How to Incorporate LLP

I. Introduction

A. What is an LLP?

LLP is deﬁned as partnership formed and registered under the LLP Act. It is an alternative corporate

business form that gives the beneﬁts of limited liability of a company and the ﬂexibility of a partnership.

LLP can continue its existence irrespective of changes in the partners. It can enter contracts and hold

property in its own name. LLP is a separate legal entity. The liability of the LLP shall be met out of the

property of the LLP but liability of the partners is limited to their agreed contribution in the LLP.

No partner is liable on account of the independent or un-authorized actions of other partners, thus

individual partners are shielded from joint liability created by another partner’s wrongful business

decisions or misconduct.

B. What are the applicable Acts / provisions that govern an LLP?

LLP is primarily governed by the LLP Act, 2008 and the rules framed thereunder, the FEMA, the Income

Tax Act and other legislation as may be applicable based on the business of the LLP.

II. Partners & Designated Partner (“DP”)

A. Who can be Partners?

Any individual or a body corporate can be a partner in a LLP

B. Who is a DP?

Designated Partner (“DP”) mean any partner designated as such pursuant to Section 7 of the LLP Act.

DP is a term used in the LLP who have been designated as such for doing the duties and discharging the

liabilities of such partners under the LLP Act.

The DP’s are responsible for the management and the execution of all the acts and things required to

be carried out by the LLP including compliance of the provisions such as ﬁling of documents/returns/

statements as required by the LLP Act.

C. What are the requirements to become a Partner or DP in an LLP?

A person, who is proposed to be appointed as DP, needs to obtain a valid DSC and DIN. A partner who is

not a DP need not have any identiﬁcation number.

Incorporation of Company/LLP in India

FAQs

D. What are the minimum and maximum number of Partners and DP in

an LLP?

There must be minimum of 2 (two) partners for formation of an LLP. There is no limit to the maximum

number of partners, however there must be 2 (two) DP’s.

E. What are the requirements to become a Partner or DP in an LLP?

§

Any individual or body corporate may be a partner in a LLP. However, an individual shall not be capa-

ble of becoming a partner of a LLP, if

a. has been found to be of unsound mind by a Court of competent jurisdiction and the ﬁnding is in

force;

b. is an undischarged insolvent; or

c. he has applied to be adjudicated as an insolvent and his application is pending.

§

Only an individual can be appointed as a DP and at least one of the DP shall be a resident of India. In

case of a LLP in which all the partners are bodies corporate or in which one or more partners are indi-

viduals and bodies corporate, at least two individuals who are partners of such LLP or nominees of

such bodies corporate shall act as DP’s. A person, who is proposed to be appointed as DP, needs to

obtain a valid DSC and DIN. A partner who is not a DP need not have any identiﬁcation number.

F. Can existing partnership ﬁrm or a Private limited company be

converted into an LLP?

Yes, an existing partnership ﬁrm or a Private limited company can be converted into an LLP by complying

with the applicable provisions of LLP Act, CA 2013 and any other rules made thereunder and by ﬁling

requisite e-forms with the RoC.

G. What are the ways to make contribution by the Partners?

A partner’s contribution may consist of both tangible and/or intangible property and any other beneﬁt to

the LLP. The monetary value of contribution of each partner is accounted for and disclosed in the books

of accounts of the LLP in the manner as may be prescribed in the rules. However, contribution by foreign

nationals should be in the form of tangible only.

H. What is the nature and extent of liability of partner of an LLP?

Every partner of an LLP, for the purpose of the business of the LLP, is an agent of the LLP but not of the

other partners.

Liability of partners is limited except in case of unauthorized acts, fraud and negligence. But a partner is

not personally liable for the wrongful acts or omission of any other partner. An obligation of LLP whether

arising in contract or otherwise, is solely the obligation of the LLP. The liabilities of LLP are met out of the

property of the LLP.

21. Refer Section 55 and 56 of the LLP Act, 2008

22. Refer Section 32 of the LLP Act, 2008

23. Refer Section 28 of the LLP Act, 2008

Provided upon request only

III. Incorporation

A. What are the steps involved in formation of an LLP?

Procure DSC and DIN: Procure DSC and DIN for the individuals acting as DP’s of LLP. A person, who

already has a DIN, is not required to obtain any new DIN. Existing DIN can be used for DP (However, DIN

should have all latest details such as resident of India, name, address etc.). Any person proposed to

become the DP in a new LLP shall have to make an application through e-form FiLLiP. An application for

allotment of DIN up to two DP’s, shall be ﬁled in e-form FiLLiP with the RoC, in case of proposed DP’s not

having approved DIN.

Creation of Business User Account on MCA V3 portal: Every director/ Designated Partner shall

have their individual Business user account on the MCA V3 poral through which the DSC of the Direc-

tors/Designated partner will be associated in order to ﬁle all the LLP forms including Form FiLLiP. The

Creation of Business User account is mandatory only for the Designated Partners of the LLP

Name reservation: The ﬁrst step in incorporation of an LLP is reservation of name of the proposed LLP.

There are two ways of reserving name of the proposed LLP.

i. File an application under LLP-RUN for ascertaining availability and reservation of the name of an

LLP; and

ii. ii. Name can be proposed in e-form FiLLiP, an application for incorporation of LLP.

Incorporate LLP: After reserving a name under LLP-RUN, applicant should ﬁle e-form FiLLiP for

incorporating a new LLP. E-form FiLLiP contains the details of LLP proposed to be incorporated,

Partners’/ DP’s details and consent of the Partner/ DP’s to act as Partners/ DP’s. On approval of the

form, the RoC will issue the CoI.

LLP Agreement: After incorporation of LLP, the Partners should execute LLP Agreement and a copy of

executed agreement is required to be ﬁled with the RoC in e-form 3 within 30 (thirty) days from the date

of incorporation of LLP.

B. What are the documents required for ﬁling name application (FiLLiP)

with the Registrar?

i. Consent of Partners;

ii. In case of Partners are body corporates, certiﬁed true copy of board resolution passed by such

body corporate Partners;

iii. Proof of address of registered ofﬁce of LLP;

iv. Subscribers’ sheet including consent;

v. Detail of LLP(s) and/ or company(s) in which Partner/ DP is a director/ partner;

vi. Copy of approval obtained from any sectoral regulator/in-principle approval;

vii. Identity and address proof of individuals acting as Partner and/or DP;

viii. List of main objects of an LLP;

24. Refer Section 11 of the LLP Act, 2008

25. Refer Section 16 of the LLP Act, 2008

Incorporation of Company/LLP in India

FAQs

ix. If the name proposed is liked to registered trademark, NoC from the trademark owner;

x. NoC of foreign body corporate for usage of name (In case of foreign entities intending to incorpo-

rate LLPs in India).

Note: All the aforesaid documents executed outside India including identity and address proofs of

foreign nationals should be duly executed and are required to be notarized, apostilled /consularized.

C. What is FiLLiP +? What are its salient features?

FiLLiP+ is the form for Incorporation of LLP and it is sole, simpliﬁed and versatile form available for

incorporation of LLP. It is a single application for-

i. Application for allotment of DIN for ﬁrst designated partners (not exceeding 3);

ii. Incorporation application; and

iii. Obtaining PAN and TAN for the proposed LLP.

D. How many names can be proposed during ﬁling of Name Reservation

Application with the Registrar?

There are two ways of reserving name of the proposed LLP:

i. Two names can be reserved in an application under LLP-RUN;

ii. One name can be proposed in e-form FiLLiP in application for incorporation of LLP.

E. Whether LLP requires a registered ofﬁce?

Yes, an LLP requires a registered ofﬁce and the same is required to be speciﬁed in the incorporation

document of an LLP. The registered ofﬁce of an LLP should be a physical ofﬁce space where the

employees shall be stationed for carrying out the business operations and is available for physical

inspection, veriﬁcation and for obtaining registrations under the laws applicable to an LLP. There is no

concept of virtual ofﬁce in India.

F. What are the key details an LLP Agreement would consists of?

The LLP Agreement should contain following details in addition to other information:

i. Name of LLP and names of Partners and DP’s;

ii. Details of agreed proﬁt and loss sharing ratio of the Partners’ contribution;

iii. Rights & duties of the Partners and DP’s;

iv. Procedures to be followed by the Partners and DP’s in decision making and convening of meetings;

v. Speciﬁc provisions governing day to day management of affairs of LLP;

vi. Terms related to admission and cessation of Partners and DP’s;

vii. Terms related to keeping of books of accounts and audit norms;

26. Refer Section 13 of the LLP Act, 2008

2 7. Refer Section 23(2) of the LLP Act, 2008

Provided upon request only

viii. Terms related to liability of Partners and DP’s and consequences of breach of agreement etc.

An executed copy of the LLP Agreement will be ﬁled with the registrar through ﬁling LLP e-form 3 within

30 (thirty) days from the date of incorporation.

G. What is the time frame within which an LLP can be formed?

Formation of an LLP has two parts. In ﬁrst part, it has to apply for name reservation followed by formal

incorporation of an LLP. Once LLP is incorporated, , it should ﬁle the LLP Agreement within the timelines

as mentioned above.

IV. Applicability of FEMA for LLP

A. Whether non-residents can incorporate LLP?

Yes, the LLP Act allows foreign nationals including foreign companies & LLPs to incorporate an LLP in

India provided at least 1 (one) DP is resident of India. However, the LLP/artners have to comply with all

relevant foreign exchange laws/rules/ regulations and guidelines.

B. Whether FDI is permitted in LLP?

Yes, FDI is permitted in LLP. The LLP with FDI can undertake or operate only in those sectors/ activities

where 100% FDI is allowed under automatic route of FDI scheme.

V. Initial post-incorporation compliances applicable to LLP

A. What are the initial post-incorporation compliances applicable to an

LLP?

The compliances to be undertaken post incorporation of an LLP are –

i. Open Bank account;

ii. Other statutory registrations such as Goods and Service Tax, Shops & Establishments, Professional

Tax, EPF, ESI, GST, etc.;

iii. On receipt of FDI, to undertake reporting actions with the RBI within 30 days from the date of

receipt of funds.

Incorporation of Company/LLP in India

FAQs

5. Conclusion

With the initiatives taken by the GoI towards the “Ease of doing business in India” an entrepreneurial

revolution is being experienced in India. Among other initiatives, MCA has introduced a single WEB

form, which is an integrated application covering securing DIN for director, CoI, getting the mandatory

EPF, ESI, tax registration numbers and opening of Bank Account. Such steps taken by the ministry does

ensure that the time taken to register a new company is signiﬁcantly reduced, which has resulted in

incorporation of the company at a faster pace.

The CA, 2013 has ushered in a new era of corporate democracy making a shift from “government control”

to “self-governance”. With the automated process kicking in, government also intends to further reduce

the number of steps and ensure that an entrepreneur faces minimum hassle while starting a new

company.

While on the other hand since the introduction of LLP Act in 2008, LLPs have been looked upon as

an attractive vehicle for undertaking business in India. An LLP is a form of business entity which

is preferred due to its simple process for formation /unwinding and does not involve too many legal

formalities. Also with the easing out of the FDI norms for the LLPs by the government, which now allows

foreign investment in LLPs under the automatic route (without approval), the LLP structures amongst

multinationals are gaining high acceptance.

With these new reforms being introduced, Indian and foreign entrepreneurs would truly ﬁnd ease in

starting their businesses in India.

Incorporation of Company / LLP in India

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