How to set up a company in India:

India is one of the world’s fastest-growing major economies and a strategic market for many European companies. However, company incorporation in India involves specific legal, regulatory, and compliance requirements that differ significantly from European jurisdictions.

This guide walks you step by step through the process of incorporating a company in India, highlighting the key decisions, legal requirements, and practical considerations for foreign investors.

Step 1: Decide on the Company Structure

Most European companies entering India choose to incorporate a Private Limited Company, because it allows 100% foreign ownership in most sectors, provides limited liability to shareholders, and is widely accepted by banks, customers, and regulators

A Private Limited Company in India requires:

• A minimum of two shareholders;

• A minimum of two directors;

• At least one Resident Director (see Step 5).

Step 2: Reserve the Company Name

What is Name Reservation?

Name reservation is the process of securing a unique name for your Indian company before incorporation. Once approved, no other entity can use the same or a deceptively similar name during the reservation period.

Key Guidelines for Selecting a Company Name

The proposed name must:

• Be unique and not identical or confusingly similar to an existing company;

• Not violate any registered trademarks;

• Avoid restricted or regulated words (such as “National”, “Bank”, or “Trust”) unless specific government approval is obtained;

• Reflect the nature of the business being carried out in India.

Using a Trademarked Name

A trademarked name may be used only if the applicant company owns the trademark, or  written consent is obtained from the trademark owner (usually via a board resolution). Supporting documents must be submitted along with the name reservation application.

Step 3: Arrange a Registered Office Address

To incorporate a company in India, you must provide a registered office address.
Key points to note:

• The address must be a physical location in India;

• It should be a place where commercial activity is permitted;

• The company must be able to receive official correspondence from government authorities.

This address becomes the company’s official address for all statutory and regulatory communication.

Step 4: Determine Share Capital Structure

Types of Share Capital

Indian company law recognizes several forms of share capital, including:

• Authorized Share Capital
  The maximum capital the company is allowed to issue.

• Issued Share Capital
  The portion of authorized capital actually issued to shareholders.

• Subscribed Share Capital
  The part of issued capital that shareholders have agreed to purchase.

• Paid-up Share Capital
  The amount actually paid by shareholders for the subscribed shares.

Minimum Share Capital Requirement

There is no minimum share capital requirement prescribed under Indian law.
A company can be incorporated with very low paid-up capital, even as low as ₹20, although higher capital is often advisable for operational and banking purposes.

Step 5: Appoint Directors and Shareholders

Shareholders

An Indian company can have:

• Individual shareholders

• Corporate shareholders (including foreign companies)

• A combination of both

This makes India suitable for both direct investments by European parent companies and joint venture structures.

Resident Director Requirement

Every Indian company must appoint at least one Resident Director.

Who Is a Resident Director?

A Resident Director is a person who:

• Has stayed in India for at least 182 days during the financial year

For newly incorporated companies, this requirement is applied proportionately by the end of the financial year.

Citizenship Requirement

The Resident Director:

• Does not need to be an Indian citizen

• May be a foreign national or Non-Resident Indian (NRI), provided the residency condition is met

This flexibility is particularly relevant for European companies relocating senior personnel to India.

Step 6: File Incorporation Documents

Once the above elements are in place, incorporation documents are submitted to the Indian Registrar of Companies.

Typical Timeline

• Name approval: 5–7 working days after submission

• Certificate of Incorporation: Approximately 1–2 weeks after filing incorporation documents

Upon approval, the company is legally formed and receives its Certificate of Incorporation.

Step 7: Open a Bank Account and Deposit Share Capital

After incorporation:

• The company must open a bank account in its own name

• The paid-up share capital must be deposited into this account

Commencement of Business

Business operations can begin only after:

• The share capital has been received in the company’s bank account

This is a mandatory compliance step under Indian company law.

Step 8: Prepare for Ongoing Compliance

While incorporation is a major milestone, Indian companies are subject to ongoing regulatory compliance, including:

• Annual filings with the Registrar of Companies

• Tax registrations and filings

• Corporate governance requirements

For European businesses, engaging local advisors early helps ensure long-term compliance and smooth operations.