Registering a Company in Chennai: A Guide for Foreign Shareholders

Registering a Company in Chennai for Foreign Shareholders 

You must follow the necessary legal procedures to register a company in Chennai for foreign shareholders. Begin by selecting a suitable business structure, such as a private limited company. Prepare the required documents, including proof of identity, address, and shareholding details of foreign shareholders. Consult a local corporate lawyer or chartered accountant to guide you through registration.

Understanding the Legal Framework 

Company Registration Laws in India

Company registration laws in India are governed by the Companies Act 2013. The Act outlines the procedures and requirements for registering different types of companies, such as private and public limited companies. It covers company formation, share capital, directors, shareholders, and compliance with statutory regulations. 

Requirements for Foreign Shareholders 

For company registration in Chennai, foreign shareholders are required to provide the following documents:

1. Passport copies of foreign shareholders
2. Proof of address of foreign shareholders
3. Bank statements reflecting the source of funds for shareholding
4. No-objection certificate from the concerned authorities, if applicable
5. Any additional documents as per the specific requirements of the registration process.

Choosing the Right Business Structure

Foreign shareholders seeking company registration in Chennai have several business structure options. The most common structure is a private limited company, which offers limited liability and separate legal entity status. Other options include a limited liability partnership (LLP) or a branch office, depending on the shareholders’ specific business requirements and objectives.

Preparing for Company Registration 

1) Conducting Market Research

Conducting market research for the foreign shareholders’ company registration in Chennai involves analysing the local market, identifying target customers, studying competitors, understanding consumer preferences, assessing market trends, and evaluating the feasibility and demand for the proposed products or services. 

2) Choosing a Business Name 

When choosing a business name for company registration in Chennai, foreign shareholders should ensure that it complies with the Ministry of Corporate Affairs guidelines. The name should be unique, not violate any trademarks, and reflect the business’s nature and objectives.

3) Appointing Directors and Shareholders

Foreign shareholders registering a company in Chennai must appoint at least one director and shareholder. The director can be a foreign national, and the shareholder can be an individual or a corporate entity. Their appointment should comply with the requirements of the Companies Act 2013. 

4) Registered Office Address Requirements

For registration of a company in Chennai by foreign shareholders, a registered office address in India is mandatory. The address should be a physical location where official correspondence can be received. It must be provided at company registration and maintained throughout its existence. 

5) Obtaining Director Identification Number (DIN) and Digital Signature Certificate (DSC) 

Foreign shareholders seeking to register a company in Chennai must obtain a Director Identification Number (DIN) and a Digital Signature Certificate (DSC). DIN can be obtained by submitting the necessary documents to the Ministry of Corporate Affairs (MCA). DSC can be obtained from authorized certifying agencies by submitting the required application and documents.

6) Drafting the Memorandum and Articles of Association

When drafting the Memorandum and Articles of Association for company registration in Chennai by foreign shareholders, it is important to include key details such as company name, registered office address, business objectives, share capital, rights and responsibilities of shareholders, and internal governance procedures. It is advisable to seek professional legal assistance to ensure compliance with Indian company laws and regulations.

Company Registration Process 

Reserve a Company Name 

To reserve a company name for registration in Chennai by foreign shareholders, you need to submit an application with the Registrar of Companies (RoC) along with the required fees and supporting documents, such as a proposed company name and the Memorandum of Association.

Obtaining a Permanent Account Number (PAN) and Tax Deduction and Collection Account Number (TAN) 

To register a company in Chennai, foreign shareholders must obtain a Permanent Account Number (PAN) and a Tax Deduction and Collection Account Number (TAN) from the Indian tax authorities. These numbers are essential for tax compliance and conducting business operations in India.

Filing the Incorporation Documents with the Registrar of Companies (RoC)

To register a company in Chennai with foreign shareholders, the incorporation documents must be filed with the RoC. These documents include the Memorandum and Articles of Association, identity/address proofs of directors/shareholders, and payment of necessary registration fees. Upon successful verification, the RoC will review the documents and issue a Certificate of Incorporation. 

Payment of Registration Fees 

The payment of registration fees for company registration in Chennai by foreign shareholders is made as per the prescribed fee structure provided by the RoC. The fees vary depending on factors such as the authorized share capital and the registered company type. The payment is typically made through electronic means or bank drafts per the RoC’s guidelines.

Verification and Approval Process

The verification and approval process for registering a company in Chennai by foreign shareholders involves the following steps:

• Submission of documents and application to the RoC.
• Verification of documents by the RoC.
• RoC’s review and approval of the application.
• Issuance of Certificate of Incorporation by the RoC, indicating successful company registration.
• Completion of post-registration formalities, such as obtaining a PAN and TAN. 

Issuance of Certificate of Incorporation

Upon completing the registration process, including submission of required documents and compliance with legal formalities, the Registrar of Companies in Chennai will issue a Certificate of Incorporation. This certificate confirms the company’s establishment and provides its unique corporate identity number, signifying its legal existence.

Post-Registration Compliance 

A. Statutory Compliance Requirements 

Foreign shareholders with a company registered in Chennai must comply with the following statutory compliance requirements: 

• filing annual financial statements, 
• holding annual general meetings, 
• maintaining proper accounting records, 
• submitting tax returns, and 
• adhering to labour and employment laws.

B. Obtaining Goods and Services Tax (GST) Registration 

Foreign shareholders registered in Chennai must obtain Goods and Services Tax (GST) registration if their business activities involve the supply of goods or services in India. GST registration ensures compliance with the country’s tax regulations and enables the company to collect and remit GST to the government.

C. Opening a Bank Account 

Foreign shareholders of a company registered in Chennai need to comply with the following requirements to open a bank account: 

• providing documents such as the Certificate of Incorporation, 
• MOA and AOA, and 
• proof of identity and address of the shareholders. 

D. Obtaining Business Licenses and Permits

After company registration in Chennai, foreign shareholders need to comply with the following business licenses and permits: 

• obtaining a GST registration, 
• professional tax registration, 
• trade license, 
• environmental clearances, and 
• any specific industry-specific licenses or permits applicable to their business operations. 

E. Compliance with Foreign Exchange Regulations

Foreign shareholders of a company registered in Chennai need to comply with the following foreign exchange regulations: 

• adhering to guidelines and reporting requirements set by the Reserve Bank of India (RBI) regarding foreign investment, 
• repatriation of funds, and 
• compliance with foreign direct investment (FDI) norms applicable to their specific industry sector.

F. Appointment of Auditors and Annual Filing Requirements

Foreign shareholders with a company registered in Chennai must comply with the appointment of auditors as per the Companies Act 2013. They are also required to fulfil the following:

• Annual filing requirements,
•  submitting financial statements, annual returns, and other statutory documents to the RoC within the specified timelines. 

Professional assistance from experts like Kanakkupillai is recommended to ensure compliance.

Other Considerations for Foreign Shareholders 

Foreign Direct Investment (FDI) Regulations 

Foreign shareholders looking to register a company in Chennai should consider India’s Foreign Direct Investment (FDI) regulations. These regulations govern the inflow of foreign investment into various sectors and specify the conditions, limits, and procedures for foreign equity participation in specific industries and activities.

Intellectual Property Protection 

Foreign shareholders should consider intellectual property protection when registering a company in Chennai. This includes trademark registration, copyright protection, and patent filing to safeguard their intellectual assets. Seeking legal advice and conducting a thorough IP audit are recommended to ensure proper protection in India.

Employment and Labor Laws 

Foreign shareholders registering a company in Chennai must consider employment and labour laws. Key aspects include compliance with minimum wage regulations, working hours, employee benefits, social security contributions, termination procedures, and adherence to anti-discrimination and workplace safety regulations. Consulting with a local labour law expert is recommended.

Taxation and Double Taxation Avoidance Agreements 

Foreign shareholders considering registering a company in Chennai should carefully consider taxation. They need to understand India’s tax laws and regulations and consider any Double Taxation Avoidance Agreements (DTAA) that may exist between India and their home country to avoid potential double taxation on their income.

Resolving Disputes

Foreign shareholders considering company registration in Chennai should carefully consider dispute resolution mechanisms. They can opt for arbitration or choose the Indian court system for resolution. Including specific provisions in the company’s articles of association can help address potential disputes effectively and efficiently. Seeking legal advice is recommended.

Conclusion

Hence, we can conclude that registering a company in Chennai for Foreign Shareholders is a long process that needs proper assistance.

With Kanakkupillai’s more than 10 years of market experience, we are here to not only assist aspiring entrepreneurs in setting up their businesses in Chennai with:

• Name search to
• Drafting AOA and MOA
• Set all the documents required for incorporation of the company
• Apply to RoC for registration and successfully obtain an incorporation certificate with ease at an economical price.