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Company Formation in India Overview

Companies Act

Companies incorporated or registered in India are governed by the Companies Act 1956.

Shareholders and Directors

• There is no need to appoint local director to incorporate a company in India.

• Foreign nationals can incorporate company in India and hold foreign equity to the extent of 100%, which is dependent upon sector in which company will operate and is subject to approval from either Reserve Bank of India (RBI) or Foreign Investment Promotion Board (FIPB).

Memorandum & Articles of Association

The Memorandum of Association states the main, ancillary / subsidiary and other objects of the proposed company. The Article of Association contains the rules and procedures for the routine conduct of the proposed company. It also states the authorized share capital of the proposed company and the names of its first / permanent directors. After that Memorandum of Association and Article of Association are required to be stamped.

A stamp duty is required to be paid on Memorandum of Association and Article of Association. The stamp duty depends on the authorized share capital.

Share Capital

Shares must be expressed in a fixed amount. "No par value" or "bearer" shares are not permitted. Shares to be subscribed must be expressed in Indian rupees.

Accounts & Auditors

Every company is required to appoint an auditor each year at its AGM. An auditor must be qualified by virtue of the Institute of Chartered Accountants of India Act 1949 and completely independent of the company. Audited accounts of the company serve as tool for various stakeholders like creditors, bankers, investors and revenue authorities.

Public Filings

The names and personal particulars of the directors and secretary, register of charges, share capital, registered office address etc. must be filed with the Companies Registry for public inspection upon incorporation and if there is any change thereafter.

Annual Meetings

An annual general meeting (AGM) must be held once in every financial year and not more than 6 months after the end of financial year. However, a company need not hold its first AGM until 18 months of its incorporation.