Doing business

India

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Setting up a company | FDI in figures | Why you should choose to invest | Procedures relative to foreign investment | Finding assistance for further information

Setting up a company

Types of companies and capital (max/min)	Number of partners/shareholders and liability
Sole Proprietorship No minimum capital	One Unlimited liability.
Partnership No minimum capital	Minimum number is 2, while as the maximum number can be 10 in case of banking business and 20 in all other types of business. Liability of the partners is unlimited.
Private Limited Minimum paid up capital of INR 100,000	Minimum number is 2, while as the maximum number can be 50 Limited liability to the amount contributed.
Public Limited Minimum paid up capital of INR 500,000	Minimum number is 7; while as there is no limit on the maximum number of members/shareholders. The liability of a member is limited to the face value of the shares he owns.
Co-operative No minimum capital requirement	Minimum number is 10; while as there is no limit on the maximum number of members. However, the members must be residing or working in the same locality. The liability of a member is limited to the extent of his capital contribution.
Hindu United Family Business (HUF) No minimum capital	All members of a Hindu undivided family can do business jointly under the control of the head of the family who is known as the 'Karta'. The members of the family are known as 'Co-parceners'. The Karta has unlimited liability while the liability of the other members is limited to the value of their individual interests in the joint family.

Business setup procedures

Setting up a company	India	South Asia
Procedures (number)	12.0	7.1
Time (days)	29.0	24.6

Source: Doing Business.

For further information: Consult Doing Business Website, to know about procedures to start a Business in India.
Ministry of Corporate Affairs, List of registered Certified Filing Centres.
Kerala Trade Register
The competent organization: Registrar of Companies (ROC)

Company Law Board

FDI in figures

Foreign Direct Investment	2008	2009	2010
FDI inward flow (millions USD)	40,418	35,649	24,640
FDI stock (millions USD)	123,293.7	167,023.2	197,939.3
Performance Index*, ranking on 141 economies	82	63	-
Potential Index**, ranking on 141 economies	84	-	-
Number of Greenfield investments***	965	742	-
FDI inwards (in % of GFCF****)	9.6	6.6	-
FDI stock (in % of GDP)	9.6	12.9	-

Source:

Note: * The UNCTAD Inward FDI Performance index is based on a ratio of the country's share in global FDI inflows and its share in global GDP. ** The UNCTAD Inward FDI Potential index is based on 12 economic and structural variables such as GDP, foreign trade, FDI, infrastructures, energy use, R&D, education, country risk. *** Green field investments are a form of foreign direct investment where a parent company starts a new venture in a foreign country by constructing new operational facilities from the ground up. **** Gross fixed capital formation (GFCF) measures the value of additions to fixed assets purchased by business, government and households less disposals of fixed assets sold off or scrapped.

Why you should choose to invest India

Strong points: - A three-tiered democratic system that ensures a stable polical environment;
- a well developed administration and an independent judicial system;
- a vast geography making India a repository of resources;
- an unparallel resource of an educated, hard-working and skilled work force, which includs engineers, management personnel, accountants and lawyers;
- a ever growing consumer base making it one of the world's largest markets for manufactured goods and services;
- a dynamic and robust financial system consisting of a comprehensive banking network, a number of financial institutions both at the national and State levels as well as a vibrant financial market;
- an economy that will continue to grow despite the international economic crisis.
Weak points: - The corruption (particularly at the federal level)
- political pressures;
- restricted FDI in certain sectors;
- the weakness of infrastructures;
- inadequate security & safety in certain areas.
Government measures to motivate or restrict FDI: The government has set up tax and non-tax incentives to establish new industrial entities in specific sectors, which include energy, ports, highways, electronics and software. The government has also created special areas dedicated to export, called export-processing zones (EPZs) or special economic zones (SEZs), to encourage foreign investment.
The central government development banks and state industrial development banks offer medium to long-term loans and sometimes invest their own capital in new projects.
However, the government has set sector-specific ceilings on foreign assets in certain industries, such as basic and cellular telecommunications services, banking, retail and civil aviation.
For more details visit: Investment Commission of India.
Bilateral investment conventions signed by India: Bilateral investment treaties with the United Kingdom, France, Germany, Canada, Malaysia, and Mauritius. UNCTAD allows you to visualize the list of conventions signed by India.

Procedures relative to foreign investment

Freedom of establishment: Various approvals and clearances are required such as permission for land use in case the factory is located outside an industrial area; environmental site approval; registration under State Sales Tax Act and Central and State Excise Acts; and consent under Water and Air Pollution Control Acts.
Acquisition of holdings: Acquisitions by private arrangement would be contractual agreements between the parties and would take the form of: share acquisitions; asset transfers; or spin off or slump sale.
Obligation to declare: Mergers and acquisitions are generally governed by the Companies Act, 1956 and the sector-specific law.
In the case of listed companies, provisions of Listing Agreements with the stock exchange SEBI (Disclosure & Investor Protection Guidelines)-2000, SEBI (Substantial Acquisition of Shares and Takeovers) Regulations- 1997 must be complied with. If a merger has cross-border aspects, the parties must comply with among others the foreign direct investment policy of the government, the Foreign Exchange Management.
Competent organization for the declaration: Department of Industrial Policy and Promotion
Requests for specific authorizations: Environment clearance from the Ministry of Environment and Forest for investment of foreign capital in fields like petrochemicals complexes, petroleum refineries, cement thermal power plants, bulk drugs etc.

Finding assistance for further information

Investment aid agency: Foreign Investment Promotion Board (FIPB)
Foreign Investment Implementation Authority (FIIA)
Department of Industrial Policy & Promotion
India Brand Equity Foundation (IBEF)
Other useful resources: Investment Commission of India
Ministry of Finance
Ministry of Commerce
National Center for Trade Information