Company Formation

Formation of Company
In the changing scenario and pursuant to the recent amendments of Companies (Incorporation) Rules, Ministry of Corporate Affairs is more focusing and concerning of easy, smooth and fastest incorporation of companies in India and for that purpose, recently a very special RUN (Reserve Unique Name) facility is introduced by the Ministry to reserve the name of the Company and a very new concept of zero fee incorporation of the Company is also introduced by the Ministry.
We provide various services and facilities to stakeholders to form the Company directly or through Reserving Unique Name Facility.
In RUN Service, stakeholder gets a time period of Twenty days from the date of approval of Company Name, meaning thereby he has to initiate a process of formation of the Company in just twenty days and one more precaution is that no re-submission opportunity is allowed in RUN Service, any applied name once may either be approved or rejected by the Ministry, whereas in direct company formation, stakeholders get two opportunities to re-submit.
Our Packages:
A: Formation of One Person Company (OPC)
It Includes
Advantages
Disadvantages
Digital Signature (One Applicant)
Reduced Compliance Burden
Limitation of Membership (Only One Member)
Director Identification Number (One Applicant)
Organized Sector of Propreitorship Company
Suitable only for Small Business/Name Problems
One Time Name Application
Limited Liability Protection to Director and Shareholder
Tax Liability

MOA/AOA Registration
Minimum Requirements and Easy to Manage
NRI is not allowed
Certificate of Incorporation
Perpetual Succession and Complete Control
Limited Business Activities

Frequently Asked Questions (FAQ)

1. Who is eligible to act as a member of an OPC?

Only a natural person who is an Indian citizen and resident in India shall be eligible to act as a member and nominee of an OPC.
For the above purpose, the term “resident in India” means a person who has stayed in India for a period of not less than one hundred and eighty-two days during the immediately preceding one financial year.
2. A person can be member in how many OPCs?                                                   
A person can be a member of only one OPC. 
3. Is there any tax advantage on forming an OPC?                                                        
There is no specific tax advantage to an OPC over any other form. The tax rate is flat 30%, other tax provisions like MAT & Dividend Distribution Tax applies as they apply to any other form of company.
4. Is there any threshold limits for an OPC to mandatorily get converted into either private or public company?                                                                                       
In case the paid-up share capital of an OPC exceeds fifty lakh rupees or its average annual turnover of immediately preceding three consecutive financial years exceeds two crore rupees, then the OPC has to mandatorily convert itself into a private or public company.
5. What is the mandatory compliance that an OPC needs to observe?
The basic mandatory compliance are:-
  • Maintenance of proper books of accounts
  • Statutory audit of Financial Statements
  • Filing of business income tax return every year before 30th September
  • Filing Annual ROC return which includes form MGT 7
6. Who cannot form a One Person Company?
  • A minor shall not eligible becoming a member
  • Foreign citizen
  • Non Resident
  • Any person incapacitated by contract
7. How do I convert an OPC to a Private limited company?
Mandatory Conversion of One Person Company (OPC) to Private Limited Company (PLC) is required in case a One Person Company meets certain parameters, like:
a) Effective date of increase in the paid-up share capital of a One Person Capital beyond rupees fifty lakhs,  AND
b) An increase of average annual turnover during the period of immediately preceding three consecutive financial years is beyond rupees two crores.
In the above case, the One Person Company shall be mandatorily required to convert itself into either a private or a public company Within a Period of Six Months. In this article, we look at the procedure for conversion of one Person Company into a private limited company or limited company.
Voluntary Conversion of OPC to Private Limited Company:-
  • When a One Person Company gets incorporated, it cannot convert itself to Private or Public company for a period of not less than two years from the date of incorporation
  • If the time period has elapsed and two years time period is over, a One Person Company can apply for converting itself to  Private Limited Company or Public limited company
  • The Conversion process should be done as per the rules and regulations laid down by the Companies Act, 2013 under Section 18, and Rule 7(4) of the Companies (Incorporation) Rules, 2014
B: Formation of Private Limited Company
It Includes
Advantages
Disadvantages
Digital Signature (Two Applicants)
Separate Legal Entity
Limitation of Membership (Upto 200 Members)
Director Identification Number (Two Applicants)
Uninterrupted Existence
Suitable Name Problems
One Time Name Application
Borrowing Capacity/Easy Bank Loan Availability/Easy Government Tenders/Foreign Funding Flexibility
Tax Liability/Compliance Formalities
MOA/AOA Registration
Easy Transferability
IPO is not allwed
Certificate of Incorporation
Owning Property
Division of Ownership

Frequently Asked Questions (FAQ)

1. What is a Private Limited Company (PLC)?

A private limited company is a company privately held for small businesses. This type of business entity limits owner liability to their shareholdings, the number of shareholders to 200, and restricts shareholders from publicly trading shares.

2. Who should opt for PLC form of Business Structure?

1. Limited risk to personal assets

The shareholders of a private limited company have limited liability. This means that as a shareholder you will be liable to pay for company’s liability only to the extent of the contribution made by you.

2. Legal Entity

A PLC has a separate legal entity different from you. This means that the Company is responsible for the management of its assets and liabilities, debtors and creditors. And you are not responsible for it. So, the creditors cannot proceed against you to recover the money.

3. Raising Capital

Even though registering a PLC comes with compliance requirements, it is preferred by entrepreneurs as it helps them raise funds through equity, expand and at the same time limits the liability.

4. Trustworthiness

Companies in India are registered with the under Companies Act 2013. Anyone can check the details of the company through Ministry of Corporate Affairs (MCA). Also, details of all the directors are provided while the formation of the company. Hence a PLC form of business structure is trusted more.

5. Can a Foreign National or an NRI be a Director in a Private Limited Company?

Yes, a Foreign National or an NRI can be a Director of a Private Limited Company in India after  However, at least one Director on the Board of Directors must be a Resident Indian.

6. Can a Foreign National or an NRI hold shares of a Private Limited Company?

Yes, a Foreign National or an NRI Foreign Companies can hold shares of a Private Limited Company

7. Can a Foreign Parent Company incorporate a Subsidiary in India?

Yes, foreign parent or holding Companies, including USA parent companies, can incorporate a subsidiary, as a 100% owned Private Limited Company in India subject to Foreign Direct Investment (FDI) Guidelines. 

8. How a foreign company can incorporate a new Company in India

Any foreign company can establish its place of business in India by filling , It is not mandatory for a foreign company to register as a foreign company by taking a Foreign Company Registration Number. 
A foreign company shall file with the registrar Form FC-1 with fees and documents required.
The application shall be supported by an attested copy of approval from the Reserve Bank of India.

9. Can a Foreign Company can register a Startup in India?

Yes,  and is subject to registration as per FDI Guidelines and registration norms.

10. What are the benefits of a Startup in India

A Startup can easily be incorporated as a private limited company and should then be registered in Startup community of India. The benefits of the Start ups in India are
  1. Tax exemption on profits for three years
  2. 80% reduction in patent registration fee
  3. Intellectual Property Rights protection
  4. Exempted from capital gain tax
  5. Easy fund raising
  6. 90-day exit window

11. What are FDI Guidelines for Foreigners in a Private Limited Company?

100% Foreign Direct Investment is allowed in India in many of the industries.

12. Is it mandatory for Directors of a foreign company to take DIN?

There is no need to apply and obtain DIN for Directors of a foreign company. However, it is mandatory of the authorized representative of the foreign company via associate DSC service available at MCA portal.

13. What are the other registration requirements of a Private Limited Company in India?

  • Register under Register for value added tax (VAT) before the Sales Tax Officer of the ward in which the company is located
  • Register for Professional tax
  • Register with Employees' Provident Fund Organization
  • Register with ESIC (medical insurance)
  • Filing for Government Approval before RBI/FIPB for Foreigners and NRI's
C: Formation of Public Limited Company
It Includes
Advantages
Disadvantages
Digital Signature (Seven Applicants)
Separate Legal Entity
Heavy Compliance Burden
Director Identification Number (Three Applicants)
Uninterrupted Existence
Suitable Name Problems
One Time Name Application
Borrowing Capacity/Easy Bank Loan Availability/Easy Government Tenders/Foreign Funding Flexibility
Tax Liability/Compliance Formalities
MOA/AOA Registration
(Minimum Authorised and Paid up Capital: Rs. 5 lacs)
Easy Transferability
Higher Incorporation Costs
Certificate of Incorporation and Certificate of Commencement of Business
Owning Property and can be listed on Stock Exchange subject to its rules.
Division of Ownership
Frequently Asked Questions (FAQ)
1: What is Public Limited Company ?
A Public Limited Company is a Company which is limited by shared and has no restrictions on the maximum numbers of shareholders. It can be formed with minimum of seven members and three Directors. It should be registered with the Registrar of Companies of the particular State under the Companies Act, 2013.
Such type of Company can offer its shares to the Public, accept deposits from it and there is no restriction on transference of shares.However, minimum share capital requirement for such a Company is Rs. 5,00,000/-
2. How can a Public Company be registered under the Indian Law ?
A Public Limited Company (Other than a Public Sector Undertaking), there must be at least SEVEN persons to form a public company. It is of the essence of the Public Company that its article do not contain provision restricting the number of its members or excluding generally the transfer of its shares to the Public or prohibiting any invitation to the public or subscriber  for its shares or debentures. Only the shares of public company are capable of being dealt in on a Stock Exchange.
D: Formation of Section 8 Company
It Includes
Advantages
Disadvantages
Digital Signature (Two Applicants)
Separate Legal Entity
Zero Benefits to Members
Director Identification Number (Two Applicants)
No Minimum Capital Requirement
No Profit Distribution to its Partners or Members
One Time Name Application/Government Application and Approval
Tax Exemption/No Stamp Duty Payable
Difficult to alter MOA/AOA and it needs Central Government Approval
MOA/AOA Registration with ROC
Credibility and No other title required
Higher Incorporation Costs
Certificate of Incorporation
Owning Property and can be listed on Stock Exchange subject to its rules.
Time Consuming
Frequently Asked Questions (FAQ)
1: What is Section 8 Company ?
A non-profit organization in India can be registered as a Trust or as Society under the Registrar of Companies as a Private Limited non-profit Company under section-8 of the Companies Act, 2013.
Earlier, this section 8 was popularly known as Section 25 of the old Companies Act, 1956, now, according to section 8 (1a, 1b, 1c) of the new Companies Act, 2013, a section 8 Company can be incorporated to promote commerce, art, science, research, sports, social welfare, education, charity religion, protection of environment or any such object. The condition is that such as Company should use its profits (if any) for promoting its objects and should not pay any dividend to its members.
2. What are key features of a section 8 company?
The key characteristics of an NGO section 8 company are:
  • Object: *It operates for common welfare of masses at large, for promotion of commerce, art, science, sports, education, research, social welfare, religion, charity, protection of environment or any such other object.
  • Profit Earning: *The objective is not to earn profit. If any profit is earned during course of its operation, the same is not to be shared among owners/members rather utilised for attaining the objects for which NGO was formed.
  • Utilisation of funds and earnings: *The profits, if any, or other income is used towards promoting of specific objects of NGO. Further there is restriction on declaration of profits as dividend to members.

3. What are the minimum requirements to start a section 8 company?
  • Minimum two shareholders;
  • Minimum two Directors (Directors and shareholders can be same person);
  • At least one Director shall be resident in India;
  • No Minimum capital required;
  • Income-tax PAN is a mandatory requirement in case of Indian nationals;
  • Any one of the Identity Proof (Voter ID/Aadhar Card/Driving License/Passport); Passport is mandatory requirement for proof of identity in case of foreign nationals;
  • Any one Proof of Residence (Electricity Bill/Telephone Bill/Mobile Bill/Bank Statement);
  • Registered Office address proof (rent agreement along with latest rent receipt and copy of latest utility bill in the name of landlord and a no objection certificate from the owner of the premises, in case the premises are rented);In case the premises are owned by a Director and Promoters, any documents establishing the ownership such as Sale Deed/House Tax receipt etc along with the no objection certificate.

4. What are the additional requirements for section 8 company registration?
Multiple forms need to be filed to apply for license. The most important form is eForm INC 12 (for issuance of license under section 8 of the Companies Act, 2013). This application shall be accompanied by:
  • Memorandum & Articles of Association of the proposed company;
  • A declaration confirming the application by a Company Secretary in Practice on the Non – Judicial stamp paper of prescribed value;
  • List of names, descriptions, addresses & occupation of the promoters as well as Board Members of the proposed company;
  • A statement showing details of assets and liabilities of the company as on date with the application;
  • An estimate of future annual income and expenditure of the proposed company, specifying the source of income and object of expenditure;
  • A statement giving brief description of work, if any, already done by the association;
  • A statement specifying briefly the grounds on which the application is made;
  • A declaration in prescribed form on non – judicial stamp paper by each person making an application;
  • A letter of authority;
  • Payment of prescribed fee Looks like too much effort? The whole process will be carried out online. You just need to upload the required documents on our encrypted Document vault and our experts will take care of all formalities for you.

5. Is Digital Signature mandatory for carrying out registration formalities?
Digital Signature is the only secure and authentic way that a document can be submitted electronically. All filings of e-forms on MCA Portal are required to be filed with the use of Digital Signatures by the person authorised to sign the documents.
Under the plan you can obtain 2 class II digital signatures along with E-token, having a validity of 2 years.
In case, you already have a DSC, our experts will offer you some concession accordingly on the above package
6. I wish to start my NGO. The objective is to impart quality education and upliftment of unprivileged children. Should i form a trust, society or register as a section 8 company?
In India, NGOs can be registered as Section 8 Company, trust or society. While, Trusts and Societies are registered under State Government regulations, section 8 companies are registered under Ministry of Corporate Affairs.
Forming a section 8 company is prefered due to following reasons: Improved recognition Better legal standing. Higher credibility amongst donors, Government departments and other stakeholders. Relaxation from a number of companies act regulations
7. Is it necessary to have 2 directors for Section 8 Company Registration?
Yes, you need a minimum of two directors for a section 8 company registration.
8. Who can become a member in Section 8 Company?
Any individual/organization can become the member of Section 8 Company including foreigners/NRI’s.
9. For incorporation of Section 8 Company, do I have to be present in person?
The entire procedure is 100% online and you don’t have to be present at our office or any other office for incorporation. A scanned copy of documents has to uploaded on document vault and our experts will carry out all registration formalities for you.
10. How much time will the section 8 company registration take?
The incorporation process gets completed on obtaining the license and issue of incorporation certificate under section 8 of Companies Act 2013, (earlier section 25 of Companies act 1956). The whole process of company incorporation can be closed less than 15 days. The time taken also depends on relevant documents provided by the applicant and speed of approvals from government. To ensure speedy registration, please pick a unique name for the proposed Company and make sure you have all the required documents prior to starting the registration process.
11. Will there be a need for any other special registration required?
In addition to registration, a non-profit engaged in certain activities might also require special license/permission. Some of these include (but are not limited to):
  • A place of work in a restricted area (like a tribal area or a border area requires a special permit – the Inner Line Permit – usually issues either by the Ministry of Home Affairs or by the relevant local authority (i.e., district magistrate).
  • To open an office and employ people, the NGO should be registered under the Shop and Establishment Act.
  • To employ foreign staff, an Indian non-profit needs to be registered as a trust/society/company, have FCRA registration and also obtain a No Objection Certificate. The intended employee also needs a work visa.
  • A foreign non-profit setting up an office in India and wanting staff from abroad needs to be registered as a trust/society/company, needs permission from the Reserve Bank of India and also a No Objection Certificate from the Ministry of External Affairs.
  • Under this plan ClearTax will help you register your NGO as a section 8 company. Our customer support will help you connect with an expert who shall advise you on applicability of other registration required. The additional registrations services(such as shop & establishment act registration etc) shall not form part of the plan and will be charged separately.

12. I and my partner are both directors and shareholders in our company. We wish to bring in two additional shareholders as well. Is that covered in the package?
In the current package, we cover upto 2 digital signatures for two directors. For two additional shareholders, you need to secure two additional digital signatures certificates. We offer digital signature certificate - to purchase digital signature
13. I and my partner are directors in our company. We wish to bring in two additional directors as well. Is that covered in the package?
In the current package, we provide for two directors only. To bring in two additional directors, you need to secure two digital signatures (DSC)
  •  to purchase digital signature
14. Our company would like to bring in a foreign citizen as a director. Is this covered in your package?
To bring in additional director, you need to secure digital signature (DSC ).
  •  to purchase digital signature
Only passport of the foreign director is required. In some countries, residency certificate will be provided. These need to be submitted for the application. Any incidental charges here is not covered in the package.
15. Our company would like to bring a non-resident Indian as a director in the company. Is this included in the package?
To bring in additional director, you need to secure two digital signatures (DSC)
Besides, we also offer various conversion  services like
1: Conversion for partnership firm to Limited Company (through formation of part IX Company/Joint Stock Company)
2: Conversion of Limited Liability Partnership into Limited Company
3: Conversion of OPC to Private Limited Company
4: Conversion of Private Limited Company into Public Limited Company and vice versa

All the above conversion will be look after and studied by case to case, all its  post effects, costings, consequences, impact will be decided and finalized at a relevant time on case to case basis.

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