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FAQs

1. What is the type of Business Entities Available in India?

The following types of Business entitles are available in India:

Private Limited Company
Public Limited Company
Unlimited Company
One Person Company
Sole Proprietorship

In addition to the above legal entities, the following types of entities are available for foreign investors/foreign companies doing business in India:

Liaison Office
Representative Office
Project Office
Branch Office
Wholly owned Subsidiary Company
Joint Venture Company

2. What is a Private Limited Company?

A Private Limited Company is a Company limited by shares in which there can be maximum 200 shareholders, no invitation can be made to the public for subscription of shares or debentures, cannot make or accept deposits from Public and there are restriction on the transfer of shares. The liability of each shareholder is limited to the extent of the unpaid amount of the shares face value and the premium thereon in respect of the shares held by him. However, the liability of a Director / Manager of such a Company can at times be unlimited. The minimum number of shareholders is 2.

3. What is a Public Limited Company?

A Public Limited Company is a Company limited by shares in which there is no restriction on the maximum number of shareholders, transfer of shares and acceptance of public deposits. The liability of each shareholder is limited to the extent of the unpaid amount of the shares face value and the premium thereon in respect of the shares held by him. However, the liability of a Director / Manager of such a Company can at times be unlimited. The minimum number of shareholders is 7.

4. What entity is best suited?

The choice of entity depends on circumstance of each case. Private Limited Company has lesser number of compliances requirements. Therefore, generally where there is no requirement of raising of finances through a public issue and the ownership is intended to be closely held by limited number of persons, Private Limited Company is the best choice.

5. What is the minimum paid-up capital of a Private Limited Company?

The minimum paid up capital at the time of incorporation of a private limited company has to be Indian Rupees 1,00,000 .There is no upper limit on having the authorized capital and the paid up capital. It can be increased any time, by payment of additional stamp duty and registration fee.

6. What is the difference between authorized capital and paid up capital?

The authorized capital is the capital limit authorized by the Registrar of Companies up to which the shares can be issued to the members / public, as the case may be. The paid up share capital is the paid portion of the capital subscribed by the shareholders.

7. When can the newly formed company start its business operations?

On receipt of the certificate of incorporation, the public company has to complete certain other legal formalities such as a statutory meeting (within 6 months), statutory report, etc. On completion of the said formalities and on filing of the statutory report with the ROC the ROC issues the certification of commencement of business to the company. Thereafter, the Public Company can start the business operations. The Private Company can start its business immediately on incorporation.

8. What other approvals are required for foreign investor in India?

Generally, prior approval is required from the RBI before investing in India. Some categories of businesses are covered under automatic approval process. However, one has to apply for the same. There are some post-incorporation filing formalities after the remittance of capital from overseas to India and on issue of shares.

9. What are other formalities before or after incorporation?

Obtaining Permanent Account Number (PAN) from Income Tax Department
Obeying Shop and Establishments Act
Registration for Import Export code from Director General of Foreign Trade
Software Technologies Parks of India registration (STPI) if required
RBI approval for foreign companies investing in India and FIPB approval, if required.
The directors of an Indian company, both Indian and foreigner directors, are required to obtain Din and DSc

10. What is Director Identification Number (DIN)?

It is an unique Identification Number allotted to an individual who is an existing director of a company or intends to be appointed as director of a company pursuant to section 266A & 266B of the Companies Act, 1956 (as amended vide Act No 23 of 2006).

11. Who can file an application for allotment of DIN?

Any individual, who is an existing director of a company or intends to be appointed as a director of the company, can file an application for allotment of DIN.

12. Who will allot the DIN ?

Central Government (Office of Regional Director (Northern Region), Ministry of Corporate Affairs, NOIDA) will allot the DIN.

13. What is a Digital Signature Certificate?

Digital Signature Certificates (DSC) are the digital equivalent (that is electronic format) of physical or paper certificates. Examples of physical certificates are drivers' licenses, passports or membership cards. Certificates serve as proof of identity of an individual for a certain purpose; for example, a driver's license identifies someone who can legally drive in a particular country. Likewise, a digital certificate can be presented electronically to prove your identity, to access information or services on the Internet or to sign certain documents digitally.

14. Why is Digital Signature Certificate (DSC) required?

Like physical documents are signed manually, electronic documents, for example e-forms are required to be signed digitally using a Digital Signature Certificate.

15. Who issues the Digital Signature Certificate?

A licensed Certifying Authority (CA) issues the digital signature. Certifying Authority (CA) means a person who has been granted a license to issue a digital signature certificate under Section 24 of the Indian IT-Act 2000. The list of licensed CAs along with their contact information is available on the MCA portal (www.mca.gov.in).

16. What are the different types of Digital Signature Certificates valid for MCA21 program?

The different types of Digital Signature Certificates are: Class 2: Here, the identity of a person is verified against a trusted, pre-verified database. Class 3: This is the highest level where the person needs to present himself or herself in front of a Registration Authority (RA) and prove his/ her identity.

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