[ESTABLISHING A BUSINESS ENTITY IN INDIA]
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Incorporation of a company or a Limited Liability Partnership (LLP) in India is an administrative process which takes approximately 15 (fifteen) to 20 (twenty) working days from filing of incorporation related documents (“off the shelf” companies are not recommended in view of related due diligence issues and liabilities). The MCA21 e- Governance programme by the Government of India has simplified the entire incorporation process and the process may be completed online. For e-filing of forms, a digital signature certificate has to be obtained from the concerned authority without which e-filing cannot be done. The purpose of the digital signature is to ensure the security and authenticity of documents filed electronically. It generally takes only 1 (one) working day to obtain a digital signature. Also, persons seeking appointment as directors of an Indian company or designated partners in the case of an LLP are mandatorily required to obtain director identification number (“ DIN ”) or Designated Partner Identification Number (“ DPIN ”) respectively, without which such appointment would be invalid. The DIN or DPIN, as the case may be, is specific to each individual and there is no requirement of a fresh DIN or DPIN for appointment as a director of other Indian company(ies) or LLP(s). A company or LLP incorporated anywhere in India is entitled to continue business activities throughout India. Joint ventures other than by way of incorporating a new company (i.e., other than by way of investment in a new company jointly with the Indian partner) may be formalized by way of a simple transfer of shares. Further, depending on the percentage of foreign direct investment contemplated, prior approval of the ministry/department concerned may be required if the business of the new company falls in a sector where 100% foreign direct
investment is not permitted under the automatic route (i.e., without prior government approval). Other contractual arrangements such as distributorship/franchise agreements or trademark/brand licensing agreements etc., for doing business in India can be formalized in 1 (one) to 2 (two) days, except where sector specific licenses are involved. India does not have any standard regulations for protection of franchisees, and thus the relationships are broadly governed by the contracts between the parties. 2.2. Shares Swap Transaction A share swap transaction is one in which consideration for the deal is not cash, but the issuance to the other party the shares of the acquiring entity. The Foreign Exchange Management (Non-debt Instruments) Rules, 2019, permits swap of equity instruments of an Indian company and/ or equity capital of a foreign entity against transaction involving transfer of equity instruments of an Indian company between person resident in India and a person resident outside India or issue of equity instruments of an Indian company to a person resident outside India. 3. Governance, Regulation, and Ongoing Maintenance 3.1 Brief summary of regulation of each type and ongoing maintenance, reporting requirements: Primary regulations under Indian laws: i. Companies Act, 2013; ii. Limited Liability Partnership Act, 2008; iii. Foreign Exchange Management Act, 1999, Foreign Direct Investment Policy of India and RBI regulations governing establishment and operations of Branch
ILN Corporate Group – Establishing a Business Entity Series
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