India client case studies in 2023
Cyprus education institution registers Indian company for student recruitment
Our Client, is a Cyprus based university offering undergraduate degrees in the areas of applied sciences, pharmacy, law, economics and engineering. Our Client approached Healy Consultants to assist setup a marketing and representative office in several countries including India to grow the international student base joining the university either undertaking a full time degree or attending courses on an interim exchange period.
Our Client, settled an initial retainer fee with Healy Consultants to provide costs breakdown, timeframe to register a representative office. However, considering the overwhelming due diligence documentation and legalization costs to register a RO, our Client and Healy Consultants agreed a new limited liability (Pvt. Ltd.) company with individual shareholders was a simpler structure to incorporate. Healy Consultants further informed the cost difference for this new structure and the accounting and tax liabilities. Our Client informed Healy Consultants that opening a bank account in India for the new entity was not really required as they did not plan to invoice students or collect any payments from them via the Indian company but through Cyprus. Healy Consultants advised the bank account was necessary to deposit the statutory share capital and it would serve to pay operational costs in India. Our client agreed, accepted the engagement timelines and costs and decided to engage Healy Consultants.
Before the company could be incorporated, Healy Consultants had to secure a Digital Signature Certificate (DSC) and a Director Identification Number (DIN) for all directors. The DSC enables company directors to e-sign and upload relevant forms to the Registrar of Companies (ROC) website. Our Client was required to sign DIN3 and DIN4 forms and courier originals to India together with notarized and legalized due diligence documents (passport and proof of address) for the proposed foreign directors and shareholders. Within 2 weeks of submitting these forms, Healy Consultants secured both DSC and DIN.
The next step was to reserve the company name through form INC1 with the Ministry of Corporate Affairs (MCA) for which Healy Consultants completed form INC1 and submitted a list of 6 company name options. Within 10 days, the MCA reverted with name approval which was valid only for 2 months. Healy Consultants prepared incorporation forms (INC9 and INC10, DIR2) and the memorandum and articles of association (M&AA) and emailed the same to our Client for signature, notarization and courier return before the submission deadline. Healy Consultants received the incorporation package 1 day before the deadline and submit the documents immediately. Our Client’s company was legally incorporated 1 week thereafter. Had our Client and Healy Consultants missed this deadline, we would have had to re-reserve the company name and re-notarize and re-legalize all corporate documents and personal due diligence, setting the engagement back an additional 2 months!
The last step of the incorporation phase was to obtain the company tax registrations known in India as Permanent Account Number (PAN) and Tax Deduction Account Number (TAN). Healy Consultants submit an online PAN and TAN applications with Income Tax Department via the National Securities Depository website. The PAN was issued within 2 weeks and the TAN was issued in an additional week.
Bank account opening
Healy Consultants and our Client agreed to open the Indian bank account with the Indian branch of an international bank in India. Our Client decided a bank account with the international bank was suitable and convenient option as no travel or complicated attestations were required. Healy Consultants liaised with the bank officer and provided our Client the bank account opening forms, a detailed signing guideline and prepared board resolutions and declarations for signature. Once all documents were correctly signed, certified and approved by Healy Consultants via email, our Client couriered originals directly to the bank in India.
The corporate bank account was approved within 4 weeks, and in an additional 3 weeks the bank in India couriered the internet banking token and password to our Client in Cyprus. Upon receipt of the banking kit, each of the individual shareholders of the Indian company were required to transfer their contribution of the share capital from their personal bank accounts to the new bank account. Once this was completed, within 2 weeks the bank issued a Foreign Inward Remittance Certificate (FIRC) for the Reserve Bank of India (RBI) confirming payment of share capital.
To complete the engagement, Healy Consultants couriered a company kit to our Client including the original certificate of incorporation, Memorandum and Articles of Association, PAN card and original share capital payment certificate from then bank.
For more information on this project, you may contact Kunal Fabiani (email@example.com)
Setting up of business in potential market
Richard and Charles are successful business partners with many years of experience in the IT industry. Over the years our Client’s management team has developed e-learning tools, application, and custom solutions using proven tools & technologies from vendors like Cisco, NetApp, VMware, Juniper, HP and IBM. IT Solutions limited contacted Healy Consultants for setting up their business in India which is a growing market.
Richard and Charles outlined their business objectives to Healy Consultants. We were able to offer a broad-based strategy which would enable our Client to best meet these objectives, including engineering the optimum corporate structure and opening a multi currency corporate bank account to facilitate international financial transactions. With costs agreed, our Client signed Healy Consultants’ Client Engagement Letter, confirming the corporate structure required us.
Healy Consultants advised the Client that setting up their business in India was challenging but exciting.
Healy Consultants informed the Client that in India every company must have a registered office before company incorporation where the complete company documents must be placed. The client already had an office.
Following the same, Healy Consultants approached Ministry of Corporate Affairs in India; to obtain director identification numbers (DIN) and DSC (Digital Signature certificate) for all the directors of the company.
Healy Consultants incorporation Team then reserved the company name with the Registrar of Companies in Bangalore. Healy Consultants prepared the corporate documents for the Indian Company and sent to the Client for their signatures. Because of their busy schedule, the Clients couldn’t sign and legalize the incorporation forms timely. Since a company name reservation is valid only for thirty days, Healy Consultants applied for the name reservation again.
Healy Consultants then drafted the Memorandum and Articles of association and other resolutions and submitted it to the Registrar of Companies in India. In three weeks, Healy Consultants obtained confirmation from the government that the company was incorporated.
Richard and Charles requested Healy Consultants assistance in opening a multi-currency bank account with the Indian branch of an international bank to support the company’s business in India. Healy Consultants completed bank application forms and prepared a detailed business plan, outlining the company’s activities, financial projections and a one-page analysis of the IT market. These documents were then couriered to the US and Germany for Richard’s and Charles’ signatures and return to us. It was challenging because the directors resided in different countries and so as the bank signatory who was living in Hong Kong. Thus, Healy Consultants went to the bank asking for time extension to have the documents signed and legalised. Shortly thereafter, Healy Consultants received the signed forms by the Client and then submitted the same to the bank in India. After two weeks we received a confirmation of corporate bank account opening and the bank package.
Textile business setup in India
Our Client is a US-based textile trader, which buys quality silk and sells it to a US factory to manufacture high class furnishings. These are then sold to major retailers in the US and Canada.
The company had been sourcing its silk from a US supplier, but dwindling margins had prompted management to seek alternative supply sources outside the US. In time, it became apparent that setting up its own textile processing factory would be the most cost-effective way to control supply/demand lines, and therefore keep its Clients happy.
When our Client contacted Healy Consultants
, his objective was to build an export-orientated factory in one of the Special Economic Zones (SEZs) recently developed in India. The board of directors had conducted some preliminary research into the project, and had concluded that potential labour shortages in China would put a labour-intensive textile factory at a competitive disadvantage. In addition, the company believed that free trade agreements between the US and India were less restrictive than those between the US and China, especially with regards to US import quotas.
Following an initial fact-finding mission to India, the company’s executive director Bob Armitage flew through Singapore on his way back to the US to discuss with our staff how we could help him with his India manufacturing plans.
Aidan Healy, managing director of Healy Consultants, convened a conference call with our India office in Mumbai, so he could receive their expert input and answer in greater detail Bob’s questions. Bob’s principal criteria were that the operation should be 100% foreign-owned, and should have good access to raw materials and labour.
Accounting and tax support
Ramesh, our India Client Relationship Officer, explained to Bob the advantages and pitfalls of setting up an SEZ company, as well as the legal, accounting and tax obligations of doing so. Bob was interested to learn that some SEZs in India offer incentives to stimulate foreign investment, including tax holidays and minimal import and export tariffs. Ramesh also stated that manufacturers operating in SEZs are unable to sell their goods locally.
The principal challenge at this stage was to decide which SEZ would be the most suitable for Bob’s company. Following his Singapore visit, Bob paid Healy Consultants a US$1,000 retainer fee to cover preliminary research into different Indian SEZs, with the objective of receiving a detailed comparison table, including setup costs, of each one.
Ramesh and his team in Mumbai began by contacting SEZ authorities in Maharashtra and Gujarat (geographically closer to Mumbai), as well as West Bengal (where several foreign textile companies have successfully set up facilities).
Within one week, our India Incorporation Team had prepared a comparison table and provided recommendations based on Bob’s criteria, and forwarded this to the Client in the US.
Following discussions with his fellow shareholders, Bob shortlisted two SEZs of particular interest to their business in West Bengal, and decided that he, along with one other shareholder, would again visit India to become better acquainted with their facilities.
We agreed that it would be more beneficial if one of our Indian team accompanied Bob and his colleague on their mission, and so Bob paid another US$1,000 retainer fee to cover the costs of having Ramesh fly to Calcutta to meet Bob and his colleague, and accompany them to the two SEZs.
During the three-day visit, our Clients met officials from the SEZ authorities and it quickly became clear that the Falta SEZ, close to Calcutta, would be the most suitable location for the textile processing facility, and so it was agreed that Healy Consultants would proceed with a quotation for business setup there.
Our Singapore head office prepared a detailed proposal, including a breakdown of costs and an outline of engagement steps, and e-mailed this to Bob. As with all Clients, our proposal documents aim to minimise unwanted surprises at any stage of the engagement, and this was especially pertinent to this engagement, given the potential bureaucratic hurdles faced in India.
Bob and his colleagues agreed to the costs as indicated, and the engagement proceeded by his signing and returning our standard Client Engagement Letter to our Singapore office, and remitting the necessary funds to our corporate bank account.
The Engagement Letter also confirmed the corporate structure for the new Indian SEZ entity. Although a subsidiary of a foreign company is allowed to have 100% foreign ownership, it requires a minimum of two shareholders. In our Client’s case, however, the company would have five shareholders (all US citizens) and two directors.
With this information, our India Incorporation Team obtained an application form from the Falta SEZ authority to set up a limited liability company Export-Orientated Unit (EOU) in the SEZ. Application Form Appendix 14-1A was completed by our staff in Mumbai. At the same time, we requested that Bob’s company courier notarised copies of their US corporate documents to India, as these would be required for submission. This step took one week to complete.
Our India Incorporation team submitted by courier the EOU application to the Development Commissioner of the Falta SEZ. In addition to the application form, our team submitted a bank draft of RS5,000 (US$120) to cover registration fees, along with notarised US corporate documents, including Certificate of Incorporation and Memorandum and Articles, and due diligence of the shareholders and directors (e g passport copies, proof of address etc) which was supplied by our Singapore head office.
To supplement the application, our Singapore-based Marketing Team had also prepared a detailed Business Plan, outlining the company’s intended activities, its Clients and suppliers, as well as market analysis and financial projections.
Three days after dispatching the courier to Falta, Ramesh followed up by telephone to check that the application had been received, and this was confirmed by the officer at Falta, who advised that a letter of approval would take up to one month.
The Falta mentioned that, since textile processing is considered a ‘sensitive’ sector, approval would only be granted by the Development Commissioner after personal verification of the EOU’s directors and inspection of the factory site before. This was communicated to Bob and the other shareholders and directors.
Five weeks after submitting the EOU application (and four follow up calls from our India-based staff), our Mumbai office received written conditional approval from the Office of the Development Commissioner of Falta SEZ.
The approval letter contained terms and conditions which required acceptance from the company shareholders and directors. Some of the conditions included an undertaking that the company would begin construction of the manufacturing facility on the allotted plot within six months; that it would export its entire output; and that it would prepare and submit a quarterly performance report. In addition, the company was required to set up a business website, and Bob has since requested Healy Consultants’ assistance to develop a 10-page website for this purpose).
This step of the process proved time consuming, because the acceptance required the signatures of all five shareholders. Although our Mumbai office had couriered the document to the US the day after receiving it from Falta, it was two weeks before it was returned, because two of the shareholders were traveling on business and had been unable to sign the undertaking. Once received, our Mumbai staff then submitted the signed acceptance of the terms to the Falta SEZ.
With this objective complete, the next step was for our India Incorporation Team to publish notice of the company’s establishment in the Gazette of India, at the Department of Commerce at the Ministry of Commerce and Industry in New Delhi.
With the company full established, Bob requested our assistance to set up a corporate bank account for the company at an international bank branch in India. Thanks to our excellent relationship with the bank worldwide, we were able to achieve this task without Bob or the other shareholders visiting India.
Our India Banking Team prepared the bank account application, while our Singapore-based Marketing Team modified the business plan which had been submitted to the Falta SEZ. The bank account application and business plan were then couriered to the US for the signatories’ signatures and return to us.
Healy Consultants’ India Banking Team then prepared a full application pack to send to the bank, including the signed documents from the US, the approval letter from Falta SEZ, the corporate documents of the US company and a copy of the bank signatories’ passports and proof of address (which had been supplied by our Singapore head office). Once this had been completed, our Mumbai staff visited the bank branch in Mumbai to submit the pack. They were advised that a bank account number would be issued within three weeks.
Healy Consultants’ Mumbai office received notification that the account had been approved within the three weeks indicated, and over the course of the following two weeks they received (in sealed, separate envelopes) Internet banking and ATM card PIN numbers, which were then couriered in separate packages to the US.
Healy Consultants completed all stages of the business setup to our Client’s satisfaction, and construction has started on the manufacturing facility in the Falta SEZ. Upon completion, it is likely that Healy Consultants will provide support services including recruitment of site managers; assistance with applications for tax exemption; assistance with obtaining reimbursement of Central Sales Tax (CST) on raw materials bought from domestic Indian suppliers; and assistance with filing tax returns.
In addition, the company will be required to prepare a quarterly performance report once it begins production, and our Client has expressed his intention to outsource this to Healy Consultants on an ongoing basis.