Opening a Public Limited Company in India: A Guide for US Entrepreneurs | India Business Setup Services for American Companies & US Citizens

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Introduction to setup a Public Limited Company in India by American Companies & US based Firms:
One of the fastest developing/growing economies in the world, India is the best place to expand your business. With a vast geographical area, skilled manpower, and excellent IT infrastructure, India has become the go-to option for foreign entrepreneurs to expand their businesses. In the recent past, many entrepreneurs and businessmen from the US, particularly from New York and California, have entered the Indian market to expand their business. A successful business venture in India can grow your business in an unimaginable manner; as a long-term prospect, you can build a successful business throughout the globe.
In this article, we will learn about how US entrepreneurs can open a Public Limited Company in India and the rules and regulations regarding the same.

Public Limited Company:
A Public Limited Company is a type of company incorporated under the Companies Act 2013 or any previous act and authorized to issue shares to the general public. A Public Limited Company shall have a minimum of 7 members and at least 3 directors.

Why opt for a Public Limited Company in India:
There are several benefits of incorporating a Public Limited Company:
1. Huge Market:
The Indian market is huge and ever-growing. Raising funds and finding a great customer and client base will be easy in this market. US entrepreneurs will not have to struggle or worry about finding a customer base or raising capital from the public.

2. Investments:
The Indian Government has been encouraging young entrepreneurs to incorporate companies/startups and promoting the idea of inviting foreign entrepreneurs to start their businesses in India. In this process, the government has introduced simplified procedures to set up businesses and incorporate companies, as well as simple tax and investment policies.

3. Geographical advantages:
Incorporating a Public Limited Company in India can be a great way to grow your business in Asia. India can provide a gateway to your business and help you find clients and customers throughout Asia.

4. Manpower and workforce:
India is the second-most populated country in the world. It has many skilled labor and software professionals. In India, you can employ the best workforce at a relatively cheaper price. You can find skilled professionals and experts for every sector and business.

5. Supportive government:
The government periodically announces different schemes to encourage foreign investors to enter the Indian Market. There are various tax schemes and grants for foreign entrepreneurs who wish to incorporate a company in India. Benefits such as special economic and industrial zones with excellent infrastructure can be the best option for any foreign entrepreneur entering the Indian market.

6. Various sectors:
There are various sectors in the Indian Market, such as Technology, healthcare, agriculture, real estate, manufacturing, production, import and export, etc.; US entrepreneurs can establish themselves in any of these sectors and, with time, expand their operations into other sectors as well.

Advantages of a Public Limited Company:
There are some general and key advantages of incorporating a Public Limited Company. These advantages are the features of the Public Limited Company as mentioned by the Companies Act 2013:
1. A public limited company can raise funds from the general public. It can issue shares to the public.
2. The Liability of the shareholders is limited.
3. The company continues to exist because it enjoys perpetual succession. Unless it is wound up, it keeps operating.
4. When a company’s shares and securities are listed on recognized stock exchanges, the public trusts the company, as the company must comply with several requirements and rules to get listed.
5. Shares of a public limited company are easily transferable, and there are no restrictions on the purchase, sale, or transfer of shares from one investor to another.

Rules and regulations applicable to a foreign entrepreneur:
Foreign entrepreneurs who wish to incorporate a public limited company in India shall follow certain rules and regulations laid down by the Indian Government:
1. When a foreign entrepreneur incorporates a business in India, foreign currency will outflow and inflow. Therefore, all such companies shall comply with the rules and regulations set out by the Reserve Bank of India (RBI) and the Foreign Exchange Management Act (FEMA). Any profits earned by the foreign investors in the form of dividends or by the owners of the business/company can be transferred back to the foreign country after paying the applicable taxes and informing the RBI. It is better to maintain the documents and records of all such transactions.
2. The Indian government allows foreign investments in many sectors to promote Indian companies. Some sectors are eligible to attract foreign investment without any approval from the Indian Government or the RBI. However, certain sectors require prior approval from the Government.
3. A company incorporated in India by any foreign entrepreneurs or businessmen can have foreign directors. Still, at least one Indian resident must serve as one of the company’s directors.
4. The company shall inform the RBI of all foreign investments and transactions. There is a portal for Foreign Investments where such reporting must be made. Specific forms must be filed when shares are issued to any foreign investor and also when the shares are transferred between residents and non-residents.

Listing of a company incorporated by a foreign entrepreneur:
A Public Limited Company can go for listing even if it is incorporated by a foreign entrepreneur, provided the applicable rules and regulations are fulfilled as mentioned by the statutory authorities.

1. The company that wishes to go for listing shall fulfill certain eligibility criteria as mentioned by the SEBI and the stock exchanges with respect to the Paid-up Capital, Financial records of the company, and contributions of the promoters (shares and securities held by the promoters before and after listing)
2. The Company shall obtain approvals from SEBI and the respective stock exchanges to list its shares and securities. The company shall submit the application along with the required documents. After proper verification, the stock exchange will either approve or reject the application.
3. The company shall disclose certain records as per the rules set by the SEBI. These records include Financial records such as Annual returns, profit and loss accounts, balance sheets, etc. The company shall also submit proof of all the annual and statutory compliances. There can be no default in any of the compliances.
4. The company shall also ensure that the board’s composition complies with the SEBI rules and form any other committee as required under the SEBI guidelines.
5. As a company incorporated by a foreign individual/entrepreneur, the company shall ensure compliance with foreign exchange authorities and the Reserve Bank of India.

Conclusion:
There are several advantages to opening a public limited company in India. By raising funds from the public, you can achieve your long-term goals of expanding your business all over India and throughout Asia. US entrepreneurs from New Jersey, New York, and California can acquire the services of local legal experts in India who can guide them through the incorporation process. This will ease their burden with respect to legal compliances and statutory filings. India is a vast country and a great opportunity for any foreign investor to build and expand their business.

FAQs on Incorporating a Public Limited Company by US Businesses in India:
1. Why should a US businessman opt for a public limited company in India?
Ans: A public limited company offers many advantages to its owner. One of the best advantages is that the company can raise funds from the public and it can get listed on the stock exchange. Thus, the public will have trust/faith in such a company.

2. What are the important rules to be followed by a foreign entrepreneur while opening a company in India?
Ans: The foreign entrepreneur shall comply with all the rules and regulations laid down in the Companies Act 2013, Ministry of Corporate Affairs (MCA), Government of India, Reserve Bank of India (RBI), Foreign Exchange Management Act (FEMA), and all other applicable laws.

3. Can I bring investments from foreign sources into my company without government approval?
Ans: There are a few sectors where you can bring in investments/funds from foreign sources without any prior approval from the RBI or the Indian Government. But for a few sectors, the approval of the government is a must. In all cases, the RBI must be informed about the transactions, and all related records and documents shall be maintained at all times.

4. What financial records of my company shall I disclose to the statutory authority?
Ans: The company shall disclose all financial records, such as financial statements, profit and loss accounts, balance sheets, audit reports, cash flow statements, etc. All these documents must be submitted to the Registrar of Companies (ROC) from time to time and to the concerned stock exchanges before listing.

5. Can a foreign entrepreneur get his Indian company listed on the Indian stock exchange?
Ans: Yes, a public limited company incorporated by a foreign individual can list its shares and securities on stock exchanges in India. The company must first comply with all the eligibility requirements and rules set out by the Securities and Exchange Board of India (SEBI).

6. How can a US entrepreneur keep track of all the legal compliances for his/her Indian Company?
Ans: You can hire a legal expert who can carry out all the activities relating to legal compliance, statutory filings, etc. A local legal advisor can ensure that the company does not default in any legal compliances and fall into trouble.
Authored by: Adv. Anant Sharma & Inayat Ahmed

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