Procedure involved to Start a Company (Private Limited)

in India
Posted by kumaran on September 6, 2006

This information will be useful for those who are looking in a nutshell the steps involved to
start a Private Limited company in India 

1. First and foremost identify the Directors of the Company. Minimum of two directors need
to present and Maximum of 8 is allowed.
2. All Directors should have DIN (Directors Identification Number). If you do not have one
you can apply DIN online
at www.mca.gov.in. FAQ on DIN http://www.mca.gov.in/MinistryWebsite/dca/faq/faq1.html
Documents required for DIN

A. Identity Proof (Any one of the following)

PAN Card
Driving License
Passport
Voter ID Card
Others (to be specified)
B. Residence Proof (Any one of the following)
Driving License
Passport
Voter ID Card
Telephone Bill
Ration Card
Electricity Bill
Bank Statement
Others (to be specified)

3. Once you have got your DIN then you need to apply for Company name. You need to go
with 5-6 names in the order which you prefer.If the name is not available then they go to the
next one in the order you have provided.

4. You need to apply online for the name availability . You need to Fill in Form 1A. Forms
are avilable at this
location.http://www2.mca.gov.in/MinistryWebsite/dca/downloadeforms/eformTemplates/103
0-Form1A_help.zip

5. Once you have got your name approved you have to apply for the Incorporation of
Company. For this you
will have to prepare Memorandum of Association which will detail what the company;s
operations the first list of directors
who are going the be in the board need to be defined in this document. This should be applied
along with Form 1
http://www2.mca.gov.in/MinistryWebsite/dca/downloadeforms/eformTemplates/1022-
Form1_help.zip. Ocne this has been approved make atleast 10-15 copies of your Certificate
of Incorporation and Memorandum of Association and have it in a booklet form.
6. Once your company has been incorporated you can open a Current account in any of the
leading banks
for carrying out your operations. You will need to submit a copy of Certificate of
Incorporation and Memorandum of Association along with Borad resolution to open the bank
account.

7. Thenyou need to apply for TAN and PAN for the Company
https://tin.tin.nsdl.com/pan/form49A.html
https://tin.tin.nsdl.com/tan/form49B.html

8. If your services are in Software related area you can apply for STPI license which will give
you certain benefits
like Company need not pay tax for 5 years, there will be no import or expurty duty levied on
software/hardware,
You will get office spaces at lower rates at STPI units. These are few of the benefits of
becoming an STPI member.

All this you can do on your own or you can outsource these to professional auditor. We did it
through Auditor and it took almost three weeks (Upto Step 7 excluding STPI) and all
charges(excluding sTPI) would approximately cost you Rs.25,000.

I am not sure how much it would cost if you do it on your own. I read in one of the blogs that
in Delhi the whole
process was completed in 30 minutes after the e-Governance was launched.

Good Luck and If you need more information or any guidance drop in a mail.

Typical Procedure to Establish Business in India

In India establishing a business takes some time. Besides incorporation there
are many other formalities in establishing a business in India. The following
chart contains typical formalities including incorporating a private limited
company in India:
 

Nature of Procedure in India Procedure Duration  

Number (days)

Obtain DIN for proposed Directors of the new Company 1 3*  

Obtain DSC for proposed Directors of the Company 2 3*  

Filing the proposed name of company for approval to the 3 7  

Registrar of Companies (ROC); Get the Memorandum and Articles
of Association vetted by the ROC and printed

Make an application to the Superintendent of Stamps or an 4 1  

authorized bank requesting for stamping of the Memorandum of
Association and Articles of Association.
Present the required documents along with the registration fee to 5 9  
the Registrar of Companies to get the certificate of incorporation

Obtain a company seal 6 3  

Apply for UTI Investors Services Limited/National Securities 7 15*  

Depository Ltd. to obtain a Permanent Account Number (PAN)

Obtain a Tax Account Number (TAN) for income taxes deducted at 8 15*  
source from the Assessing Office in the Income Tax Department

Register under Shops and Establishment Act 9 2*  

Register for value added tax (VAT) before the Sales Tax Officer of 10 12*  
the ward in which the company is located

Register for Profession tax 11 2*  

Register with Employees' Provident Fund Organization 12 2*  

Register with ESIC (medical insurance) 13 1*  

Filing for Government Approval before RBI/FIPB for Foreigners 14 15*  

and NRI's

Totals: 14 40  

Note: Procedures sometimes take place simultaneously. Instances of this are marked with an asterisk (*). The
above procedures and timings are indicative for a typical big city in India where all the required documents are
ready with the promoters. The actual time and procedure may vary with city and state and the nature of business.

All the procedures must be followed.

SPECIAL NOTE
 NEW DIRECTOR REGISTRATION REQUIREMENTS IN INDIA

DIN - Director Identification Number

Directors for an Indian company, both Indian and foreigners, must register and get
and identification number under the new requirements. It is called Director
Identification Number- DIN.

DSC - Digital Signature Certificate for Directors

Directors for an Indian company, both Indian and foreigners, are also required to
get Digital Signature Certificate - DSC - under the new requirements. Digital
Signature Certificate (DSC) is required for all Directors or authorized
representatives of any company and professional who will require to sign ROC
forms or documents. A DSC, like hand written signature, establishes the identity of
the sender filing the documents through internet which sender can not revoke or
deny. A DSC is not only a digital equivalent of a hand written signature it adds extra
data electronically to any message or a document where it is used to make it more
authentic and more secured. There are various classes of DSC.

Click here to Contact us for Obtaining DIN and DSC in India

Requirements for a Private Limited Company

1. A Registered Business Name: This must be followed by the word ‘Limited' or ‘Ltd'.
The Companies Registration Office exercises some control over the choice of name, it
cannot be identical (or very similar to) the name of an existing company. It won't be
considered if it is offensive or illegal and the use of certain words in a company (for
example, `Institute', `National') can only be used in certain circumstances. The
company name must be displayed in a conspicuous place at every office, or other
premises where the company carries out business.

2. A Registered Office: This need not necessarily be the same address as the business is
conducted from. Quite frequently the address used for the registered office is that of
the firm's solicitor or accountant. This is the address, through, where all official
correspondence will go.

3. Shareholders: There must be a minimum of two shareholders (also described as

`members' or `subscribers'). A private company can have up to fifty shareholders.
  

4. Share Capital: The company must be formed with a stated, nominal share capital
divided into shares of fixed amounts. Small companies are frequently formed with a
nominal share capital of Rs.100.
 

5. Memorandum of Association: The memorandum is the company's charter. It states the

company's name; the situation of its registered office; its share capital; the fact that
liability is limited and, most importantly, the object for which the company has been
formed. In theory, the company can only operate in the areas mentioned in the objects
clause but in practice the clause is drawn to cover as wide an area as possible, and
anyway a 75 per cent majority of the members of the company can change the objects
whenever they like. Nevertheless, it is worth bearing in mind that directors of the
company will incur personal liability if the company engages in a type of business
which is not authorized by the objects clause. The memorandum must be signed by at
least three shareholders.

6. Articles of Association: The document contains the internal regulations of the

company, the relationship of the company to its shareholders and the relationship
between the individual shareholders. Many companies don't bother to draw up their
own articles but adopt (sometimes with some modifications) articles set out in the
Companies Act.

7. Certificate of Incorporation: This is the document, which the registrar of companies

issues to you once he has approved your choice of name and your memorandum.
When you receive this document your company legally exists and is ready to trade.

8. Auditors: Every company must appoint a qualified auditor. The auditor's duty is to
report to the treasurer whether or not the books of the company have been properly
kept, and that the balance sheet and profit and loss account presents (or doesn't
present) a true and fair view of the company's affairs and complies with the
Companies Act. Auditors are appointed or re-appointed at general meetings at which
annual accounts are presented, and they hold office from the conclusion of the
meeting until the next general meeting.

9. Accounts: The Companies Act lays down strict rules on accounting. Every company
must maintain a set of records, which show the financial position at any one time with
reasonable accuracy. The accounts comprise a profit and loss account and balance
sheet with the auditors' and directors' reports appended. A new company's accounting
reference period begins on its incorporation and runs until the following 31st March -
 unless the company notifies the registrar of companies otherwise. Within ten months
of the end of an accounting reference period, an audited set of accounts must be laid
before the shareholders at a general meeting and a set delivered to the registrar of
companies.

10. Registers, etc.: In addition to the accounts books, companies are required to have: a
register of members and share ledger; a register of directors and secretaries; a register
of share transfers; a register of charges; a register of debenture holders; a book can be
purchased to hold all of the above. This will be provided automatically if you buy a
running concern.

11. Company Seal: All companies must have an engraved seal. This must be impressed
on share certificates and must be used whenever the company has to execute a deed.
Again, this is included in the ready-made company package.

Corporate Documents & Registration of a Company

For incorporating a company in India, an application for registration should be submitted to
the registrar of companies with the following documents:

1. Memorandum of Association;

2. Articles of Association;

3. a declaration signed by a person named in the articles of the proposed company as a

director, manager, or secretary of the company, or by an advocate of the Supreme Court or
High Court, or by an attorney entitled to appear before the High Court, or by a chartered
accountant practicing in India stating that all the requirements of the Companies Act 1956
and the applicable rules with respect to the registration and other matters have been complied
with;

4. a list of persons who have consented to act as directors of the company.

5. if the proposed company is a public company, consent of very person prepared to act as a
director must be submitted in a prescribed form;

6. information about directors, managing directors and managers and secretary must be
submitted in a prescribed form;

7. information about the registered office in a prescribed form;

8. power of attorney in favor of one of the promoters or any other person, authorizing him/her
to make corrections in the documents submitted to the registrar of the companies, if it
becomes necessary; and

9. applicable registration fee payable to the registrar of the companies.

Advantages of Incorporating in India

 Many tax exemptions available to the company set up in Special Economic Zone;

 Many tax incentives available to IT companies;

 India has got double taxation treaties with many countries;

 Minimum authorized capital of only INR 100,000 (US $ 2250 approximately) is

required to form a private company in India;

 Skilled and intelligent employees available at nominal rate;

 With its large base of English speaking skilled human resource, it is most sought after
destination for business process outsourcing, Knowledge  processing etc.

Applicable Laws for Forming a Company in India

The laws applicable for incorporating a company in India include the Indian Companies Act
of 1956, read with Companies (Central Governments') General Rules and Forms,1956, the
Indian Income Tax Act, and other laws & regulations. The Foreign Exchange Management
Act of 1999 is applicable for foreign investments and transactions.

See also Doing Business with India Free Guide | FDI in India Sector wise Guide | Formation of
Subsidiary in India | Starting a Business in India | Opening Branch in India | Incorporating
company in India | Procedure for Formation of Company in India | Government Approvals for
Investing in India | Entry Strategies in India for Foreign Investors | FIPB Approval for Foreign
Investment in India  |  RBI Approvals for FDI in India | FDI in Small Scale Sector in India Further
Liberalized | Tax Rates in India | Withholding Tax Rates For Foreign Companies Doing
Business In India Under The Tax Treaties | Annual Corporate Filings in India | Joint Ventures in
India | Outsourcing to India | Legal Outsourcing
Where to Incorporate in India?
A company incorporated in any state of India can do business in all the states of India. The
following are the locations of ROC's in India:
 

States & U.T.'s of India ROC Locations

Registrar of Companies Delhi & Haryana,
Delhi & Haryana
NEW DELHI

Registrar of Companies Karnataka

Karnataka
BANGALORE

Registrar of Companies Maharashtra

Maharashtra, Dadra & Nagar Haveli
MUMBAI ( Bombay )

Pune, Kolhapur, Ratnagiri, Satara, Sindhudurga, Sangli, Sholapur & Registrar of Companies Pune,
Ahmednagar districts in Maharashtra PUNE

Registrar of Companies Tamil Nadu,

Tamil Nadu
CHENNAI ( Madras )

Coimbatore, Nilgiris, Periyar Salem, Dharmapuri & Dindigul, Quaid-e- Registrar of Companies Coimbatore
Milleth districts in Tamil Nadu COIMBATORE

Registrar of Companies Gujarat,

Gujarat
AHMEDABAD

Andhra Pradesh Registrar of Companies Andhra Pradesh,

HYDERABAD

Assam, Tripura, Manipur, Nagaland, Meghalaya, Arunachal Pradesh, Registrar of Companies Assam, Tripura, Manipur, Nagaland, Meghalaya,
Mizoram & Shillong Arunachal Pradesh, Mizoram & Shillong
SHILLONG

Bihar & Jharkhand Registrar of Companies

PATNA

Goa, Daman & Diu Registrar of Companies Goa, Daman & Diu,
GOA

Jammu & Kashmir Registrar of Companies Jammu & Kashmir

JAMMU & SRINAGAR

Kerala, Amindivi, Minicoy & Lakshadweep Islands Registrar of Companies Kerala

COCHIN

Madhya Pradesh & Chhattisgarh Registrar of Companies Madhya Pradesh,

GWALIOR

Orissa Registrar of Companies Orissa

CUTTACK

Pondicherry Registrar of Companies

PONDICHERRY

Punjab, Himachal Pradesh & Chandigarh Registrar of Companies Punjab, Himachal Pradesh & Chandigarh,
JALANDHAR

Rajasthan Registrar of Companies Rajasthan ,

JAIPUR

Uttar Pradesh & Uttaranchal Registrar of Companies Uttar Pradesh,

 KANPUR

West Bengal Registrar of Companies West Bengal

CALCUTTA (Kolkata)

The Registrar of Companies Andaman

Andaman
PORT BLAIR

Sweat Equity in a company in India

The question is asked a lot, if an Indian company can issue sweat equity. There are separate
rules for sweat equity in a private company in India and a public company in India.

Sweat Equity in a private company in India

The provisions for issue of Sweat Equity are covered under Section 79A of the Companies
Act. It provides that a company may issue sweat equity shares of a class of shares already
issued if the following conditions are fulfilled:

 the issue of sweat equity shares in authorized by a special resolution passed by the
company in the general meeting.

 The resolution specifies the number of shares, current market price, consideration, if
any, and the class or classes of directors or employees to whom such equity shares are
to be issued.

 not less than one year has, at the issue elapsed since the date on which the company
was entitled to commence business.

 The sweat equity shares of a company whose equity shares are listed on a recognized
stock exchange are issued in accordance with the regulations made by the Securities
and Exchange Board of India in this behalf.

 In view of the above provisions, you can't issue Sweat Equity at the time of
incorporation of your Company as one year has not elapsed since the date on which
the company was entitled to commence business.

In addition to the above provision, other regulatory provisions are applicable for issuing
sweat equity shares for a private company in India.  Please feel free to Contact us for further
information about sweat equity in an Indian company.

Sweat Equity in a public company in India

The aforesaid provisions regarding issuing of Sweat Equity under Section 79A of the
Companies Act are applicable to a public company in India.
The sweat equity shares of a company whose equity shares are listed on a recognized stock
exchange are issued in accordance with the Securities and Exchange Board of India (Issue of
Sweat Equity) Regulations, 2002.  Please feel free to Contact us for further information about
sweat equity in an Indian company.