Essential Legal Documents You Need to Start a Business in India

India is experiencing a surge in entrepreneurship and businesses. However, starting a new business requires a thorough understanding of crucial legal documentation to ensure compliance and seamless operations. Business registration documents are essential for startups to operate legally, attract investment, and ensure future growth. Learn how to register a business as we break down all the necessary documents needed to start a business in India.

Memorandum of Association (MoA)

MoA is an important business legal document that defines India’s structure, aims, and scope of activities. An MoA is critical to ensure that the company is legally compliant.

It safeguards the rights of shareholders and prevents illegal endeavors by giving stakeholders clarity and openness. It also specifies the maximum share capital the business can issue and the scope of members’ liabilities, whether restricted by shares or guarantees.

The key components of MoA include the following:

• Name Clause: States the registered name of the company

• Situation Clause: Provides the full address of the registered office

• Object Clause: Specifies the company’s objectives

• Capital Clause: Outlines the authorised share capital

• Liability Clause: Defines the liability of members

Articles of Association (AOA)

An AOA is a fundamental legal document for businesses that defines a company’s internal governance structure and sets forth its guidelines in line with the company’s goals and policies. It also establishes its directors’ and shareholders’ rights and obligations. An AOA governs the company’s daily operations and stakeholder engagement and ensures an effective and efficient management structure.

 The key components of AOA include:

• Share Capital: Details of total capital amount, types of shares, and rights attached to each type of shares

• Shareholder Rights and Responsibilities: Outlines the shareholders’ rights, responsibilities, and obligations to the business and each other

• Management Structure: Guidelines on the appointment, powers, and duties of directors and other key managerial personnel

• Decision-Making Processes: Procedures for conducting board and shareholder meetings, including voting rights and quorum requirements

• Transfer of Shares: Regulations on how shares can be transferred or sold within the company

• Dividend Distribution: Policies regarding the distribution of profits to shareholders

• Auditor Provisions: Outlines the appointment, powers, and responsibilities of auditors

Director Identification Number (DIN)

A DIN is a unique identification number provided to serving and aspiring company directors by the Central Government of India. It is mandatory compliance for all companies registered under the 2013 Companies Act. This unique number is required to submit the company’s legal documents and filings with the Registrar of Companies (RoC).

DIN aids in verifying the qualifications of directors, avoiding fraudulent activity, and guaranteeing the integrity of firm leadership.

To obtain a DIN, you need to follow these steps:

1. Form Selection: Choose the SPICe form if you’re applying for a new company or the DIR-3 form for an existing company. Start collating sufficient identity and address proofs as well.

2. Obtain a Digital Signature Certificate (DSC) before actually applying for DIN: Form DIR-3 must be signed by the applicant and digitally validated by a company secretary, managing director, director, CEO, or CFO of the company.

3. Registration Fee Payment: Pay the registration fee digitally through NetBanking, credit card, debit card, pay later, or NEFT. Register using the MCA21 portal to obtain a login ID. Log in and use the ‘eForm upload’ link from the ‘eForms’ menu to upload the DIR-3 eForm. The unique number will be issued upon successful verification.

Shareholder Agreement

A shareholder agreement is an enforceable contract by a company’s shareholders defining their rights, obligations, and operating guidelines. It is one of the crucial documents required to start a business since it protects the shareholder, resolves disputes, and facilitates smooth decision-making.

The key aspects of a shareholder agreement include:

• Share Distribution: Clarifies the allocation of shares

• Share Classes: Defines the types of shares and their rights

• Preferential Rights: Grants rights given to certain shareholders over others

• Board Powers: Outlines decision-making authority of the board of directors

• Transfer Regulations: Sets rules governing the transfer of shares

• Termination and Exit: Highlights exit procedures and sale of shares

A corporate lawyer or expert can help determine whether a shareholder agreement is meeting both legal and the company’s standards.

Founders’ Agreement

One of the essential documents required to start a company is the Founders’ Agreement, which should be created in the early phases of a company’s establishment. It outlines the rights, obligations, and responsibilities of the founders of a business venture, including decision-making processes, ownership percentages, and dispute resolution mechanisms.

It is crucial to ensure smooth operations, and it is recommended that it is legally vetted and stamped to ensure legal validity and enforcement.

The main features of a typical Founders’ Agreement include:

• Roles and Responsibilities of Each Founder

• Ownership Structure with equity distribution and percentage ownership among co-founders

• Vesting Schedule with a timeline over which founders earn their ownership stake

• Intellectual Property Rights addressing ownership and usage rights of any intellectual property developed

• Dispute Resolution Mechanisms to resolve conflicts or disagreements

• Non-Compete and Confidentiality Clauses ensuring data confidentiality and non-engagement in competing businesses

Certificate of Incorporation

The Registrar of Companies issues a Certificate of Incorporation confirming the establishment of a newly formed company. It is an assurance that it is legally compliant and can now be formally acknowledged as a separate legal entity. A separate legal identity unlocks important commercial operations, including contract signing, opening of bank accounts, and more.

The certificate includes:

• Business Name: Official company name registered with the Registrar of Companies

• Purpose Statement: Brief description of the company’s main business objectives

• Registered Address: Official contact address of the company

• Share Capital Details: Information about your authorized share capital, including the number and value of shares issued

To obtain a Certificate of Incorporation, follow these steps:

• Choose a unique and available business name

• Register with the Ministry of Corporate Affairs (MCA), and submit necessary legal documents for business and forms, including the SPICe+ application

• Prepare the MOA and AOA

• Submit the application and supporting documents to the RoC

• The certificate will be issued once approved by MCA

The certificate will include the CIN, company name, and other relevant details.

Trademark Registration

Trademark registration is the legal process by which you can obtain exclusive rights to a unique name, design, or symbol associated with a company or product. It is essential to safeguard a company’s intellectual property, prohibit others from using similar markings, and increase brand awareness and trust among customers.

Trademark registration covers more than just logos and products; it also helps protect company identity, and branding components like taglines and business papers. This guarantees the complete safeguarding of all business-related assets.

Go to the Trade Marks Registry’s online portal to access the original trademark registration application and fill out the form with all the relevant information.

Follow these steps to obtain and download a trademark registration certificate:

• Open the official Trade Marks Registry website

• Click on the ‘Trade Mark Application / Registered Mark’ option

• Enter the Application Number under the “National / IRDI Number” option

• Click on the trademark number and click on ‘View Registration Certificate’

• Your trademark certificate will open in a new tab

• Click on the download icon to save the certificate in a PDF format

No objection certificate (NOC)

NOCs are issued by any relevant entity to convey that there are no objections to the details in a given document. They are critical documents for startups and businesses in India.

You need an NOC to ensure no legal or contractual barriers impact the business plan and that all stakeholders have provided consent for it.

To obtain a NOC:

• Identify the appropriate stakeholder or authority and request the NOC

• Send in an application and the required documents

• Depending on the business, region, and requirement, different rules and regulations may apply

• Once the application has been completed and accepted, you can get the NOC certificate

Company PAN Card

A company Permanent Account Number (PAN) is a uniquely identifiable number provided by the Income Tax Department of India to registered businesses. It serves as a crucial identification for businesses for tax-related activities. You can use the company PAN card for various financial transactions, including opening bank accounts, filing taxes, and performing business operations. It promotes accountability and transparency in company transactions while ensuring compliance with tax legislation.

To apply for a company PAN card, you can visit the National Securities Depository Limited (NSDL) website or the UTI Infrastructure Technology And Services Limited (UTIITSL) website, and submit the required documents. Learn about how to apply for a company business card.

TIN

Every business in India is given a unique 11-digit identity number known as a TIN or Taxpayer Identification Number. It is required for many types of tax filings, including Value Added Tax (VAT), Central Sales Tax (CST), and Tax Deducted at Source (TDS).

It is provided automatically during company registration and you can apply for it both offline and online. The state’s Commercial Tax Department is the issuing authority, and processes may differ by each state.

Goods and Services Taxpayer Identification Number (GSTIN)

The GSTIN is a unique identification number provided to Indian businesses registered under the Goods and Services Tax (GST) regime. It is used for a variety of GST-related activities, including filing returns, obtaining input tax credits, and paying taxes.

You can register for a GSTIN online through the GST portal. The procedure includes filling out an application form, submitting the necessary documents, such as PAN, proof of company address, and bank account information, and undergoing verification by GST authorities.

To learn more about getting GSTIN, click here.

 Related Read: How to Get GSTIN Number Online?

Non-Disclosure Agreement (NDA)

A legally enforceable agreement that establishes a confidential relationship among two or more parties is called a Non-Disclosure Agreement (NDA), often referred to as a Confidentiality Agreement. It describes the conditions for sharing and using private information.

NDAs are essential when starting a business in India since they shield confidential information from being revealed to other parties. They guarantee that confidential information is solely used for its intended purpose and contribute to the development of mutual trust.

The essential components of an NDA are:

• Describes the purpose, cause, and management of confidential information

• Specifies ownership of the confidential information

• Describes the obligations and limits of the recipient

• Defines boundaries for the protection of information, including exceptions

• Outlines remedies for breach of confidentiality

• Indicates confidentiality duration and data disposal terms

Startups and businesses commonly use NDAs before meeting with potential investors to protect confidential data during negotiations.

To obtain an NDA,

• Select the type of NDA you need (mutual, non-mutual, or multi-party)

• Draft the NDA, covering key elements such as purpose, disclosure of confidential information, ownership of materials / no warranty, term, return of confidential information, or any other general factors you wish to include

• Alternatively, consult an attorney to draft a customized agreement based on your needs

Employee Offer Letter

Employment contracts explain what employees can expect, their obligations, and how challenges will be addressed transparently. These legal company documents address a variety of topics, including employment information and confidentiality requirements. A legal professional should create these documents to ensure compliance.

The key parts are:

• Terms of employment, including job details, duties, work hours, and termination conditions

• Employee commitments and expectations

• Intellectual property rights

• Leave and benefits, including vacation days, holidays, and workplace rules

• Standards for employee performance

• Conditions for employee shares in the company (if applicable)

Incorporation Documents for Foreign Nationals

In order to guarantee compliance with regulatory standards, foreign nationals starting a business in India need to provide extra documentation, including:

• Passport valid for the next 6 months

• Valid business or employment visa

• Proof of address

• Indian government-issued ID, such as a driver’s license or national ID card

• Documents related to the foreign national’s business, such as a business license, registration certificate, or proof of business operations

• Power of attorney

• Foreign national’s consent

• Documents showing the foreign national’s financial resources, such as bank statements or proof of investment

• Declaration in Form INC-9

Privacy Policy and Terms of Use

Terms of service offer a structure to handle user data and interactions. Privacy policies inform users about how their personal information is collected, stored and used by the business. These documents are crucial for promoting consumer trust, enforcing compliance with the law, and encouraging open communication between companies and consumers.

Conclusion

These essential legal documents required for starting a business in India are crucial to maintaining legal compliance in India’s growing business environment and protecting investors, companies, and individuals.

Frequently Asked Questions (FAQs)

1. Do the document requirements differ depending on the business structure (sole proprietorship, LLC, corporation)?

Yes, different documentation requirements apply to different business structures in India. While corporations and LLCs require more detailed documentation, such as yearly reports, tax registrations, and business licenses, sole proprietorships need to provide minimal documents.

2. Do I need a permit to operate my specific type of business?

Yes, a permit may be required for you to run a specific type of business legally in India. Non-compliance with permits or other documents may result in penalties, fines, or legal action.

3. When should I start gathering the necessary business documents?

Start gathering the necessary documentation for establishing a business as soon as possible. You should start collecting documents before initiating the formal registration process to guarantee a smooth and quick application procedure.

4. How long does it typically take to obtain all the required documents?

The specific document and processing speed could influence the time it takes to get all the necessary documents. A business visa typically takes 10–15 days, an e-visa typically takes 3–5 days, and additional documents like PAN, GST, and RoC registrations require 10–30 days.

5. Can I get help with completing the necessary paperwork for starting a business?

Yes, you can get assistance with completing all the necessary documentation for launching a business in India. You can consult a professional who can help you with legal and regulatory compliance.

6. What documents do I need to hire employees?

In order to recruit employees, you must get a formal employment contract, guarantee that all legal criteria are met, and submit an official offer letter with the terms and conditions applied.

7. Are there any ongoing document filing requirements for my business?

Yes, every business in India has to comply with ongoing paperwork filing obligations. These include submitting the required income tax, GST, and other mandatory returns as authorized by law.

8. What happens if I lose or damage an important business document?

If you lose or damage an important business document, your company may suffer serious financial losses, legal issues, and reputational harm.