Starting an investment company in India is a complex process that involves adhering to specific legal requirements and obtaining necessary licenses. This article outlines the detailed steps and legal considerations to consider if you plan to start an investment company using your own savings.
Introduction
The regulatory landscape for investment companies in India is stringent and involves multiple stages. Given the critical nature of these requirements, we highly recommend consulting with a professional Chartered Accountant (CA), Chartered Statistician (CS), or corporate lawyer based in India. These professionals can provide tailored advice based on your specific situation.
Initial Considerations
Based on your interest in starting an investment company, it is essential to consider the following:
You mentioned planning this for over a year. The regulatory environment in India is complex and ever-evolving, necessitating expert guidance.Legal Structure and Entity Registration
India's investment companies are required to register under the Companies Act, 2013. You can choose between a private limited company or a public limited company. Depending on your specific business structure, either entity may be more suitable.
Private Limited Company
A private limited company is typically chosen for investment firms focusing on personal investment or advisory services. To incorporate a private limited company:
Register the company with a minimum authorized and paid-up capital of INR 20 million. Obtain necessary licenses, such as being a Financial and Investment Advisor. Register with the Securities and Exchange Board of India (SEBI) and other relevant exchanges. If you plan to accept public deposits, obtain the appropriate RBI approvals or register as a Non-Banking Financial Company (NBFC).Public Limited Company
A public limited company can be a more complex option, especially if you plan to accept public deposits. The process involves:
Incorporation and registration with a minimum authorized and paid-up capital of INR 50 million. Applying to the Reserve Bank of India (RBI) for a license to operate as a Non-Banking Financial Company (NBFC). Meeting the minimum net owned funds requirement of INR 20 million. Opening a corporate bank account and depositing INR 20 million in fixed deposits to obtain the RBI license.Banking and Payment Systems
Entering the online payment and banking space in India is also a significant milestone. Companies like PayTM and Airtel Payments Bank are leading in this area. To launch a payments bank, you need:
A registration as a Non-Banking Financial Company (NBFC) with the Reserve Bank of India (RBI). A unified payment interface (UPI) through the National Payments Corporation of India (NIC).This process involves obtaining the necessary RBI licenses and adhering to the regulations set forth by the RBI and relevant state-level statutes.
Conclusion
Starting an investment company in India is a multifaceted endeavor that requires a thorough understanding of the regulatory framework. It is crucial to seek professional guidance to ensure compliance and a smooth launch. The steps outlined above provide a comprehensive overview of the legal and logistical requirements. Good luck with your venture!