Reply soon sir.
Querist :
Anonymous
(Querist) 21 January 2012
This query is : Resolved
Can 3 citizens of Singapore float an u/s 25 company in India. I am helping some people wanting to start a school for CSR/charity in India. They will obtain NIOS & CBSE affiliation separately. Alternatively, can the buy out an existing u/s 25 company?
Raj Kumar Makkad
(Expert) 21 January 2012
No. Foreign Nationals are not permitted to float a company in India.
M/s. Y-not legal services
(Expert) 22 January 2012
Formation and Registration of a Non -Profit organisations in India
1) Trust
2) Society
3) Section-25 Company
Additional Licensing/ Registration
Section-25 Company
According to section 25(1)(a) and (b) of the Indian Companies Act, 1956, a section-25 company can be established ‘for promoting commerce, art, science, religion, charity or any other useful object’, provided the profits, if any, or other income is applied for promoting only the objects of the company and no dividend is paid to its members.
Legislation : Section-25 companies are registered under section-25 of the Indian Companies Act. 1956.
Main Instrument : For a section-25 company, the main instrument is a Memorandum and articles of association (no stamp paper required)
Trustees : A section-25 Company needs a minimum of three trustees; there is no upper limit to the number of trustees. The Board of Management is in the form of a Board of directors or managing committee.
Application for Registration :
1.An application has to be made for availability of name to the registrar of companies, which must be made in the prescribed form no. 1A, together with a fee of Rs.500/-. It is advisable to suggest a choice of three other names by which the company will be called, in case the first name which is proposed is not found acceptable by the registrar.
2.Once the availability of name is confirmed, an application should be made in writing to the regional director of the company law board. The application should be accompanied by the following documents:
Three printed or typewritten copies of the memorandum and articles of association of the proposed company, duly signed by all the promoters with full name, address and occupation.
A declaration by an advocate or a chartered accountant that the memorandum and articles of association have been drawn up in conformity with the provisions of the Act and that all the requirements of the Act and the rules made thereunder have been duly complied with, in respect of registration or matters incidental or supplementary thereto.
Three copies of a list of the names, addresses and occupations of the promoters (and where a firm is a promoter, of each partner in the firm), as well as of the members of the proposed board of directors, together with the names of companies, associations and other institutions in which such promoters, partners and members of the proposed board of directors are directors or hold responsible positions, if any, with description of the positions so held.
A statement showing in detail the assets (with the estimated values thereof) and the liabilities of the association, as on the date of the application or within seven days of that date.
An estimate of the future annual income and expenditure of the proposed company, specifying the sources of the income and the objects of the expenditure.
A statement giving a brief description of the work, if any, already done by the association and of the work proposed to be done by it after registration, in pursuance of section-25.
A statement specifying briefly the grounds on which the application is made.
A declaration by each of the persons making the application that he/she is of sound mind, not an undischarged insolvent, not convicted by a court for any offence and does not stand disqualified under section 203 of the Companies Act 1956, for appointment as a director.
3.The applicants must also furnish to the registrar of companies (of the state in which the registered office of the proposed company is to be, or is situate) a copy of the application and each of the other documents that had been filed before the regional director of the company law board.
4.The applicants should also, within a week from the date of making the application to the regional director of the company law board, publish a notice in the prescribed manner at least once in a newspaper in a principal language of the district in which the registered office of the proposed company is to be situated or is situated and circulating in that district, and at least once in an English newspaper circulating in that district.
5.The regional director may, after considering the objections, if any, received within 30 days from the date of publication of the notice in the newspapers, and after consulting any authority, department or ministry, as he may, in his discretion, decide, determine whether the licence should or should not be granted.
6.The regional director may also direct the company to insert in its memorandum, or in its articles, or in both, such conditions of the licence as may be specified by him in this behalf.
Source : CAF India
Model MOA : http://www.karmayog.org/startanngo/startanngo_11420.htm
For more details do see the below Link
icai.org/icairoot/publications/complimentary/cajournal_may04/p1241-46.pdf
-tom-
malipeddi jaggarao
(Expert) 22 January 2012
I agree with expert MR.Makkad. Mr.Tom the query is whether foreign nationals float a company in India under sec.25of Company Act. Your reply is not applicable to foreign nationals. Foreign national can not out rightly buy Indian Company but they can join with the Indian Company.
M/s. Y-not legal services
(Expert) 22 January 2012
you are welcome mr.jaggarao..
what you meant by foreign national?
Foreign companies
Indian has amongst the most 6 liberal and transparent policies on FDI among emerging economies. FDI up to 100% is allowed under almost all activities, except a few.Press Note 7 (2008 Series) further provides that the following sectors are prohibited for FDI:
The extant policy does not permit FDI in the following cases:
(I) gambling and betting;
(II) lottery business;
(III) atomic energy;
(IV) retail trading (except single branded product retailing).
General permission of the Reserve Bank of India (RBI) is available to Indian companies to issue right/bonus shares, subject to certain conditions. Entitlement of rights shares is not automatically available to investors who have been allotted such shares as Overseas Corporate Bodies (OCBs). OCBs have been derecognized as a class of investors with effect from 16 September 2003. Such issuing companies would have to seek specific permission from RBI, Foreign Exchange Department, Foreign Investment Division, Central Office, Mumbai for issue of shares on right basis to erstwhile OCBs. However bonus shares can be issued to erstwhile OCBs
Where a scheme of merger or amalgamation of two or more Indian companies has been approved by a court in India, the transferee company may issue shares to the shareholders of the transferor company resident outside India, subject to ensuring that the percentage of shareholding of persons resident outside India in the transferee or new company does not exceed the percentage specified in the approval granted by the Central Government or the RBI.
An individual resident in India may purchase equity shares offered by a foreign company under its ESOP scheme if he/she is an employee or a director of an Indian office, branch or subsidiary of a foreign company.
In the case of the software field, a resident may purchase shares of a Joint Venture Company/Wholly owned Subsidiary (JV/WOS) if he/she is an employee or director of the Indian Promoter Company where the shares so acquired do not exceed 5% of the paid-up capital of the JV/WOS outside India. .
Entry options for foreign investor
By incorporating a company under the Companies Act 1956 through:
!. By incorporating a company under the Companies Act 1956 through:
(II) joint ventures; or
(III) wholly owned subsidiary.
Foreign equity in such Indian companies can be up to 100% depending on the requirements of the investor, subject to any equity caps prescribed in respect of activities under the FDI policy.
2. As a foreign company through:
(I) liaison office/representative office;
(II) project office;
(III) branch office.
Such offices can undertake activities permitted under the Foreign Exchange Management (Establishment in India of Branch Office of other place of business) Regulations, 2000.
Establishments set up in Special Economic Zones, Free Trade Zone, Software Technology Park or as Export Oriented Units, are entitled to several fiscal benefits. Please note that the benefits extended to the above cease in 2010, with the exception of Special Economic Zones, which do not have a Sunset Clause.
Foreign Companies
Registration of non-resident companies
A foreign company, meaning a body corporate incorporated outside India but having a place of business in India (Companies Act, sec 591), is required, within 30 days of the establishment of a place of business in India, to deliver to the Registrar for registration, a certificate copy of the charter, statutes, memorandum articles, etc, of the company, full address of the registered or principal office of the company, names of the persons in India authorized to accept service of process on the company and the full address of the office of the company in India.
The Registrar, for the purposes of a foreign company, is the Registrar having jurisdiction over New Delhi. The documents referred to must also be delivered to the Registrar of the State in which the principal place of business of the company is situated.
Establishing a legal presence in India
In addition to a wholly owned subsidiary/joint venture in India, a foreign company may establish its presence in India by either setting up:
a liaison office;
b branch office;
c branch office;
Establishing a liaison office and a branch office or project office requires prior approval of the Reserve Bank of India (“RBI”). Liaison office in India.
A liaison office means a place of business to act as a channel of communication between the principal place of business or head office and the entity in India but which does not undertake any commercial/trading/industrial activity and maintains itself out of inward remittances received from abroad. A liaison office may be permitted to carry on the following activities:
a representing in India the parent company/group companies;
b promoting export/import from/to India;
c promoting technical/financial collaboration between parent/group companies and companies in India; and
d acting as a communication channel between the parent company and Indian companies.
Branch office in India
A foreign company/person resident outside India may be permitted by RBI to undertake the following activities:
(I) import/export of goods;
(II) rendering professional or consultancy services;
(III) carrying out research work in which the parent company is engaged;
(IV) promoting technical or financial collaborations between Indian companies and parent or overseas group company;
(V) representing the parent company in India and acting as buying/selling agent in India;
(VI) rendering services in information technology and development of software in India;
(VII) rendering technical support to the products supplied by the parent/group companies;
and foreign airline/shipping company
-tom-
Sailesh Kumar Shah
(Expert) 22 January 2012
Alternatively, can the buy out an existing u/s 25 company?
Answer: Check FDI Rules.
V R SHROFF
(Expert) 22 January 2012
Foreigner can have over 75% share holding called MNC
Mr. Shah may throw more light
Sailesh Kumar Shah
(Expert) 22 January 2012
@Mr.Shroff
I am not totally aware from FDI policy. But I also know that it should also comply FDI rules.
Guest
(Expert) 03 July 2013
The economic reforms launched by the Government from 1991 onwards have resulted in substantial economic growth and the integration of India into the global economy. The pace of reforms has gained a
new momentum due to political stability and strong industrial growth. With the opening up of the Indian capital markets to Foreign Institutional Investors in 1993, the Foreign Direct Investment (FDI) regime too
has been progressively liberalized.
The FDI Policy in India is formulated by the Department of Industrial Policy and Promotion (DIPP), Ministry of Commerce and Industry. In formulating the sector-specific FDI policy for various sectors, the guidelines issued by the other Ministries of the Central Government are also taken into account. While the FDI Policy formulated lays down the broad policy framework relating to foreign investments in India, the administration of the policy and its implementation are done through the exchange control laws governed
by the Foreign Exchange Management Act, 1999 (FEMA). The FEMA confers powers on the Reserve Bank of India (RBI), the apex bank of the country, to frame detailed regulations in respect of various
aspects of exchange control in a liberalized framework. Similarly, the Government has been empowered to frame rules. The RBI and the Government have accordingly announced a series of regulations and rules respectively relating to various aspects of exchange control, including foreign investments into India.
These regulations and rules give legislative effect and force to the policy formulated by the DIPP.
The FEMA and the regulations relating to FDI framed there under by the RBI (FDI Regulations) have from time to time, on a progressive basis, been liberalizing the exchange control regime of India. Foreign
investments in most sectors are now under what is known as the “automatic route”, which essentially means that an investor can bring in investment in those sectors without any prior approval from any
regulatory authority. Some of the sectors continue to be regulated through stipulated maximum caps.
Where the foreign investment does not come under purview of the automatic route, they will be subject to the consent of the Foreign Investment Promotion Board (FIPB) (the “approval route”). Foreign investment
in the Telecom services, for example, could be made up to the extent of 49% of a company’s equity under the automatic route. Foreign investment beyond 49% of the company’s equity would require the prior
approval of the FIPB and would be subject to the guidelines issued by the Government, which in this instance would be the Press Note 3 (2007 Series).
Subsequent to Press Note 2 (2000 Series), FDI up to 100% has been allowed under the automatic route in the Education Sector. Despite this freedom, investment into the education sector has been restricted
due to the prevailing regulations which require the entity setting up the school or college or a deemed
university to be of a non-profit character. The bearing of a not-for-profit character inevitably requires the entity to be either a registered society or a trust (in case of schools, colleges and deemed universities) or a Section 25 company (mostly in case of schools). A trust or a society is not eligible to receive foreign investment under the automatic route. Even if investments were to be permitted, the entities being of nonprofit nature would not be able to distribute returns on the investment. Further, a Section 25 company
being of a charitable nature, would be required to apply its profits or other income towards the promotion of its objects which could be either commerce, art, science, religion, charity or any other useful object.
Foreign Investments in case of Schools & Colleges – Structuring & Options Foreign investments can, thus, be made only into companies providing educational services (Education Services Company) to these trusts, societies or Section 25 companies. A number of funds that have invested in the education sector have setup such Education Services Companies which provide services
to the related trust, society or Section 25 company and is in turn compensated for it. A wide array of services, including management services, teacher training, curriculum designing, etc., can be provided to the related entity running the school from which income can be derived.
The Education Services Company, however, may not be able to provide services in respect of construction and the infrastructure requirements of the school. With the presence of foreign investment in
the Education Services Company, its venture into infrastructure and construction services for the schools may be treated as FDI into construction and development projects, which would then be required to meet the criteria relating to minimum capitalization norms, minimum buildup area, lock-in period, etc. as provided under Press Note 2 (2005 Series). This may not necessarily be commercially viable with respect to educational institutions.
Raj Kumar Makkad
(Expert) 03 July 2013
The basic question still sand unanswered: Whether a Foreign National can form a Company in India?
AND its sole reply is no. If any one has contrary reply then bring it with relevant rule position.
Guest
(Expert) 04 July 2013
Ofcourse a foreign national can. My reply is very specific to that effect. U/s 25 of Companies Act a foreign national can promote a company in India. Recently a Company which is a USA based organization came up with forming a company u/s 25 of Companies Act.
Guest
(Expert) 04 July 2013
My earlier reply to that effect is very specific and the norms and route to be followed in the said regard.
prabhakar singh
(Expert) 04 July 2013
A co.u/s 25 of the Co. Act is basically a non profit organization like an NGO forming where of by foreigners is not prohibited.
Guest
(Expert) 04 July 2013
Exactly Singh Sir
Devajyoti Barman
(Expert) 04 July 2013
A query if one year old is relived today.
Amazing.
Raj Kumar Makkad
(Expert) 04 July 2013
One year old query has been revived now so it is being attended by experts.
ajay sethi
(Expert) 04 July 2013
best of all it was an anonymous query
