What is a Shelf Prospectus? Meaning & Provisions Under the Companies Act, India

Why You Should Start an Artificial Intelligence Solutions Business in India?

India is becoming a global AI hub. Several factors make it fertile ground for launching AI startups:

• Huge Market Demand: Industries like fintech, healthcare, education, and logistics are actively adopting AI.
• Government Support: Initiatives like the National Strategy for Artificial Intelligence, startup schemes, and sandbox environments encourage AI innovation.
• Talent Availability: India boasts one of the largest pools of tech and data science talent.
• Cost Advantage: Operating costs and engineering salaries are still lower than in the West.
• Global Export Potential: Indian AI products can serve both domestic and international markets.

Market Research and Niche Identification

Before writing a single line of code or registering your business, research is key.

• Market Research: Analyse trends in AI adoption from predictive analytics and NLP to computer vision and GenAI. Identify real pain points across industries, understand competitor offerings, and spot emerging gaps.
• Niche Selection: Don’t try to be everything to everyone. Narrow your focus. Are you solving a problem in healthcare diagnostics, automating retail inventory, or creating AI copilots for content teams?
• Data-Driven Decision Making: Use public datasets, surveys, Google Trends, and customer interviews to validate demand.

Tip: Start small, prove your model in one segment, and then scale.

‍Kickstart your AI venture—register your startup with expert help tailored for tech founders.

Legal Structure Selection

Your legal structure affects liability, taxation, compliance, funding, and perception.

Popular options for AI startups:

• Private Limited Company (PLC): Best suited for startups seeking to raise capital. Offers limited liability, better credibility, and scalability.
• Limited Liability Partnership (LLP): Combines the flexibility of partnerships with limited liability. Less ideal if you plan to raise venture capital.
• One Person Company (OPC): Easier to set up with a single owner, offers no liability protection but limited growth potential.

Note: Most AI startups aiming for scale and funding choose to register as Private Limited Companies under the Companies Act, 2013.

Registration and Compliance

Once you’ve selected your legal structure, follow these key steps to register your business:

Key Registration Steps:

1. Obtain DSCs for directors (Digital Signature Certificate)
2. Register your company with the MCA (Ministry of Corporate Affairs)
3. Apply for PAN and TAN
4. Register for GST if your turnover exceeds the threshold or you're providing services across states
5. Open a bank account in the company’s name

Tip: Use the SPICe+ form on the MCA portal- it combines name approval, incorporation, PAN, TAN, EPFO, and ESIC into one form.

Intellectual Property (IP) Protection

For an AI startup, IP is your core asset. Whether it's your brand, your algorithm, or your dataset, protect it.

What You Should Consider Protecting:

• Trademark your brand name and logo
• Copyright original code, training data, or written content
• Patent any novel AI technique, model architecture, or unique solution

Data Privacy and Compliance

AI businesses often deal with large volumes of personal and sensitive data. Protecting it is surely mandatory.

Ensure:

• Clear privacy policies
• User consent mechanisms
• Proper data anonymisation
• Secure storage practices

Funding Your AI Venture

AI businesses often require upfront investment for model training, infrastructure, and talent. Here's how you can fund it:

Funding Options:

• Bootstrapping: Start lean, especially if you're solving a niche problem
• Angel Investors: Look for early-stage investors with tech or SaaS experience
• Venture Capital: Once you have traction or a working product
• Startup India Scheme / MeitY Grants: Government initiatives for deep-tech and AI

Tip: Most investors in AI want to see real use cases, traction, and defensible technology.

Operational Setup

Once registered, set up your AI business for daily operations:

• Choose your tech stack (e.g., Python, TensorFlow, AWS/GCP)
• Hire key roles- data scientists, ML engineers, backend devs, and product owners
• Set up internal processes for version control, documentation, and data pipelines
• Create scalable workflows for automation over manual ops

Keeping Up with AI Regulations

AI is under increasing scrutiny globally. Your startup must stay ahead of legal and ethical expectations.

Stay informed on:

• India’s upcoming AI regulation framework
• Global movements like the EU AI Act or the OECD AI principles
• Set up an internal AI ethics framework even if you’re early-stage.

Marketing and Scaling

Even the best AI solution won’t go far without the right Go-To-Market (GTM) strategy.

Marketing Channels:

• Content Marketing & SEO – Educate, don’t sell
• LinkedIn & Twitter/X – Engage with the tech and founder community
• Product Demos & Webinars – Show real-world use cases
• Partnerships – Integrate with existing platforms or systems

Challenges and Considerations

AI startups in India face unique challenges. Be prepared for:

• High Development Costs: GPUs and infrastructure aren’t cheap.
• Access to Quality Data: Clean, labelled data is hard to come by.
• Talent Gaps: Skilled AI engineers are in high demand.
• Evolving Regulations: Compliance is still catching up with innovation.
• Ethical Concerns: Bias, misinformation, and explainability are real issues.

Build lean, partner with academia, and stay agile. Solve real problems, not just technically impressive ones.

Frequently Asked Questions (FAQs)

‍

Understanding the Role of a Director

Directors are individuals appointed by shareholders to supervise a company's activities, as guided by the Memorandum of Association (MOA) and Articles of Association (AOA). Since a company is a legal entity and cannot act independently, it functions through its directors. The Board of Directors, composed of these individuals, is responsible for the company's management and decision-making.

In a Private Limited Company, directors hold significant importance. They are tasked with making everyday decisions and overseeing the company's administration. Shareholders rely on directors to manage their investments effectively and ensure the company's growth and success.

Types of Directors of a Company

Directors are categorised into various types based on their roles and responsibilities. Let us take a closer look at each type:

Executive Directors

• Actively involved in the company's daily management.
• Often hold specific executive roles, such as CEO, CFO or COO.
• Responsible for implementing the company's strategies and policies.

Non-Executive Directors

• Do not participate in the company's day-to-day management.
• Provide independent oversight to the company's board and management.
• Offer valuable insights and advice based on their expertise and experience.

Independent Directors

• A subset of non-executive directors with no financial or other vested interests in the company apart from their role as directors.
• Primary responsibility is to safeguard the interests of the company's shareholders.
• Ensure transparency and accountability in the company's operations.

Nominee Directors

• Appointed by third-party authorities or the Government to tackle mismanagement and misconduct.
• Represent the interests of the appointing authority.
• Monitor the company's activities and report any irregularities.

Appointment of Director to Private Limited Company

Specific requirements must be met when appointing directors in a Private Limited Company, these are:

• The maximum directors in a private company is 15. 
• The minimum directors in a private company is 2.
• The limit of 15 directors can be exceeded by appointing additional directors through a special resolution with the support of 75% or more shareholders.
• The appointment of directors must be in accordance with the provisions of the Companies Act 2013.

Provisions of the Companies Act, 2013

The Companies Act 2013 includes several key provisions related to the appointment and roles of directors:

• Section 149: Details mandatory requirements, such as having a certain number of directors, including a female director and a resident director.
• Section 152: Specifies the process for appointing directors at the company's general meeting and mandates the use of the Director Identification Number (DIN).
• Section 161: Provides guidelines for appointing additional, alternate and nominee directors by the Board.
• Section 164: Lists the disqualifications for becoming a director, ensuring that only eligible individuals are appointed to the board.

By adhering to these provisions, companies can establish a well-structured and compliant board of directors.

Reasons for Adding or Changing Directors in a Company

There are several reasons why a company may choose to appoint new directors/board of directors or change its existing board composition:

1. Introducing New Talent: As a company grows, it may become necessary to bring new talent to the board to address new challenges and requirements that come with expansion.
2. Preventing Ownership Dilution: By appointing additional directors, shareholders can delegate more operational responsibilities without relinquishing strategic control.
3. Addressing Inefficiency of Current Directors: A company may appoint new directors to maintain efficiency if existing directors are underperforming due to personal issues.
4. Complying with Statutory Requirements: Companies must maintain a specific number of directors according to the Companies Act 2013. They must promptly appoint new directors to comply with legal requirements if the number falls below the minimum.

Eligibility to Be A Director in a Company

To be eligible for appointment as a director, an individual must meet the following criteria:

• Be at least 18 years old, as minors are not permitted to hold the director position.
• Not be disqualified under the provisions of the Company Act 2013, which include:
  
  • Being an undischarged insolvent
  • Having been convicted of an offence involving moral turpitude
  • Having been convicted of an offence under the Companies Act 2013
  • Having been disqualified by an order of a court or tribunal
• Have mutual consent from the Board of Directors, shareholders and the individual being considered for the directorship.

It is crucial to ensure that the prospective director meets these eligibility criteria before proceeding with the appointment process.

Documents for Director Appointment

When appointing a director, the following documents are required:

1. PAN card
2. Identity proof (Voter ID, driver's license, Aadhaar card, etc.)
3. Residence proof (utility bills, rental agreement, etc.)
4. Recent passport-sized photograph
5. Digital Signature Certificate (DSC)

Procedure for Appointing/Add a Director to a Company

The process of appointing a director involves several key steps:

1. Reviewing the Articles of Association (AOA)

The first step is to review the company's Articles of Association (AOA) to ensure that it includes a clause permitting the appointment or addition of directors. If the current AOA lacks such a provision, it should be amended to include one before proceeding with the director's appointment.

2. Conducting a General Meeting for Director Appointment

The company must formally appoint a director by passing a resolution in a general meeting, either during an Annual General Meeting (AGM) or an Extraordinary General Meeting (EGM). 

To arrange an EGM, the company must conduct a board meeting to pass a resolution for holding the EGM. The resolution to appoint the director must be filed in Form MGT-14 with the Registrar of Companies within 30 days.

3. Applying for Director Identification Number (DIN) & Digital Signature Certificate (DSC)

The individual selected for directorship must apply for a Digital Signature Certificate (DSC) and a Director Identification Number (DIN) if they do not already possess these. After obtaining the DIN, the prospective director must provide the company with their DIN along with a declaration affirming that they are not disqualified from being a director.

4. Obtaining Consent from the Prospective Director – Form DIR-2

The individual proposed for directorship must express their consent to serve in this role by submitting Form DIR-2, a formal consent to act as a director. An individual can only be appointed as a company director by explicitly giving their consent. This step is crucial to ensure that the prospective director is willing to take on the responsibilities associated with the position.

5. Issuing a Letter of Appointment to the Director

After obtaining consent from the prospective director, the company should issue a formal Letter of Appointment. This director appointment should detail the terms and conditions of the appointment, including the director's roles, responsibilities and any remuneration or salary. The Letter of Appointment serves as a legal document that outlines the expectations and obligations of both the company and the director.

6. Filing Forms DIR-2 and DIR-12 with the ROC

Once the resolution for the appointment of a director is passed and the individual has submitted Form DIR-2, the company can officially appoint them as a director. 

The company must file both Form DIR-2 and Form DIR-12 (detailing the particulars of the director's appointment) with the Registrar of Companies (ROC) within 30 days of the director's appointment. Failing to file these forms within the prescribed time frame can result in penalties and legal complications.

7. Filing Amendment Applications with GST and Tax Authorities

After appointing a new director, the company must file the necessary applications to update the director's details with various regulatory authorities, including the GST Network (GSTN) and other relevant certificates, to reflect the change in directorship. This step ensures that the company remains compliant with all legal and regulatory requirements related to its directors.

Frequently Asked Questions:

Difference between Private Limited, LLPs & OPCs

Now that we've introduced the differences between these three types, let's explore their features and registration processes more thoroughly. This will help you determine which one is the most suitable for your business needs.

Private Limited Company: Features

In India, the Private Limited Company stands as the predominant choice for company registration, governed by the Companies Act of 2013 under the jurisdiction of the Ministry of Corporate Affairs (MCA). This structure is favoured by startups and businesses aspiring for growth and stability, owing to its adaptable ownership model and efficient management practices.

Outlined below are some key characteristics of a Private Limited Company:

1. Limited Liability

• Shareholders enjoy limited liability, safeguarding personal assets from business debts.

2. Separate Legal Entity

• Regarded as a distinct legal entity from its shareholders, allowing it to engage in contracts, own assets, and litigate under its name.

3. Ownership

• Owned by shareholders who possess shares in the company, with ownership transfer facilitated through share transactions.

4. Management

• Managed by appointed Directors, while day-to-day operations are overseen by management, with significant decisions often requiring shareholder approval.

5. Shareholders

• Requires a minimum of two shareholders and can accommodate a maximum of 200.

6. Regulation and Compliance

• Governed by the Companies Act and regulated by the Ministry of Corporate Affairs, mandating compliance with annual financial filings, general meetings, and statutory record maintenance.

7. Investment and Funding

• Attracts investment and funding relatively easily due to its defined ownership structure and limited liability feature.

Private Limited Company: Registration in India

The Ministry of Corporate Affairs (MCA) has introduced a streamlined and online process for company incorporation known as Simplified Proforma for Incorporating Company Electronically Plus (SPICe+), comprising two parts: Part A and Part B.

The steps are as follows:

1. Step 1: Apply for DSC

• Obtain a Digital Signature Certificate (DSC) from Certifying Agencies (CAs) with either one or two-year validity.

2. Step 2: Apply for Name Approval

• Apply for name using SPICe+ Part A which facilitates 'Name Reservation' with the provision for two proposed names and one re-submission (RSUB).

Note: While simultaneous application for name approval (Part A) and Incorporation (Part B) through SPICe+ is feasible, only one name can be reserved.

3. Step 3: Apply for Company Registration & Other Applications

• Following name approval, apply for Company Registration using SPICe+ Part B, which also includes the application for allotment of Director Identification Number (DIN), Permanent Account Number (PAN), Tax Deduction and Collection Account Number (TAN), etc.

4. Step 4: Apply for a Bank Account

• Open a current account for your company to facilitate seamless financial transactions and business operations.

5. Step 5: File the Commencement of Business Certificate

• Within 180 days of incorporation, file the Commencement of Business Certificate through Form INC-20A, which is a declaration submitted by the Director of the Company to the Registrar of Companies.

Upon approval of the SPICe+ Form, the Registrar of Companies (ROC) issues the Certificate of Incorporation, confirming the successful registration of your company.

The Certificate of Incorporation includes vital information such as the Company's name, registration number (CIN), date of incorporation, registered office address, and so on.

Example of CIN: U72200KA2013PTC097389

Read more about what each letter in a CIN signifies here.

{{pvt-cta}}

Limited Liability Partnerships: Features

A Limited Liability Partnership (LLP) is a business structure that combines features from both traditional partnerships and limited companies. And, LLPs are often favoured by professional services firms, small businesses, and ventures seeking the blend of partnership flexibility and limited liability protection.

Key characteristics of an LLP include:

1. Limited Liability

• Partners in an LLP benefit from limited liability akin to private limited companies.

2. Separate Legal Entity

• An LLP exists as a distinct legal entity from its partners, capable of owning assets, entering contracts, and engaging in legal proceedings independently.

3. Ownership

• Partners own the LLP, with the ownership structure outlined in the LLP agreement. Ownership transfer typically requires consent from other partners.

4. Management

• Managed by partners or a designated management team as specified in the LLP agreement. Decision-making is often collaborative, with each partner having an equal say.

5. Number of Partners

• Requires a minimum of two partners, with no maximum limit.

6. Regulation and Compliance

• Governed by the Limited Liability Partnership Act in India, featuring less stringent regulatory requirements compared to private limited companies. Compliance entails filing annual returns and maintaining statutory records.

7. Flexibility

• Offers enhanced flexibility in internal management and decision-making processes compared to private limited companies.

Limited Liability Partnerships: Registration in India

Establishing a Limited Liability Partnership (LLP) as a legally recognized business structure involves several crucial steps. Here is a brief and comprehensive outline of the LLP registration process.

1. Step 1: Obtain a DSC

• Obtain a Digital Signature Certificate (DSC) from Certifying agencies. To know more about the process, click here.

2. Step 2: Apply for Name Reservation

• Reserve an LLP's name via the LLP-RUN form, overseen by the Central Registration Centre. Up to two names can be proposed.

3. Submit the FiLLiP Form

• Fill out the FiLLiP form and submit it to the Registrar along with the Subscriber sheet and Director's consent (Form DIR-9).

4. Draft & File the LLP Agreement

• File the LLP Agreement using Form 3 on the MCA portal within 30 days of registration.

Upon approval of the FiLLiP Form by the Registrar of Companies (ROC), you will receive the Certificate of Incorporation, which has important details such as the LLP's name, registration number (LLPIN), date of incorporation, registered office address, and so on.

Example of LLPIN: AAA-1234

{{llp-cta}}

One Person Companies: Features

One Person Companies (OPCs) present a unique business structure where a single individual can establish and manage a company. Combining aspects of a Private Limited Company and the advantages of Sole Proprietorship, OPCs cater to entrepreneurs and business owners who handle all ownership, operation, and management duties themselves.

1. Sole Ownership

• An OPC is solely owned and managed by a single individual, referred to as the sole shareholder or member.

2. Limited Liability

• Like other corporate structures, OPCs offer limited liability protection to the sole owner.

3. Separate Legal Entity

• OPCs are recognized as separate legal entities independent of the sole owner. This legal distinction enables you to enter contracts, own assets, and participate in legal proceedings under your company’s name.

4. Perpetual Succession

• Despite having only one member, OPCs feature perpetual succession. A nominee appointed during incorporation typically assumes control in the absence of the sole member.

By combining limited liability, separate legal entity status, and simplified operations, OPCs emerge as an appealing choice for small businesses and startups led by single entrepreneurs.

One Person Company: Registration in India

Due to their similarities with private limited companies, OPCs also employ SPICe+ for their company registration process.

SPICe+ (Simplified Proforma for Incorporating Company Electronically Plus) is a comprehensive online form introduced by the Ministry of Corporate Affairs (MCA) in India to streamline and simplify the company registration process.

1. Step 1: Apply for DSC

• Obtain a Digital Signature Certificate (DSC) from any Certifying Agencies in India.

2. Step 2: Submit Part A of SPICe+ Form (If filled separately)

• Apply for name approval using Part A of the SPICe+ form, allowing for submission of up to two proposed names and one re-submission.

3. Step 3: Draft the MoA & AoA

• Draft the Memorandum of Association (MoA) and Articles of Association (AoA) detailing the company's objectives and rules.

4. Step 4: Submit Part B of SPICe+ Form

• Submit Part B of the SPICe+ form along with necessary documents, including DSC, MoA, AoA, and declarations. Pay the prescribed fee for registration.

5. Step 5: Appoint a Nominee

• Appoint a nominee director as required by OPC regulations.

6. Step 6: File for the Commencement of Business Certificate

• Within 180 days of incorporation, file for the Commencement of Business Certificate (Form INC-20A) with the Registrar of Companies.

Upon successful approval of the SPICe+ Form, you’ll receive an email notification from the MCA containing the Certificate of Incorporation (COI) and PAN and TAN details of the Company.

The certificate of Incorporation (COI) includes crucial details such as the Company Name, Registration Number (CIN), Date of Incorporation, Registered Office Address, Company Structure, and more.

{{opc-cta}}

For added clarity, check out our curated collection of sample templates, where you can download and customize most of these above-mentioned templates, as required.

Company Registration with Razorpay Rize

Razorpay Rize provides a wide array of services to facilitate an end-to-end streamlined company registration process, all at the lowest fees and without any hidden charges. Explore the different legal structures below to find the one that’s best for your business.

{{company-cards}}

Our package includes:

• Company Name Registration
• 2 Digital Signature Certificates (DSCs)
• 2 Directors’ Identification Numbers (DINs)
• Certificate of Incorporation(COI)
• MoA & AoA [Applicable for Private Limited Companies and OPCs]
• LLP Agreement [Applicable for LLPs]
• Company PAN & TAN

*Prices and documents can differ based on the company type.

Find Out Which Company Type to Register

If you operate a small business with limited resources, opting for LLP or OPC registration might be more favourable due to lighter compliance requirements. However, for larger businesses with substantial capital needs, registering as a Private Limited Company provides greater flexibility in raising funds. So, before proceeding with the registration of either a Private Limited Company, LLP, or OPC, it is essential to carefully evaluate the following factors.

• Business Nature and Size
• Fundraising Requirements
• Tax Implications
• Personal Liability Protection

Ultimately, the choice between a Private Limited Company, LLP, or OPC structure depends on the unique characteristics of your business, including its nature, size, fundraising requirements, tax implications, and personal liability protection.

Still confused about which company type to register with? We’ve got you covered! Introducing our latest tool - "Know Your Company Type."

For the first time in India, answer a quick set of questions about your startup, and this tool will utilize your responses to identify the perfect company registration type for you. Find your ideal fit with just one click!

{{know-your-company}}

In summary, choosing between Private Limited Companies, OPCs, and LLPs depends on your business goals and preferences. Each structure offers unique benefits, whether it's scalability with Private Limited Companies, convenience with OPCs, or simplicity with LLPs. If you have any unanswered questions or want to get started with the company registration process, feel free to get in touch with us!

‍