Legal Entity Selection and Company Formation in India
Structuring and establishing an Indian legal presence that reflects the business model, ownership, governance and operational requirements.
Entity selection is a legal and commercial decision rather than an incorporation formality. The structure affects ownership and control, liability, funding, profit repatriation, tax, governance, employment, contracting, compliance, closure and the ability to introduce investors or undertake a future sale.
DB Legal advises foreign companies, founders and investors on the available structures and works with company secretaries, accountants, tax advisers, banks and other professionals to implement the selected route.
Private limited company
A private limited company is commonly used for an operating Indian subsidiary, a joint venture, an acquisition vehicle or an investment platform. It provides limited liability, a separate legal identity, a share-capital structure, board-based management and a familiar framework for investment, employee equity and future transfers.
Public company
A public company may be relevant where the proposed ownership, capital-raising or business plan requires a public-company structure. It is subject to a more extensive corporate governance and compliance framework.
Limited liability partnership
An LLP combines separate legal personality and limited liability with a contract-based internal governance model. Its suitability for foreign investment depends on the applicable sector and foreign investment conditions, as well as tax, capital and commercial considerations.
Branch office
A branch is an extension of the overseas company rather than a separate Indian company. Its permitted activities, establishment and operation are governed by the applicable foreign exchange and registration framework.
Liaison office
A liaison office is generally intended for representative and communication activities and is not an ordinary revenue-generating business vehicle. Its permitted functions and funding arrangements are limited.
Project office
A project office may be appropriate for a foreign company executing a specific project in India, subject to the conditions applicable to the project and the establishment of the office.
Legal entity selection factors
-
Scope of permitted business activities and sector licences.
-
Maximum foreign ownership and applicable approval route.
-
Wholly owned, joint venture or partner-based structure.
-
Equity, debt and other funding requirements.
-
Liability separation between the Indian operation and the overseas parent.
-
Board composition, management authority and shareholder controls.
-
Ability to employ personnel and hold Indian assets.
-
Ability to contract and invoice Indian customers.
-
Profit distribution, royalty, service-fee and repatriation requirements.
-
Future fundraising, acquisition, restructuring or exit plans.
-
Tax, accounting, audit, secretarial and regulatory compliance.
-
Time, documentation and ongoing administrative requirements.
Company formation and establishment work
-
Reviewing the proposed ownership, directors, capital structure and business objects.
-
Name availability and corporate identity considerations.
-
Drafting or reviewing the memorandum and articles of association.
-
Drafting shareholder or joint venture arrangements where there is more than one owner.
-
Preparing initial board and shareholder resolutions and governance delegations.
-
Assisting with beneficial ownership, know-your-client and corporate information requirements.
-
Coordinating the registered office and statutory registrations with relevant professionals.
-
Reviewing employment, consultancy, lease, services and other pre-operational documents.
-
Supporting bank-account opening and initial capital infusion from non-resident shareholders.
-
Advising on foreign investment reporting and post-incorporation corporate actions.
Post-incorporation legal framework
The incorporation certificate is only the starting point. A new Indian business ordinarily requires governance documents, authority matrices, contracts with group entities and third parties, employment documentation, data and technology terms, policies, capital and foreign investment records, and a recurring board and shareholder calendar.
DB Legal can establish the initial legal framework and provide continuing support as the Indian entity commences operations, enters contracts, hires personnel, raises or receives funding and expands its activities.