Incorporation of Indian Company by Chinese National

How can a Chinese National incorporate Company in India?

Foreign Direct Investment (FDI) is high in India at all times and, with the kind of growth saga that India has to share, investing in the Indian market will prove very promising and beneficial to companies around the world, including Chinese companies proposing to invest in India.

As has been said, investment by Chinese companies and Chinese nationals in India is high at all times and, therefore, it is essential to have an insight into the legal aspect of the process of incorporation of a company by a Chinese person and also the guidelines and laws prescribed pertaining to to the available modes of investment in India by a person of foreign origin.

In order to understand the process and legalities of incorporation of a business in India by a Chinese person there are certain key points which should be taken into consideration. 

Key Points to be considered before incorporating a Company in India or starting a business in India

Point No. 1: Check if the investment is allowed

The first step is to check with the RBI Guidelines if the investment in India by a Chinese person/national is allowed or not. If it is allowed then the route of investment and the mode of approval shall be taken in consideration.

In India, any Foreign Direct Investment (FDI) is governed by the RBI and DIPP and there are two routes/modes of FDI pertaining in India:

A. Automatic route: If your business falls under this route then you do not require any approval from the Reserve Bank or Government of India for the investment. One can directly start the company registration procedure and invest the capital funds into the bank account of the company.

B. Approval route:  Under the approval route also known as the government route, prior approval from the Government of India though the authorised agencies is to be mandatorily taken by the investor.

All the application filed for seeking approval (approval route) are forwarded to the Foreign Foreign Investment Promotional Board (FIPB).

Point No 2: Mandatory Legal Requirements

THere are cetain minimum legal provisions applicable for incorporating a Company in India which should be taken into consideration before begining the process of incorporation:

A. Resident Director: It is a mandatory requirement that one of the directors of the proposed Company should be a person resident in India i.e he/she must have stayed in India for more than 182 days during the past financial year i.e. 1^st April to 31^st March.

B. Registered Office Address: One of the mandatory requirement to register a company in India to have a registered office address. Being a Foreign/Chinese national, you will be needing to rent or lease a space as the registered office address for your proposed Company. One of the periodic Compiance provisions also requires the Company to have an office (commercial) space as it requires exact gps coordinates and pictures of the office along with any one of the directors in the office to be filed with the govt. 

C. Amount of Initial Investment: A Company in India can be registered with as low a INR 1 but it is advisable to have a minimum capital ample enough to meet the initial expeses for establishment and operations of the Company. THis piece of information is an essential for filing the forms for incorporation of the Company.

D. Experience Consultant: In India the legal regime has been considered to be quite dynamic and a bit complicated to understand. For the purpose of hassle free incorporation and percise advise it is essential that you choose your legal advisors with care. CORPZO has experience in incorporating more than a 1000 companies in India and comprises of professionals with experience and knowledge to make your business journey easy.

E. Tax rates: The rates of taxation in India are a bit on the higher end, however there a reduced tax rates offered on certain types of business entities. We can help you identify the best suitable type of business entity so that you dont have to worry about paying huge taxes. Private Limited Company or Publice Limited Companies enjoy the lowest rates of income taxes (i.e. 15%-22%) in compaarison to all other forms of corporate business structures.

Point No 3: Choose the Form of business entity to be incorporated

If you are a foreign national, there are several different forms of business entities available you to establish your business in India. Some of the commonly known forms are private limited company, public limited company, limited liability partnership, branch office etc,. The format of business entity must be selected only after meticulous examination of all the related facts and features of the respective form of business entity.

A Chinese national can register business in any of the below mentioned formats as per their requirement without any restrictions with as much as a 100% investment in Private Limited Company:

A. Private Limited Company,

B. Public Limited Company

C. Limited Liability Partnership

D. Branch Office/ Liaison office/ Project Office (If a Chinese national doesn’t want to straight away incorporate a Company in India then one of these forms of business may be established with the approval from RBI)

FDI in India by a Chinese national is subject to prior approval by the government in accordance with the Press Note 3 (2020) by the DIPP.

Corpzo recommends incorporation of a limited company (Private or public) due to its favourable features, reduced tax rates and easy compliance. 

Procedure for registration of Company in India by a Chinese National (Foreign National)

Following procedure is to be followed to incorporate a Company in India:               

STEP 1:. Mandatory Requirements: 

In order to incorporate a Private Limited Company in India or a LLP in India a minimum of two directors is a must. One of the directors should mandatorily be a resident of India i.e. he/she should have continuously stayed in India for over 182 days in the previous year.

STEP 2: Documents required: 

There is a specific set of documents prescribed by the ministry of Corporate affairs which needs to be fulfilled in order to incorporate the company without any hassles. The documents required are as follows:

➲ Identity proofs of directors and shareholders

➲ Address proof of the directors and shareholders

➲ Proof of Residence of the directors and shareholders

➲ Proof of Registered office address

The copy of the all related documents required for company registration should be notarised by a notary in the home country or by the Indian Embassy.

STEP 3. Name approval & incorporation: 

Name of the proposed Company is allotted by the Ministry of Corporate Affairs (MCA) through Central Registration Center (CRC). The name application is to be filed along with 1-4 options of unique (phonetically non similar) names along with the main objects (Activities) of the proposed company. The said application is subject to approval by the CRC in accordance with the prescribed guidelines. The name approved by the CRC is valid for a period of 20 days during which all the formalities of incorporation should be completed and filed with the MCA for approval.

STEP 4. Application of Digital Signature Certificate:

In India the process of incorporation of a Company is completely online and as such it shall be signed by the proposed directors of the Company digitally. In order to sign a document digitally it has been prescribed by the government of India that every director and shareholder should have their Digital Signature Certificates approved from the agencies identified by the Government of India.

STEP 5. Filing for Incorporation:

Once the name application is approved and the digital signature certificates are obtained, the forms specified for the incorporation of a Company in India shall be prepared along with all the necessary attachments and annexures. In order to incorporate there are 3 forms prescribed which have to be filed simultaneously in order to incorporate a Company namely Spice (Form for Incorporation), SPICe MOA (Memorandum of Association) and SPICe AOA (Articles of Association).

STEP 6: Investment in Paid-UP Capital (Initial Capital) 

On approval of the forms of incorporation the next step is to open a bank account in India. It is mandatory to open a bank account in India and deposited the initial subscription money in the said account by the initial shareholders of the proposed Company.

STEP 7. Approval for Foreign Direct Investment:

If all or any of the shareholders of the Company are citizens of any of the Country having border adjacent to India (like Pakistan, Bangladesh, China), the directors of the newly incorporated company need to file an application for approval route of FDI in order to invest in the Company.

STEP 8. Investment by shareholders:

Once the Approval for FDI is received from the authorities, the all the shareholders (including foreign Shareholders or Chinese Shareholders) of the Company shall invest the amount of their subscription money towards shares directly in the Bank account of the Company.

STEP 9. Certificate of Commencement of business:

Post completion of the process of incorporation and before commencing any business activity, it is mandatory to file for obtaining the certificate of commencement of business within 180 days of incorporation.

Documents Required for Incorporating a Company in India by a Chinese National / Foreign National

For every foreign Director and Shareholder

1.    ID PROOF (Anyone 2 of the following)

➲ Passport (Mandatory for foreign national)

➲ Driving License

➲ Any other government issued identity proof

2.    ADDRESS PROOF (Any one of the following and proof should be not older than 2 two months)

➲ Bank Statement

➲ Mobile Bill

➲ Telephone Bill

➲ Electricity bill

3.    Address Proof for Principal place of Business (in India) (Anyone of the following and proof should not be older than 2 months)

➲ Electricity bill

➲ Gas Bill

➲ Water Bill

➲ Rent Agreement

➲ Other Utility bills

4.    Contact Information

➲ Mobile Number

➲ Email Id

5.    Following documents will be prepared by us and shared once we received the aforementioned documents:

➲ MOA

➲ AOA

➲ DIR-2

NOTE : All the documents OF THE FOREIGN NATIONALS have to be notarised in the following manner (as applicable):

A.     All the documents need to have a translated version in English attached alongwith them.

B.     The documents should be apostilled if the place of residence of the director(s) is Hong Kong or Macao only

C.     ELSE the documents need to be Consularised (documents need to be notarised and attested/approved by the consulate of china)