A private company is required to be incorporated with a minimum paid-up capital of INR 100,000 and a public company with a minimum paid-up capital of INR 500,000. A listed public company making an initial public offer of any security for a sum of INR 10 crores (one crore equals 10 million) or more, shall issue the same only in dematerialized form by complying with the provisions of the Depositories Act 1996. In a public offer of securities, there is a prohibition on the allotment of share capital to the public unless the minimum subscription has been received by the company (Companies Act, sec 69). The amount payable on application on each share must be at least 5% of the nominal amount of the share.

The Companies Act does not require that a director must be a shareholder of the company. Typically, however, the company’s articles usually contain a places a limit on the maximum nominal value of shares which can be prescribed as qualifying shares for a director.

The procedures for the incorporation of a public and private company are the same. Procedures for incorporation commence with the promoters’ application for the approval of name of the proposed company filed with the Registrar. Ordinarily, within 4-5 days from the date of the application, the Registrar usually grants permission to incorporate. This is conveyed by the Registrar through e-mail to the promoters giving consent for incorporation of the proposed company by that name.

Within sixty after receiving the Registrar’s permission, the promoters are required to complete registration of the company. The formalities for registration include the registration of articles, memorandum of association and a declaration of compliance with the provisions of the Companies Act. If these formalities are not completed within the sixty days period, another application must be made to the Registrar to re-validate the proposed name for a further period of 30 days.

Upon registration, the Registrar issues a certificate of incorporation. A private company is authorized to start business immediately on incorporation. A public limited company must obtain a certificate of commencement of business from the Registrar. A certificate of commencement of business is available upon filing a prospectus or a statement in lieu of prospectus and a declaration with regard to payment by the directors for qualifying shares (Companies Act, sec 149).

Holding companies are required to disclose their interest in the subsidiary at the end of the financial year (Companies Act, sec 212). There is no corresponding requirement imposed on a subsidiary to disclose the shareholding of its holding company.

There are no restrictions on the disposal of shares but if a securities transaction involves a foreign element, the permission of RBI is required under the exchange control laws. The permission may be in the form of a general permission granted or a specific permission applied for and then granted. A private company must by its Articles restrict the transferability of its shares. The extent of restriction will be governed by the provisions of its Articles.