Setting up Business

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Business in Tamil Nadu

Setting up Business

Understand the fundamentals and regulations involved in establishing an entity

Investor Type
Route
Incorporation of Entity
IEM/IL Registration
Land Parcel Identification
Incentive Sanction Subject to Eligibility
Pre-establishment Clearances
Construction
Pre-operation Clearances
Commercial Production
Post-operation Renewals

Investor Type
Route
Incorporation of Entity
IEM/IL Registration
Land Parcel Identification
Incentive Sanction Subject to Eligibility
Pre-establishment Clearances
Construction
Pre-operation Clearances
Commercial Production
Post-operation Renewals

Note : Click on any tab to see it in detail

Route (for FDI only)

Automatic Approval

No Prior Approval Required; RBI has to be Notified within 30 days of Inward Remittances or Issue of Shares to Non-Residents
Sectors under Automatic Route: Click Here

Government Approval

Foreign Investment Proposed, but not covered under the ‘Automatic Route’ are considered for Governmental Approval on the Recommendations of the Entrusted to the concerned Administrative Ministries/Departments.
Single Point Interface to Facilitate Foreign Direct Investment in Sectors where Government Approval is required: Click Here
Sectors where Government Approval is required: Click Here

Incorporation Of Entity

For setting up a business in India, an investor will need to decide which form of legal entity the business will take to start the operations. The favourable options for carrying out manufacturing/services and other related business operations are:

Private Limited Company - A Private Limited Company is a Separate Legal Entity, which offers Limited Liability to its Shareholders. The Shareholders are Limited and usually is closely held within the Group
Public Limited Company - A Public Limited Company is a Separate Legal Entity that offers Limited Liability. The Shares are widely held and offered to the General Public.
Limited Liability Partnership - Limited Liability Partnership is a Separate Legal Entity and is Liable to the full Extent of its Assets but the Liability of the Partners is Limited to their agreed Contribution in the LLP.

Comparative Analysis of different Business Establishments in India:

Particulars	Private Company	Public Company	LLP
Minimum Members	2	7	2 partners
Maximum Members	200	Unlimited	No Limit
Minimum Directors	2	3	2 Designated Partners
Maximum Directors	15	15	NA
Resident Director (mandatory)	1	1	1 Designated Partner
Transfer of Ownership	Ownership can be transferred	Ownership can be transferred	Ownership can be transferred
Subscription of shares	Public subscription not allowed	Public subscription allowed	Public subscription not allowed
Legal Status	Pvt Co is a separate legal entity registered under Companies Act, 2013. The Directors are liable for defaults made under the act	Public Co is a separate legal entity registered under Companies Act, 2013. The Directors are liable for defaults made under the act	LLP is a separate legal entity registered under LLP Act, 2008. The Designated partners of LLP are liable for contraventions under the act
Annual statutory filings	Annual statement of accounts & annual return with ROC	Annual statement of accounts & annual return with ROC	Annual statement of solvency & annual return with ROC

Additional Information

No minimum paid up capital, No filing for SPICe+ company incorporation form and filing of eMoA, eA0A. It takes ~ 18 days for the company incorporation process.

Pre-requirements for Company Incorporation
- Minimum of two Persons should act as Directors and two Persons as Shareholders
- Memorandum of Association and Articles of Association (Charter Documents) have to be Executed
- Resolution to be passed by the Foreign Company’s Board for Incorporating a Company in India and Authorizing a Person to Sign on its behalf Duly Notarized and Apostilled
Company Incorporation
- Simplified Single web based form SPICe+ to be filed online in order to Incorporate a new Company in India, which includes Processes such as Name Reservation, etc.
- Digital Signature Certificates (DSC) to be Applied for Directors
- Other Tax and Regulatory Registrations can be Processed through a Simplified form AGILE-PRO, and Bank Accounts may also be opened
- The Registrar of Company will Issue a Certification of Incorporation on Successful Formation of the Company
Post Incorporation compliances
- Appointment of Statutory Auditor should be done within 30 days of Incorporation. Board of Directors must Appoint a practicing Chartered Accountant to act as the Statutory Auditor.
- Within 180 days of Incorporation, mentioned Capital in the Charter Documents has to be deposited in the Indian Bank Account and a Commencement Certificate needs to be obtained from the MCA.

IL/IEM Registration

Industrial Entrepreneur Memorandum (IEM)

Industrial undertakings exempted from the requirements of Industrial Licensing under Industries (D&R) Act, 1951 are required to file information relating to setting up of industries
Existing Units, New undertaking having an investment of Rs 10 Crore or above in the 'manufacturing sector' and Rs. 5 Crore or above in the 'services sector are required to file an IEM
Cannot be considered as a clearance /approval to carry on any industrial activity contemplated in the IEM unless the provisions of statutes/regulations/notifications etc., issued by the Central/ State Governments or any specific directions or Stay Orders issued by the Court/competent authority relevant to such an activity, are also fully complied with
For Detailed Overview: Click Here

Industrial Licensing (IL)

Licensing is done under Industries (Development & Regulation) Act 1951. Post 1991 de-licensing, presently only five industries require compulsory licensing :
- Electronic Aerospace and Defence Equipment
- Industrial explosives including detonating fuses, safety fuses, gun powder, nitrocellulose and matches
- Cigars and cigarettes of tobacco and manufactured tobacco substitutes
- Specified hazardous chemicals i.e., (i) hydrocyanic acid and its derivatives (ii) Phosgene and its derivatives and (iii) Isocyanates & disocyanates of hydrocarbon not elsewhere specified (example methyl Isocynate)
- Distillation and brewing of alcoholic drinks
Any non-MSME unit manufacturing these items, need an IL which is issued with an obligation to export 50% of the new additional annual production to be achieved within a maximum period of 3 years
For Detailed Overview: Click Here
FAQ: Click Here

Land Parcel Identification

The following points need to be considered before finalizing the land parcel by any investor:

Qualitative Parameters	Quantitative Parameters
Park/ zone special package/ incentives (special economic zone, free trade zone, etc.)	Buy v/s Built to Suit cost
Plot size, shape and number of land lease options	Industrial ecosystem: distance to suppliers/ customers
Infrastructure: Quality of industrial park infrastructure development	Connectivity: Distance or proximity to ports, airports, outbound logistics, Proximity to residential areas for employees
Industrial ecosystem: Presence of major customer/ supplier base	Manpower costs
Manpower availability	Utilities: Cost for electricity, water supply, natural gas etc.
Utilities: Quality of power supply, water supply, fuel etc.	Categorization of business and land from a Pollution Control Board perspective i.e. (Red, orange and green categories)

Categorization	Based on	Particulars
	Land	Private Land, Private Industrial Parks, Government Parks
	Business Type	SEZ, EOU, DTA
	Ownership	Freehold, Lease, BTS, RBF
	EIA Classification	Category A, B, B1

For more details visit:

SIPCOT Locations: Click Here

Special Economic Zone (SEZ) Schemes: Click Here

Export Oriented Unit (EOU) Schemes: Click Here

Incentive Sanction (Subject to Eligibility)

Tamil Nadu offers competitive policies to support the investors in their capital investment through a wide range of incentives like-

Capital Subsidy
SGST Reimbursement
Land Cost Subsidy
Stamp Duty Exemption
Training Subsidy
Green Industry Incentive
Electricity Tax Exemptions

Customized packages can be structured on case to case basis.

For more details, visit:

TNIP 2021: Click Here
TNEV: Click Here
TNEHMP: Click Here
TN A&D: Click Here
Policy Team: Click Here

Pre-establishment Clearances

Name of the Clearance	Department
Allotment of Land in Industrial Area	State Industries Promotion Corporation of Tamil Nadu (SIPCOT) Small Industries Development Corporation (SIDCO)
Planning Permission for the Factory Buildings	Chennai Metropolitan Development Authority (CMDA) Directorate of Town and Country Planning (DT & CP)
Building Permit	Greater Chennai Corporation Municipal Corporation/Municipality Town Panchayat Village Panchayat
Approval for Factory Plans	Directorate of Industrial Safety and Health (DISH)
Fire Safety - No Objection Certificate	Fire and Rescue Services
Statutory Approval of Electrical Drawings	Tamil Nadu Electrical Inspectorate
Power Connection	Tamil Nadu Generation and Distribution Corporation (TANGEDCO)
Water Connection	Chennai Metropolitan Water Supply and Sewerage Board
Water Connection	Tamil Nadu Water Supply and Drainage Board (TWAD Board)
Consent to Establish (CTE)	Tamil Nadu Pollution Control Board
Registration of Establishments for Employing Building and Other Construction Workers	Directorate of Industrial Safety and Health (DISH)
Change of Land Use for lands located in non-planned areas	Directorate of Town and Country Planning (DT & CP)
Approval for Boiler Manufacturer from Directorate of Boilers	Directorate of Boilers
Approval for Boiler Erector from Directorate of Boilers	Directorate of Boilers
Registration of Partnership Firms	Registration Department
Registration of Societies	Registration Department
Registration of immovable property	Registration Department
Property mark registration and issue of transit permit for Red Sander Wood	Department of Forest
Property mark registration and issue of transit permits for Non-exempt trees other than Red Sanders Trees/ Timber	Department of Forest
No Objection Certificate	Directorate of Public Health and Preventive Medicine
Registration and mutation of land records	Revenue Department
Permission for road cutting/ Right of Way	Greater Chennai Corporation Municipal Corporation/Municipality Town Panchayat Village Panchayat
NOC for felling and selling of sandal wood trees	Department of Forest
NOC for prior intimation of felling of Red sanders, Black wood, Silver oak, Rose wood and Teak trees	Department of Forest

For more details visit: Click Here

Pre-operation Clearances

Name of the Clearance	Department
Issue of Trade License	Greater Chennai Corporation Municipal Corporation/Municipality Town Panchayat Village Panchayat
Final Safety Certificate	Tamil Nadu Electrical Inspectorate
Factory Registration and License	Directorate of Industrial Safety and Health (DISH)
Fire & Rescue Services License	Fire and Rescue Services
Compliance Certificate	Fire and Rescue Services
Consent to Operate (CTO)	Tamil Nadu Pollution Control Board
Authorization for Handling Hazardous Wastes	Tamil Nadu Pollution Control Board
Boiler Registration and Issue of Certificate for the use of Boiler	Directorate of Boilers
Registration of Principal Employer Establishments for Employing Contractual Workmen	Directorate of Industrial Safety and Health (DISH)
Registration of Principal Employer Establishments for Employing Inter-State Migrant Workmen	Directorate of Industrial Safety and Health (DISH)
License for Manufacturer/Repairer/Dealer of Weights or Measures	Labour Department
License for Contractor for Employing Contractual Workmen	Labour Department and Directorate of Industrial Safety and Health (DISH)
License for Contractor for Employing Inter-State Migrant Workmen	Labour Department and Directorate of Industrial Safety and Health (DISH)
Grant of a License to Sell, Stock or Exhibit or offer for Sale or Distribute Drugs	Food Safety and Drug Administration Department
Grant of a License to Manufacture/ Loan License to Manufacture/ Repack for Sale or for Distribution of Drugs	Food Safety and Drug Administration Department

For more details visit: Click Here

Post-operation Clearances

Name of the Clearance	Department
Renewal of Consent to Operate (for enterprises that had applied initial approval through the single window portal)	Tamil Nadu Pollution Control Board
Renewal of Authorization for Handling Hazardous Wastes	Tamil Nadu Pollution Control Board
Renewal of Certificate Authorizing the Use of Boiler (for enterprises that had applied initial approval through the single window portal)	Directorate of Boilers
Renewal of Factories License (for enterprises that had applied initial license through the single window portal)	Directorate of Industrial Safety and Health (DISH)
Renewal of Fire & Rescue Services License	Fire and Rescue Services
Renewal of License for Manufacturer/Repairer/Dealer of Weights or Measures	Labour Department
Renewal of License for Contractor for Employing Contractual Workmen	Labour Department and Directorate of Industrial Safety and Health (DISH)
Renewal of License for Contractor for Employing Inter-State Migrant Workmen	Labour Department and Directorate of Industrial Safety and Health (DISH)
Renewal of Approval for Boiler Manufacturer (for enterprises that had applied initial approval through the TN e-Sevai Open Portal)	Directorate of Boilers
Renewal of Approval for Boiler Erector (for enterprises that had applied initial approval through the TN e-Sevai Open Portal)	Directorate of Boilers
Renewal of License to Sell, Stock or Exhibit or offer for Sale or Distribute Drugs (for enterprises that had applied initial license through the TN e-Sevai Open Portal)	Food Safety and Drug Administration Department
Renewal of License/ Loan License to Manufacture/ Repack for Sale or for Distribution of Drugs (for enterprises that had applied initial license through the TN e-Sevai Open Portal)	Food Safety and Drug Administration Departmentt

For more details visit: Click Here