Doing Business in India - RSM Austria

The requirements for public and private companies are as follows:
Requirements Public Private
Minimum numbers of subscribers/shareholders/members 7 2
Maximum number of subscribers/shareholders/members No limit 50
Minimum number of directors 3 2
Therefore even if a foreign company wants to incorporate its 100% subsidiary in
India, it will need one other shareholder, which could be another foreign body
corporate or foreign resident individual or a Indian resident individual, who would
hold at least one share, as a nominee of the foreign company or in his own name. The
third option is for the second shareholder to be an Indian resident or Foreign
resident individual who could hold one share jointly with the foreign company in
order to satisfy the requirement of a minimum of two shareholders. The first
arrangement is, however, preferable in case of private companies in order to retain
the character of the Indian company as a “pure” private company.
Directors are responsible for the management of the day to day affairs of the
company. Unless otherwise required by the company’s articles, directors need not
be shareholders. The directors should meet periodically by convening Board
Meetings. There should be at least one board meeting in each quarter and four
board meetings in a year. Decisions taken are resolved by passing appropriate Board
Resolutions. The directors can pass resolution by circulation in certain
circumstances without holding a Board Meeting.
In case of every public company (and a private company, which is a subsidiary of a
public company) at least two-thirds (2/3) of the total number of directors are liable
to retire by rotation (one-third of such directors shall retire at every AGM). The
remaining one-third (1/3) directors (non-rotational) may be appointed as provided
in the company’s AoA.
In the case of a private company, which is not a subsidiary of a public company, the
appointment of directors may be as per the procedure specified in its AoA. Where
the AoA do not provide otherwise, the directors are to be appointed in a General
meeting. The provisions relating to rotational retirement of directors do not apply in
case of a private company, which is not a subsidiary of a public company.
A person cannot be a director in more than 15 public limited companies. Alternate
directorships, directorships in private companies which are neither subsidiaries nor
holding companies of a public company and directorships in unlimited liability
companies) are not considered for the above purpose. Every public limited company
should have at least 3 directors, but not more than 12 (unless it has received
approval of the Department of Corporate Affairs). On other hand, a private limited
company must have at least 2 directors. An alternate director may be appointed by
the Board of Directors when a director is expected to remain outside the state in
which meetings of the Board are ordinarily held for a continuous period of three
months.
Directors can be appointed by the shareholders in the annual general meeting, by
the board of directors and also by the central government. Directors may also be
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DOING BUSINESS IN INDIA