L‘internationalization enterprises often involves the need to establish a company in the target country, i.e., the nation to which you intend to expand your business.
Among the most attractive destinations for Italian companies, the’India stands out as one of the most promising and dynamic markets, ranking fifth among world economies.
For companies that want to penetrate this market, it is essential to know the different corporate forms available that can facilitate such entry. We have already covered in another article the different corporate options provided in Indian law, offering a general overview of them. In this article, we will focus on the Private Limited Company, analyzing its requirements and the main Indian law regulations governing the operation of companies in the country.
The legal tools available to Italian companies wishing to export to India Are governed exclusively by Indian law.
The two main recognized corporate forms are the Private Limited Company (PLC) and the Public Limited Company (PLC), both of which are well-established and widely used internationally.
The Indian regulatory framework also includes more recent options, such as the Limited Liability Partnership (LLP), which combines the advantages of a partnership with those of a limited liability company. Despite these alternatives, the Private Limited Company remains the choice of choice, especially for SMEs wishing to initiate processes of internationalization in the territory.
The main sources of corporate law in India include:
These laws provide the essential regulatory framework for foreign and local investors who wish to establish a company or start business operations in the nation.
The notion of a limited liability company under Indian law is very similar to Western law, offering a asset protection to the partners. In a Private Limited Company, therefore, the liability of the partners is limited to their subscribed capital, meaning that they are not obligated to cover the company's obligations with their personal assets.
The Memorandum of Association, i.e., the articles of incorporation of the company, may provide for forms of limited liability with a guarantee to be borne by the shareholders, such as the obligation to contribute to liquidation costs. In such cases, liability extends to liquidation costs, but not to debts incurred in the ordinary course of business.
In addition to the Private Limited Company, there are several legal forms that companies can consider to set up their business in India, especially in a context of internationalization. The main types include:
All companies must be registered with the Registrar of Companies (ROC), the Indian equivalent of the commercial register. The ROC, along with the Company Law Board (CLB), deals with the approval of companies and verification of compliance with the Companies Act.
A recent reform introduced the National Law Tribunal, a body that replaced the CLB in its oversight functions.
For Italian companies, particularly small and medium-sized enterprises (SMEs), the Private Limited Company represents the most suitable legal form. This type of company offers more streamlined procedures than the Public Limited Company, making it ideal for those wishing to enter the Indian market without facing excessive bureaucratic burdens.
The minimum requirements for establishing a Private Limited Company in India are as follows:
Once these requirements are met, the company can be registered with the ROC and begin its operations in the Indian market.
The Private Limited Company offers several advantages to Italian companies, particularly with regard to the limited liability that we have already mentioned, which protects the personal assets of the partners. In addition, the possibility of forming a company with foreign members at 100% represents a unique opportunity for those who wish to directly control the business without having to involve local partners.
The process of establishing a Private Limited Company in India requires some basic steps:
India today represents a highly attractive destination for the strategies of internationalization Of numerous Italian companies.
Octagona is ready to support companies from all sectors that wish to expand their business in the Indian market, offering assistance in setting up a company in the territory.
For more information or if you have any questions, we invite you to fill out our contact form.
The form most suitable for Italian SMEs is the Private Limited Company. It offers leaner procedures and fewer bureaucratic burdens than the Public Limited Company, limits the liability of shareholders to the subscribed capital and allows foreign shareholders to hold 100% of the shares, without the obligation of local partners.
A minimum capital of 100,000 rupees, approximately 1,600 euros, at least two partners (up to a maximum of 50), and at least two directors, one of whom must be a resident of India, are required. If these requirements are met, the company can be registered with the Registrar of Companies and begin operations.
The procedure involves a Digital Signature Certificate for each administrator, a Director Identification Number issued by the Indian Ministry of Corporate Affairs, registration with the Registrar of Companies, and a Certificate of Incorporation. Then operational registrations, such as GST and IEC, are required to operate in the market.
The Branch Office represents the parent company and operates directly in India, with authorization from the Reserve Bank of India. The Liaison Office is only a point of contact and cannot carry out commercial activities. The Project Office serves specific projects; it lasts as long as the project and requires RBI authorization and registration with the ROC.
The LLP, governed by the Limited Liability Partnership Act of 2008, is a flexible solution for SMEs. It combines a limited liability company with a partnership, protects the shareholders’ assets and simplifies administration. The catch is that it is only permitted in sectors where 100% of foreign direct investment is allowed.
The Registrar of Companies (ROC) is the Indian equivalent of the business register and all companies must register. Along with the Company Law Board, which is now replaced by the National Law Tribunal with a recent reform, it is responsible for the approval of companies and verifying compliance with the Companies Act.
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