STARTING BUSINESS IN INDIA STEP BY STEP GUIDE
January 20, 2020
Company registration has forever been a major hassle for entrepreneurs looking to set up their businesses in India. It’s no wonder then that India has been ranked 142nd on the Ease of Doing Business Index and 158th on Ease of Starting a Business. The newly introduced INC-29, a five-in-one form introduced by the Ministry of Corporate Affairs (MCA) in May 2015, will go a long way toward improving this ranking.
The INC-29 doesn’t replace the old procedure (at least not yet), but significantly reduces interaction with the authorities through the clubbing of forms for DIN allotment, name reservation, incorporation, PAN & TAN, as well as ESIC (Employee state insurance corporation) registration.
- Obtain Digital Signature Certificate from MCA-authorised agency
- Time to Complete: 2 to 5 days
Anyone of the proposed directors must obtain a Class-II Digital Signature Certificate (DSC) from an MCA-authorised agency to use the electronic filing system of the MCA 21. There are six vendors in all, including Tata Consultancy Services, e-Mudhra and n-Code. The rates of each vendor differ vastly, from INR 400 to INR 2650. Charges would include the cost of a physical USB token and the certificate itself.
It would take 2 to 5 days to complete this, mostly depending on how long it takes to courier your documents to the vendor.
The applicant would need to submit the completed Class-II form, self-attested copy of PAN card or, in case of foreign nationals, copy of Passport, and self-attested copy of Voter ID/Ration Card/Driver’s License/Latest Utilities Bill/AADHAR Card.
- Preparing INC-29
- Time to Complete: 1 to 3 days
- Cost to Complete: Company secretary fees
As soon as you get your DSC, you can file INC-29, but don’t assume that you will be ready to do so. The INC-29 is an eight-page form requiring several pieces of information and documents, some of which require a Company Secretary’s signature, to be submitted in one go. Also, in case of errors in your form, resubmission is allowed only once, after which you will have to pay form filing fees again and apply for a refund on the government fees you’ve paid. So please note the documents you need to have in order to prepare the INC-29 and the attachments.
FOR DIRECTOR INFORMATION NUMBER APPLICATION:
Up to three directors can apply for the Director Identification Number (DIN) through INC-29; the rest, if any, may do so separately. The DIN is the number through which the MCA identifies directors of companies. Obtaining a DIN involves the submission of the following documents:
- Scanned copy of Passport-sized photograph
- Scanned copy of PAN card (passport if foreign national) and Driver’s License/Voter ID/Latest Utilities Bill. Both should be self-attested, but foreign nationals would need them notarized by the Indian embassy, too (if they belong to countries, not in the commonwealth, they would also need to be apostilled).
FOR NAME APPROVAL
While the old process allowed you to submit six options for your company name, in order of preference, the INC-29 only allows you to give one option. Understanding the MCA’s naming guidelines, therefore, is critical to ensuring your form is approved on the first attempt. Largely, you need to follow the following rules:
- Ensure that your company’s proposed name has not already been taken on mca.gov.in.
- Ensure that there is no registered trademark in the same name by checking at ipindia.nic.com. If there is one, you can get an NoC from the trademark owner authorising you to use it.
- Ensure that the first half of the name is unique. Avoid geographical references, adjectives, abbreviations and generic terms. Also, the words bank, exchange and stock exchange require approval from RBI and SEBI.
- Ensure that the second half describes the sector you’re in.
Once you’ve decided on a name, also describe the significance of the name in one or two sentences. It would need to be entered into the form.
FOR MEMORANDUM AND ARTICLES OF ASSOCIATION
The Memorandum of Association (MoA) and Articles of Association (AoA) need to be attached to the INC-29. These may or may not be drafted by a Company Secretary, but should contain the signature of one. The MoA will also contain the main objects of your business (keep in mind that the Registrar tends to disapprove of businesses that are in unrelated sectors). You would also need to attach an affidavit from all subscribers through Form INC-9 (available on mca.gov.in). The cost of these documents would vary depending on the Company Secretary you choose.
FOR REGISTERED OFFICE VERIFICATION
All companies must have a registered office address. This does not have to be a commercial space. It can even be the home of a director. But the details need to be provided, along with a copy of the Rental Agreement along with an NoC from the owner (if rented property) and sale deed (if the property is owned).
For Appointment Letters and Declarations
A number of attachments need to be submitted along with the application. These need to be self-attested, but a Company Secretary must give a separate declaration toward your company verifying the authenticity of all the declarations. The required attachments are:
- Letters of appointment of directors, CEO, managers
- Declaration by the first director in INC-9
- Declaration by appointee director and managing director in Form DIR-2.
- Filing INC-29
- Time to Complete: 1 day
If you have all the papers in order, you can now file the INC-29. Fill in the form and attach all the required documents. Ensure that you haven’t missed anything out or it will come in for resubmission. And if the Registrar finds an error in your form on resubmission, too, the form will be rejected completely.
Once you file the form, you will be directed to pay the fees and stamp duty to a payment gateway. The fees will change according to the authorised capital fee and the stamp duty will vary according to your location.
- Issue of Incorporation Certificate
- Time to Complete: 2 days onwards
- Cost to Complete: Does not apply
While the government claims that it will issue the incorporation certificate within two days, this is still to be tested. However, the filing of the single INC-29 form will grant you the incorporation certificate, which is, in itself, a huge step forward.
Once you receive this certificate, you can follow the old steps listed below from Procedure 6 (Make a Seal) onwards. Hopefully, the PAN & TAN and ESIC registrations are also soon combined in the INC-29, as seems to be the plan. This would shorten the procedure some more and move us further up the rankings on the Ease of Doing Business Index.