Local Indian Subsidiary or Joint Venture Company :

Subject to Foreign Direct Investment Guidelines and Foreign Exchange Regulations discussed in Chapter three, a foreign company can set-up its own wholly owned Indian subsidiary or joint venture company with an Indian or foreign partner.

Subsidiary or a joint venture company can be formed either as a private limited company or a public limited company. A private limited company is obliged to restrict the right of its members to transfer the shares, can have only 50 shareholders and is not allowed to have access to deposits from public directly. It is also subject to less corporate compliances requirements as compared to a public company which is eligible for listing on stock exchanges. A company is regulated inter alia by the Registrar of Companies (ROC) under the Companies Act, 1956. The table below highlights certain key differences between a private and public company:

  Private Limited company Public Limited company
Minimum number of shareholders 2 7
Maximum number of shareholders 50 Unlimited
Minimum number of directors 2 3
Maximum number of directors 7 12 (can be increased with Government approval)
Minimum paid –up capital requirement in general INR 1,00,000 INR 5,00,000

A private company can commence business immediately on obtaining a Certificate of Incorporation from the Registrar of Companies (ROC). A public company is required to obtain a “Certificate of Commencement of Business” by filing additional documents with the ROC.