Forms of Buisness

• a company
• a partnership
• a cooperative
• a joint Hindu family; and
• a sole proprietorship.

In a public limited company, the minimum number of shareholders is seven with no maximum limit. The minimum amount of capital is INR 500,000 for a public limited company. There is no statutory provision for a company to have a supervisory board.

The various kinds of companies that are recognized by the Companies Act 2013 are as follows:

• public limited companies;
• public unlimited companies;
• private limited companies;
• private unlimited companies; and
• one-person companies (OPCs).

For a company with unlimited liability, the liability of the members is unlimited. Limited companies can be limited either by shares or guarantee. Unlimited companies and companies limited by guarantees may or may not have share capital. The most prevalent form of large business enterprises is a company incorporated with limited liability, and companies limited by guarantee and unlimited companies are relatively uncommon.

The minimum number of shareholders in a private limited company is 2, while the maximum is 200. The minimum amount of capital is INR 100,000 for a private limited company. There is no statutory provision for a company to have a supervisory board. The concept of OPC was introduced by the CA 2013 and enables an entrepreneur carrying on a business in the sole proprietor form to enter into a corporate framework. An OPC is a hybrid of the sole proprietor and corporate form of business, and has been provided with concessional/relaxed requirements under the CA 2013. Only a natural person who is an Indian citizen and resident in India (i.e. who has stayed in India for a period of not less than 182 days during the immediately preceding calendar year) is eligible to incorporate an OPC. The OPC must have a minimum of one director, who can be the sole shareholder himself, and it can have a maximum of 15 directors.

Registrars of Companies (ROC) appointed under the Companies Act are vested with the primary duty of registering companies in the respective states and the Union Territories. Stamp duties and a registration fee are also payable.

Partnerships are governed by the Indian Partnership Act 1932. The number of partners may not exceed 20, or 10 in the case of a banking business. The liability of the partners is unlimited and the partnership firm has no separate legal existence of its own.

The partnership deed or partnership firm need not be registered. However, registration is advisable as an unregistered firm may be deprived of certain legal benefits.

The Limited Liability Partnership Bill 2008 was passed by Parliament in December 2008 and received presidential assent in January 2009. It was subsequently gazetted as the Limited Liability Partnership Act 2008, under which:

• the current Indian Partnership Act 1932 will not apply, which means that unlike an ordinary partnership, a limited liability partnership (LLP) may have an unlimited number of partners;
• a partner in an LLP can be an individual or a corporate body, and may include non-residents;
• the liability of partners in an LLP will be limited to their agreed contribution;
• LLPs may be used for various business activities and not just for the provision of professional services;
• ordinary partnerships, private limited companies and unlisted public companies may be converted into LLPs; and
• foreign LLPs may establish a presence in India, although details have yet to be issued.

A foreign LLP is a body corporate regarded as a company under the Income Tax Act. A domestic LLP, although a body corporate, is regarded as a partnership under the Income Tax Act.

A joint Hindu family business is a distinct type of organization. In this form of business ownership, all members of a Hindu undivided family do business jointly under the control of the head of the family, known as the karta. The members of the family are known as co-parceners. Such an organization comes into existence by the operation of Hindu law and not out of contract. Membership is the result of status arising from birth in the family.

Registration is not necessary.

There are no specific provisions. A holding company is defined in the CA 2013, in relation to one or more other companies, as a company of which such companies are subsidiary companies.

A foreign company is required to comply with the provisions of the CA 2013 with regard to its business carried on in India as if it were a company incorporated in India if 50% or more of its paid-up share capital is held by one or more Indian citizens or companies incorporated in India. The foreign company must register with the ROC within 30 days of the establishment of its place of business in India.

A foreign company means any company or body corporate incorporated outside India that has a place of business in India whether by itself or through an agent, physically or through electronic mode, and conducts any business activity in India in any other manner.

There are no specific provisions. Joint venture companies incorporated in India are treated the same as domestic companies.

India has systematically rolled out a public-private partnership (PPP) programme for the delivery of high-priority public utilities and infrastructure. The PPP Cell of the Department of Economic Affairs provides key information related to PPP initiatives in India, including policy documents, government guidelines, model documents, project information, information on the institutional mechanisms for appraisal of PPP infrastructure projects, schemes developed for financial support to PPP projects and guidance material and reference documents developed by the PPP Cell.

A sole proprietorship business has no legal existence separate from its owner. The liability of the proprietor is unlimited and ease of formation is its most important feature because it is not required to go through elaborate legal formalities. No agreement needs to be made and registration of the firm is also not essential. However, the owner may be required to obtain a licence specific to its line of business from the local administration.

A cooperative society is a voluntary association of ten or more members, who join together on the basis of equality for the fulfilment of their economic or business interest. Registration of a cooperative enterprise with the Registrar of Co-operative Societies is compulsory. A cooperative has a separate legal existence.

Cooperatives are to the provisions of the Co-operative Societies Act 1912 or respective State Co-operative Societies Acts. There are different types of cooperatives such as consumer cooperatives, producer’s cooperatives, marketing cooperatives, housing cooperatives, credit cooperatives and farming cooperatives, but the aim of all such cooperatives is to promote the welfare of their members.