Business in India and European Union...University of Tampere Faculty of Economics and Administration Department of Management Studies ASIAI003 Legal Aspects of Asian Business Business

University of Tampere

Faculty of Economics and Administration

Department of Management Studies

ASIAI003 Legal Aspects of Asian Business

Business in India and European Union

Subject:

Chocolate Manufacturer

Worked out by:

Katerina Silarova,

Michaela Kuzelova,

Katarzyna Macierzynska,

Anna Maciborska,

Despoina Sakoglou

Tampere, February 22


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Content

A.1 Selection Criterias in Choosing and Evaluating Final Business Mode for Indian Market ........... - 3 -

Indian Market Pleading ................................................................................................................... - 3 -

Chocolate - Product Definition ........................................................................................................ - 3 -

Startup Entering Strategy ................................................................................................................ - 5 -

A.2 Chosen Business Mode, Analysis on Main Legal Determinants and Risk Scenarios Stemming from Different Business Modes ......................................................................................................... - 10 -

Representative office ................................................................................................................ - 10 -

Wholly owned subsidiary in India ............................................................................................. - 10 -

Merger and acquisition ............................................................................................................. - 10 -

Partnership with middleman ..................................................................................................... - 11 -

JV partnership ............................................................................................................................ - 11 -

Equity Joint Venture ...................................................................................................................... - 12 -

Process of launching the JV in India: ............................................................................................. - 13 -

Who helps in setting up the business in India: .............................................................................. - 13 -

Pros and cons of JV: ....................................................................................................................... - 14 -

A3. Most important positive and negative legal aspects in selling for India compared in selling for the European Union markets ............................................................................................................ - 17 -

A4. Most Important Ethical or Moral Challenges ........................................................................... - 20 -

A Few Key Issues When Picking First Steps in Indian Market ....................................................... - 21 -

Indian Culture ................................................................................................................................ - 23 -

Business practices in India ( what is worth to remember) ........................................................ - 23 -

Indian business etiquette (Do's and Don'ts) ................................................................................. - 24 -

A5. Essential Contents of Selected Business Laws ......................................................................... - 25 -

INTELLECTUAL PROPERTY RIGHTS ................................................................................................. - 25 -

Patents ....................................................................................................................................... - 25 -

Copyrights .................................................................................................................................. - 26 -

Industrial design rights .............................................................................................................. - 27 -


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Trademarks ................................................................................................................................ - 27 -

Protection of Geographical Indications ..................................................................................... - 28 -

Integrated Circuit Layout Design protection ............................................................................. - 29 -

Protection of undisclosed information ..................................................................................... - 29 -

LABOUR LAW ................................................................................................................................. - 30 -

CONTRACT LAW ............................................................................................................................. - 31 -

TAXATION LAW .............................................................................................................................. - 32 -

Referencies ........................................................................................................................................ - 35 -

List of Pictures ................................................................................................................................... - 37 -


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A.1 Selection Criterias in Choosing and Evaluating Final Business Mode for Indian Market

Indian Market Pleading Southern Asian India is exponentially accepting new overseas investors and, being known as originally rather poor country, a sort of riddle „What is so attractive about this infrastructurally insufficient and bureaucratic land?“ came to our minds.

An instant casual research on Indian economic potential gave us more than convincing answer:

According to Ministry of Finance, it is the emerging fifth largest economy in the world and has the third largest GDP in entire Asia. Indian market offers promising growth and earning for diverse businesses. Contradicting the Indian social conditions, it houses vast number of brainy and educated people willing to dive in exacting labour.1

Chocolate - Product Definition

Right next to the strongest invent and development in the field of computers, software and small cars, India is also the world largest producer of milk and second largest producer of food. Altogether, India’s food processing industry is one of leading industries in the country - ranked fifth in terms of production, consumption, export and expected growth.

Refer to India Brand Equity Foundation’s Food Processing edition2

Among Indian major trading partners, surprisingly, even Belgium plays a significant role.

, mass market value added products are dairy and bakery, while dairy can be ranged among those favourable segments of food processing.

3

Hot and humid plains of India would seem an ultimate holdback for farming, manufacturing, storing and exporting such an „instable“ item as our dairy product in question. However, a deeper insight in the sphere of chocolate competitors in India proves contrast. Cadbury’s India Limited, the most threatening player in the Indian chocolate industry and worthilly popular brand in the world has found ways to get through these obstacles. Hence it is a good leader to be taught successful aspects

Tracing suitable final product for both India and Europe, there the idea of a chocolate arose promptly in our heads. Not only high-quality and exquisite taste Belgian chocolate (Leonidas or GuyLian) owns that label of reputation among European sought-for chocolate producers. Also other „big fish“ in the European cocoa market has gained some esteem, such as Finnish Fazer, Swiss Lindt and originally also Nestlé, plus British Mars or Cadbury.

1 Marginally collected data from BUYSA.GOV <http://www.buyusa.gov/india/en/motm.html> (approached 17.02.2010)

2 For whole biding see <http://ibef.org/download/Food_Processing_270608.pdf> (app. 17.02.2010)

3 Selected from India Industry, Country Profile <http://www.indianindustry.com/country-profiles/india.html> (app. 17.02.2010)


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from. Therefore we devoted some time to penetrate into the project that deals with problems and challenges of the Indian Chocolate Industry, growth opportunities and strategies to be adopted for growth in this industry and also points to a brief study of the vast Cadbury corporation.4

We see how rarely the chocolate is consumed within India, concentrated on urban areas in the first place. Nevertheless, with reference to the project, statistics presume escalating scale these years. In Europe, on the other hand, the consumption is heavily widespread in following countries:

Picture 1 - Chocolate Consumption per Head

There lies our determination to locate our factory in Germany, which both presents a crossroad for biggest chocolate consumers, as well as manufacturers, and is naturally a powerful economic spot in Europe by its largest GDP. This value is no less crucial for our intent as most chocolate items are generally considered and expended by urban and, in most cases, by well-off citizens. Germans along with the rest of the European Union would then become our target segment number one. And due to the fact Indian territories consist mostly of suburban and middle class inhabitants who pay pragmatical attention rather to small chocolate bars and other small-sized and cheaper confectionaries, right these chocolate articles we aim to sell for the Indian market in about 30% of its production.

However, setting concrete parcel for our plant in Germany can not be done without consideration of how susceptible grounds local chocolate market poses. Even there exist an eminent „cocoa leader“, the Bremer HACHEZ Chocolate Gmbh & Co. As this manufacturer‘s delicate products are based on high content of cocoa butter made especially of Ecuadorian beans which create superior texture and mild flavour, obviously, such recognized quality of own peculiar recipe is hardly competed.

4 Reference to the project of chocolate industry in India: <http://www.scribd.com/doc/21338400/chocolate-industry-in-india> (approached 18.02.2010)


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Our idea is to utilize propper Indian irrigated fields and local habile farmers under the skillful care and expert supervision to grow superb cacao as an incorporator to existing farming units. Employing Indian specialists educated and experienced in food processing and hiring technology experts from there too, that shall be our substancial portfolio to start our business. Once we manage agreements in these spheres, we would propose collaboration to HACHEZ to establish a strong multivariable chocolatemaker with the view of knowledge and, most of all, mutual export exchange.

Therefore, which seem to a certain degree hazardous, we plan to take roots of our factory in outskirts of Bremen too. Not only because of logistics benefits within the vision of future cooperation, Bremen is also a kind of strategic place being close to the line of ports and borders when it comes for export and import solution.

In India then, refer to the listing of largerly involved states in food processing industry, the Andhra Pradesh offers fruitufl agriculture and opportunities.

Picture 2 - State-wise Attractiveness for Investing in Food Processing

Startup Entering Strategy Analysis stemming from 8 known steps to successful startup.5

1. Discover a problem

Setting a table for almighty Indian industries would mean to include telecommunication, small car, software, computer, spice, jewellery, apparel or chemical industry for instance.6 But then these articles aren’t necessarily insufficient throughout the country. What India lacks is a question of import. To name a few foreign import items: IT, electronics, optics, food and fat, wine, logistics, petroleum, raw materials, or pharmaceutical products.7

5 Inspired by startups dealing website of PluGGd.in: <http://www.pluggd.in/steps-to-successful-startup-savitabhabhi-case-study-297/> (approached 18.02.2010)

Need of food and welfare in India are apparent. As quite good agricultural conditions and willing farmers are both available, another food

6 Detailed list of vast Indian export industries to be found here: <http://www.india-exports.com/> (app.18.02.2010)

7 List of importers: <http://www.infodriveindia.com/India-Imports-Trade-Data.aspx> (approached 19.02.2010)


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processing industry might certainly be welcome, although lots of similar food producers already occupy Indian interior.

2. Create a motivating product

We may say a nail was discovered and a hammer that has clear differentiator from its competitors is needed. As India is a huge milk producer and Europe boosts diverse chocolate articles, also we picture our international cooperation to be launching out such elements as pure chocolates, cakes, pastries and wafer biscuits. Our utmost plan is to combine knowledge of spice-experts from India and European idyomatic repices, such as Bremer Hachez represents in its entirely original and distinct chocolate goods.

3. Deliver consistently

Once we enter European market by promoting our up-to-date innovating chocolate articles to wholesalers and retailers in Germany, we hope to disperse our net in whole European Union. Depending on each particular progress, the idea is to establish a solid branch also in India. So that in the end at least two fully operating factories would supply chocolate artifacts through, in the run of time, efficiently developed logistic system in Indian and European market. Hopefully, once even to remainding countries.

4. Get around initial problems

It may easily happen that HACHEZ rejects our proposal, or that Indian legislative system does not allow us to launch such business, or either the Ministry of Finance in India rises incorporation related taxes or European Comittee restricts our transition into merger to reduce the danger of our threat for European market in case of forming a strong monopol which adjusts high prices for others. Or in all, preparation and one step ahead are essential. In the first case, our chocolate focuessed company aims to generate distinctive articles even without HACHEZ reinforcement. European restrictions for multi-merger corporation of us, India and HACHEZ shall not have far-going impacts as we yet do not calculate on expanding up to the level of equality with such chocolate „dominators“ as Nestlé or Cadbury. Our market impress shall not cause a big stroke neither for investors nor customers.

Plus as we must count on eventual risk, a well-calculated founder’s budget, later negotiated with our Indian team player in Andhra Pradesh, represents one of our testimonials for the middle man in India (planwise TECNOVA which helps formulating start-ups from strategy to implementation with the aim of new company’s success8

Moreover, India itself has the most liberal and transparent policies on foreign direct investment among major economies of the world. For FDI profits earned, dividends and proceeds out of the sale of investment are fully repatriable. Manufacturing sector is still growing, favourably about 8.8% last year. 55% of Indian popoulation are below the age of 25, which are chocolate most keen consumers.

).

8 More about inter-corporation negotiator TECNOVA here: <http://www.tecnovaglobal.com/index.htm> (app. 19.02.2010)


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5. Launch new features

Along with the profit cumulation feasible improvements in technology, logistics (especially when fighting with the supply in Indian insufficient infrastructure of highways, ports, railways, airports etc.) design, manpower, public relations and prices are covered within our business prospectus.

6. Good public relations:

All business sustainability lies, predominantly, on relationships with customers. To win clients‘ interest is one of most challenging targets for successful „anchorange“ in selected market. Apart from customers, much wider environment decides about our run-up – government, competitors, suppliers, financial institutes, further concenrned particular organisations. To address all of these and to simplify our own beginning and king of promotion, we mean to register in Indian Importers Association9

Indian Importers Association Benefits to Indian Importers

as an anticipation of expected delivery of meaningful portion produced in the nearest future.

IIA is a platform for interaction between members and concerning Government officials.

It offers an opportunity to its members to explain their problems and grievances to concerning Government departments.

The members will get an exposure to Multilateral & bilateral trade agreement, foreign market trends and policies, international price index etc.

The association will update the members about trade inquiries it shall be receiving from overseas .

Trade delegations will be sponsored for visiting and every effort will be made to get the same to be subsidized by foreign embassies.

International Trade fairs, Seminars, workshops, events, exhibition / conference and management talks on EXIM policy, One to One negotiations, buyers and sellers meet.

Representations to the Government organizations can be made through the association.

The top organization of Indian Industry like FICCI, CII, ASSOCHAM, INDIAN CHAMBERS OF COMMERCE, FIEO, PHD Chamber of Commerce shall be constantly inviting our members to participate in buyer / seller meets. Members will be kept posted on such meets and they can attend the same.

9 Along with mentined benefits above the IIA webpage: <http://indianimportersassociation.com/index.htm> (app. 20.02.2010)


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7. Business mode

Pursuant to sumary of determined goals a their reasons above, a structured guideline of sequential steps to achieve our business aim turns up:

Picture 3 - Selection Criterias For Our Business Mode

To sum up basic explanatory points:

A. Corporation Infrastructure

Core Capabilities A chocolate is much sought-for article among population with high GDP upon which European Union members converge. India is world most intense milk producer, consists mainly of middle class diligent and educated citizens. Processed food plays a big export/import role. Cooperation Network Indian both middleman and negotiator Tecnova India PVT. LTD. with its seat close to New Delhi enables strategies, implementation assistance, leverage and competing effectiveness in Indian market. Indian Import Association poses promotion benefits and local government and exhibitions conductor. HACHEZ in Bremen embodies an important cooperator among distinctive chocolate-item manufacturers. Value Formulation Unique HACHEZ recipes for pure chocolate made of ecuadorian cacao beans and its long-term sustainability in the market are, no doubt, promissing cons. Indian farmers are well-known for their elaborate skills and India itself exports various spice which is nowadays added to several chocolate bars and pastries. In words of „noted“ cooperators and „peculiar“ production techniques we believe in some sort of positive reflection.

B. Our Offer Capabilities

Proposed Value

Customer Relationship

Distribution Logistics

Target Customer

Revenue Sources

Core Capabilities

Proposed Value

Cooperation Network

Value Formulation

Cost Structure


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High quality pure chocolates, cakes, pastries and wafer biscuits of innovative flavours and in the run of time also for affordable prices, especially considering Indian market.

C. Segment Approach

Customer Relationship Public Relations through Indian Import Association, exhibitions, wholesalers and retailers addressing and media promotion. After some time special loyalty programs discounts. Distribution Logistics With headquarters seated in German Bremen we mean to join HACHEZ in the future and, already from the startup initiation utilize surrounding infrastructure of ports and railways, among others. Planned share of at least 30% of production in India shall be sold right from Indian branch, which is meant to be build there gradually as a collateral factory. Target Customer Mainly middle-aged citizens and children after our delivery is sold to large multiple stores in German, remaining European Union, India and the rest of approachable countries.

D. Financial Calculation

Cost Structure Applications, fees, licenses, services, credits, premises, transportion, rentals, payments and entire start-up, cultivation and production expenditures covered in structural foundation’s budget. Revenue Sources For each sold unit and further corporation treaties shared equally with our jointventure partners.

8. Future Growth

Basic vision of our company lies upon tiniest anchorement in chocolate market at the utmost beginning. Step by step a sheer success would mean a contract sealed by Indian supplier, another with German HACHEZ and far more with individual wholesalers and retails. Whether some confectioner’s, coffehouses or tv programmes will ever carry a label of our venture in means of reputation that is a question of patience, investigation, study and certain degree of motivation.


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A.2 Chosen Business Mode, Analysis on Main Legal Determinants and Risk Scenarios Stemming from Different Business Modes

We have several options how to enter the Indian market. As an instance we might enumerate some

of them: direct investing, investments on green or brown field, merger and takeover, franchising,

licensing and joint venture.

Representative office A Liaison Office functions as a representative office set up primarily to explore and understand the

business and investment climate. The mission of the representative office is to act as a liaison

between the home office and trade organizations or related industries in India. Representative

offices often engage in market research and establish contacts with prospective customers and

partners. It is important to remember that the representative office is not a separate legal entity.

Rather, it is an extension of its parent company.

Wholly owned subsidiary in India Instead of having a joint venture company, a foreign company may incorporate its wholly owned

subsidiary ('WOS') in India, where 100% FDI is permitted. A 100 % subsidiary, incorporated as a

private company, is treated as a private company for the purpose of the act, even though the foreign

holding company is a public company under the law of its country.

A person resident outside India shall be allowed to establish a branch or office or other place of

business to act as a channel of communication between the principle place of business or head office

by whatever name called or represent the interest of the foreign companies executing a project in

India in accordance with the relevant provisions and regulations prescribed under FEMA.

Merger and acquisition

A merger or acquisition is a combination of two companies where one corporation is completely

absorbed by another corporation. The less important company loses its identity and becomes part of

the more important corporation, which retains its identity. A merger extinguishes the merged

corporation, and the surviving corporation assumes all the rights, privileges, and liabilities of the

merged corporation. A merger is not the same as a consolidation, in which two corporations lose

their separate identities and unite to form a completely new corporation.


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Partnership with middleman Intermediary within a channel of distribution used to transfer products from the manufacturer to the

end user. Those who actually take title to the products and resell them are merchant middlemen.

Those who act as brokers but do not take title are agent middlemen. Merchant middlemen include

wholesalers and retailers. Agent middlemen includemanufacturer's representatives , brokers, and

sales agents. Middlemen expand the capacity of the manufacturer to distribute products to the end

user, transfer title between channel levels, collect payments from middlemen and end users, and

communicate product information to all channel participants. When the financial and expert

resources are available inhouse, manufacturers can increase their profit margins by reducing the

involvement of middlemen.

JV partnership It is a contractual agreement joining together two or more parties for the purpose of executing a

particular business undertaking. All parties agree to share in the profits and losses of the enterprise.

Considering all factors and circumstances we have decided to build our business as common

enterprise with Indian local partner. Reasons why we will do a business via JV are followed:

marketing factors

market size

market potential

endeavour to maintain market share

profitability

commercial and political factors

trade barriers

preferences of customers

cost factors

resource proximity

qualified and well- experienced labour force

equity and technology availability

low rate of cost- labour, progression, transportation

investment climate factors

affirmative relationship to foreign companies

political stability

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restraints in level of equity kept by domestic country

foreign currency stability

tax system

awareness of local market

financial possibilities for investors

overall lower cost rate

Equity Joint Venture It’s a relationship based on a contract between mainly two parties. It’s a resource correlation of two

or more partners’ out- country with in- country partner. They incorporate tangible or intangible asset

to common assets. These belongings of each party is considered as a contribution to company. JV is

aimed to realize common business purpose, share a risk, and assemble money on one side and either

technology, knowledge or procedure inputs on second side. That was equity JV based on financial

support meaning that one party is committed to bring financial enter to new company. Beside this

kind we know contractual JV which is based on contract among parties without equity cohesion. We

decided to establish equity JV.

Factors considering before establishing and signing JV:

coming across an appropriate partner

drafting a detailed business plan to be concurred from each side

development of an strategy

special allocations of income, gain, loss or deduction to be made among the partners

risk taking

dispute resolution agreements

valid law

force majeure

holding shares and their transfer

board of directors

general meeting.

CEO/MD

management committee

important decisions with consent of partners

dividend policy

funding


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Picture 4 - Joint Venture Development

Process of launching the JV in India: 1. First you have to obtain governmental approvals from RBI (Reserve bank of India) or FIPB (Foreign

Investment Promotion Board)

- Automatic Approval Route - The investors are only required to notify the Regional

office concerned of RBI within 30 days and file the required documents with that office

within 30 days of issue of shares to foreign investors

- FDI in activities not covered under the automatic approval route requires prior

Government approval and are considered by the Foreign Investment Promotion Board

2. Selection of a local partner

3. Signing either Memorandum of Understanding or a Letter of Intent

4. Negotiation- debate the terms, conditions to avoid any later misunderstandings

5. JV agreement

Who helps in setting up the business in India: Foreign Investment Promotion Board (FIPB) has been set up in the Ministry of Finance to promote

inflows of FDI into the country, as also to provide appropriate institutional arrangements,

transparent procedures and guidelines for investment promotion and to consider and

approve/recommend proposals for foreign investment.

The Secretariat for Industrial Assistance (SIA) has been set up by the Government of India in

the Ministry of Commerce & Industry to provide a single window service for entrepreneurial

assistance, investor facilitation and receiving and processing all applications which require

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Government approval. It also notifies all Government Policy decisions relating to investment

and technology and collects monthly production data for select industry groups.

Pros and cons of JV:

Advantages Disadvantages

reduction of risk, low risk

opportunities restricted power for decision making

the fastest and most effective

way to penetrate the market

possibility of being ripped off or

disappointed by unscrupulous and

unprofessional JV partners

ability to increase profit

margins, high profits

hurting your reputation and/or

customers and associates by

associating with the wrong people

the leveraging of underutilized

resources

provide companies with the

opportunity to obtain new

capacity and expertise

speed, access, sharing of

resources

trust from domestic publicity

As you can see, pluses of JV prevails to minuses, therefore we deem that JV is the best choice how to

come in the Indian market. We, as a European company, operate in such a different environment

compared to Indian one. We have been looking for stable, powerful local partner due whom we

become significant market player with well- build reputation. Local partner brings us knowledge

about that market, manners and customers wishes and desires. He’s the one who knows how to do

business, how to negotiate, how to act and how to listen to customers’ needs. We offer know- how,

skills and experience, traditions in chocolate production and brand name well- known in every corner

in Europe. We know that JV partnership is the right step in order to infiltrate the new market and

increase our market share and profit.


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Of course doing a business always goes hand in hand with potential risk. We have to count

with this option. JV might preferably face breakdowns as follows:

poor or unclear leadership

cultural differences

poor integration process

inadequate preplanning

agreements could not be reached on alternative approaches to solving the basic objectives of

the joint venture

people with expertise in one company refused to share knowledge with their counterparts in

the joint venture

parent companies are unable to share control or compromise on difficult issues

JV is a partnership of at least two independent legally and economical autonomous firms achieving

same goals. We have to fulfil some requirements in order to succeed. Some of them are mentioned

below:

each participant has something of value to bring to the venture

pay attention to careful preplanning.

before the contract signing each side should know second side properly

the agreement or contract should provide for flexibility in the future.

there should be provision in the agreement for termination including buyout by one of the

participants.

key executives must be assigned to implement the joint ventures.

a distinct unit be created in the organisational structure which has the authority for

negotiating and making decisions.

business strategy

Establishing enterprise in different country with diverse culture requires a lot of work to do in

advance to the current act. One of the “have to be properly discussed” is a legal form or type of

company which we bring into play to enter the new market. Necessity of knowing all essential legal

aspects of business forms and demands of domestic system increases in cases with unfamiliar, far

markets with dissimilar habits and customs. Once we cross domestic boarders with our business, we

have to keep in our mind, that taxes, capital requirements, executing authorities, dividend policy etc.

varies from country to country. Thinking about business mode is based on consideration how much

power we want keep, how different society is willing to accept foreign business activities, whether


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exist any requirements for equity share owned by domestic company, risk feasibility, overall

cons and pros and state support. Right decision may help us raise our probability to succeed.


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A3. Most important positive and negative legal aspects in selling for India compared in selling for the European Union markets

For almost 5 years India's economy has had an annual regular increase between 7-8% per annum. In 2006 India's economy was the fourth largest economy in the world (after the economies of the U.S., China and Japan). In the same year, India's exports amounted to about 112 billion, while imports about 188 billion dollars. In 2008, its GDP grew by 7.3% in 2009, despite the global crisis on financial markets. Overall, the Indian economy ranged from 6% upwards. In the second quarter of 2009, the Indian economy grew by 6.1 percent.

Indian retail market, in terms of volume, is the fifth in the world. It is worth noting that it is only 10 years old. The market was considered the most attractive emerging market for investment-related retail sector in 2009 as a result of the Global Retail Development Index (GRID) issued by AT Kearney's. Retail sales in cities are conducted in small and medium-sized shops as well as in larger supermarkets. Villages are supplied by small shops. The number of "shops" (or rather the points of sale) in India is estimated at 10 million.

India's five-year development plan for the period 2007-2012 emphasizes not only economic issues but also the most important social issues. According to the plan, economic growth must go in hand with the increase in standard of living of society. In addition, the dynamically growing Indian consumer market attracts the attention of many international companies. Broad social changes, including rapid urbanization, expansion of electronic media, education, growth, foreign and domestic travel, has changed significantly the way of life of many Indians. They have also radically changed their consumption habits. The demand for products and services of good quality, such as ready-made food products, branded clothes, cars, electronics, restaurants, travel have Increased dramatically. Easy availability of consumer finance has further driven consumer boom.

In comparison, the European Union (comprised of 27 countries), has the highest gross domestic product in the world. In the third quarter of 2009, the European economy even began to exhibit signs of exit from the recession.

For our company, the sales of chocolate in the Indian market and the European Union economy is an important factor in sales growth. If they are in better condition it is more likely that our product will be sold to more customers. Global economic history shows chocolate and chocolate products are less sensitive to the economic slowdown. They are included within the category of luxury goods within the markets, but it is a luxury available upon nearly every table already. But for us, the state of the economy and improving the economic situation is an additional factor in increasing sales of chocolate. Our chocolate selling company wants to increase the standard of living, especially in rural India. The goods market has increased significantly over the past several years, and the market share of rural consumption goods (such as bicycles, watches, radios, etc.) exceeded 75%. With these changes we can begin to advertise our chocolate in the media, so that we can count on the sales growth of our products. In rural districts, because electronic media advertising are important role to producers of branded products. Advertising in the media significantly influences the change in consumer preferences in India.


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Unfortunately, access to the Indian market is not easy. On the one hand, there have been consistent assessment of all EU countries, but border procedures are cumbersome and lengthy and there are significant problems with corruption. These are widespread because the protective mechanisms of the market, from the largest in the agri-food products such as cereal import (done only through the State-run the "Food Corporation of India”), to specific labeling of goods to market and deliver the goods with the least shelf life of at least 60% of the initial period. This is a serious handicap in the case of a very long period. Unfortunatly, foreign investors have had to face problems in India: developed bureaucracy, tough laws (often conflicting), and developed corruption. According to Transparency International, India remains one of the most corrupt countries in the world. While they surveyed 180 countries, India was 84th in the list of least corrupt countries. In the past 5 years will see changes for the better. Even in 2004, India was at the 90th position among 146 countries. Procedures associated with the start of foreign investment last a long time, and unclear rules cause the investors unforeseen problems. Besides, India is a country that prefers using administrative restrictions on its market. India uses a global crisis as good reason not to come in on their market.

These risks in the Indian market are negative aspect of selling our product in such a country. In addition, language barriers, as well as cultural and mental barriers certainly arise during the process of selling our products. At in additional obstacle is the label of the product, more specifically, the language that should be on it. The languages of Hindi and English support a full role, liaison. Moreover, there are up to 21 official languages in certain states. Despite these difficulties, we will get through them and sell our product on the Indian market.

Our company is already selling chocolate to the European Union market, so we do not have to worry about problems that may be encountered in India: corruption, unclear law. Indeed, the European Union guarantees the free movement of products. The introduction of common regulations is an accepted practice in member countries and the basic technical standards or requirements of metrological guaruntee the quality and safety of the product. Some goods have regulated legal standards, which are referred to as "harmonized", and the remaining goods are not covered by the relevant regulations and have to use the group determining the area of "non-harmonized”.

A free trade area consists of removing all barriers (mainly customs duties and charges having equivalent effect) in the flow of goods between the countries. All the goods are sold without tariffs, while the countries of the FTA may have different duties in relation to third world countries. The Member States’ free trade zone still has the same effect on the amount of customs duty on goods flowing in from third world countries to countries outside this zone. The creation of a free trade area, causes the need to distinguish the goods which come from another country belonging to the zone and those which come from countries outside the zone. With regard to European integration, the rules of free trade zone between the Member States came into force, effective upon the entry of the Treaty establishing the European Economic Community (1958). Trade within the European Union is on the market, which covers the whole of the Union without internal borders. The internal Market is also a single market defined in the Article. 7a of the Treaty establishing the European Community (according to the uniform text of 1992), as an area without internal frontiers in which it is the free movement of goods, services, persons and capital, which allows for increases in production scale and therefore, its benefits, ensuring freedom of competition and creating incentives to invest. Consumers making purchases in the domestic market are better informed and better protected against potential


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hazards arising from the purchase of goods or services. Systems of monitoring compliance with existing legislation are meant to operate effectively within the single market, rather when they cross national borders for goods. The idea of a single market is based on high level of mutual trust and the balance regulatory systems.

With this transparent and open-access solutions, our company, which sells the EU chocolate, does not have to worry about India’s developed bureaucracy, tough and often conflicting laws, and corruption.

In addition, European Union rules clearly define the requirements to be fulfilled by chocolate.

Chocolate in the EU is a generic term identifying the products manufactured from cocoa and sugar containing at least 35% cocoa derivatives, including at least 18% cocoa butter and 14% non-fat dry cocoa.

CHOCOLATE MILK - at least 25% cocoa (cocoa mass cocoa butter +) and at least 14% milk.

WHOLLY-MILK CHOCOLATE - at least 30% cocoa (cocoa mass cocoa butter +) and 18%

HALF-BITTER CHOCOLATE Exquisite - at least 43% cocoa, including at least 26% cocoa butter.

CHOCOLATE Exquisite / PÓŁGORZKA - at least 50% cocoa, including 18% cocoa butter.

BITTER CHOCOLATE - at least 60% cocoa, including at najmnej 18% cocoa butter.

WHITE CHOCOLATE - at least 20% cocoa butter (no cocoa pulp), 14% milk.

This gives us assurances that our products will not be removed from the market and that we will be able to smoothly plan strategies for the sale of our products.

India is the second, after China, the most populated country in the world, in which approximately 16% of the world's population lives. It is believed that in 2010, the number of people living in India, will be more than 1 200 million. The fertility rates in India reduces from year to year, but there are also decreased levels of fatalities. This is associated with a reduction in infant mortality, the development of medicine and education. It well affects the sale of ours products in Indian market. This helps us to plan their sales strategy for several years in advance. Many religions, their factions and sects in India have also affects on cuisine, which is an extreme but a huge role in India chocolate play.

The European Union, which is the world's third largest population, has about 595 million inhabitants. More people live only in China and India. Another factor that speaks for advantage our product is that Europe accounts for almost half of the world’s consumption of chocolate. The average European eats about 8 kg, or 80 tablets of chocolate a year.


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A4. Most Important Ethical or Moral Challenges

Starting a business is always linked up with many challenges. These challenges are increasing

especially when the destination is another country. Cultural differences, religious, moral and ethical

issues are obvious challenges we have to handle . Thus, before making any step , what you have to

do is filter through all of these factors. Every country is governed by its own laws and customs,

without its knowledge and solution how to solve them, we can not lead a successful business.

India certainly belong to the countries where business knowledge is extremely important. Not

depending on what kind of business we conduct, associated with chocolate or another, certainly this

process will be accompanied by ethical and moral challenges.

In a diverse and complex country like India, it's difficult to Impart generic conclusions that could be

used by those wanting to do business here. Regionalism, religion, language and caste are all factors

that need to be taken into account when doing business in India. Behavior, etiquette and approach

are all modified depending on whom you are addressing and the context in which they are being

addressed.

The Indian government seeks to make India a friendly environment for business. In assessing

such elements as legal environment clarity and transparency of the existing rules can be said

that India is characterized by great good will. The Government does much to attract foreign

investors and to strengthen economic ties with other countries, including the European

Union, which is the main trading partner of India. However, despite good will, you can still

encounter problems with starting the business.

The most serious problem is the Indian bureaucracy and state offices that operate inefficient

and slowly. To obtain the necessary permits must sometimes wait a long time, but not due

to the ill will of officials and their attitudes to corruption (i.e. their expectations for a bribe),

but a different approach to the passage of time. In this case, the opening of the business plan

must take into account the longer waiting period for anything.

Fortunately, many decisions can be accelerated through personal contacts, friendly

conversation, etc. Although the problem of corruption in India is everywhere, many officials'

decisions, which are long awaited, can be accelerated only by direct contact, rather than

financial arguments.


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Moving to India, however, will require in such cases the necessary understanding of local

culture, mentality and knowledge.

Europeans can have many troubles and difficulties in dealing with Indian businessmen due to

corruption and laziness of civil servants. You can, of course, meet unreliable or fraud ones

against who you have to be properly protected (e.g. conducting an interview on the

appropriate associate / partner).

As a rule, however, the Indians are coming to foreign contacts very seriously and make

efforts to reliably meet their obligations.

A major problem is certainly timeliness. Indians have problems with this, but there are many

positive exceptions. The biggest surprise may be just the Indian culture itself. It is the

environment in which the developed mentality and behavior patterns of most businessmen

in India. Most, because in India you can meet a large group of businessmen who started in

the U.S., not India. And of course there is the question of language. Good knowledge of

English is essential in dealing with Indian businessmen. It must however be prepared for a

completely different, a strong accent and a different vocabulary.

A Few Key Issues When Picking First Steps in Indian Market It is essential to know the Indian culture, even minimally.

This way will be easier to understand unusual or different behavior ,on the other hand it will

be easier for business meetings and negotiations.

It is difficult to negotiate, if either party refers to other patterns and different value systems.

European businessman often does not fully understand the argument will be given by the

Indian partner. Knowledge about Indian culture allow easier navigation in new culture. We

must also keep in mind the respect for that culture. Everyone should attempt to adjust own

behavior to standards in force in India. In this way, will further the positive assessment of the

Indian partners, which is necessary for further contacts. Note that considerations of "non-

trade", "non-economic" impact on cooperation. Even if the financial assessment of potential


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contract falls positive, then the final decision in India is affected by additional factors

such as personal assessment.

The cultural nuance’s important thing is that the Indian partner had the feeling that the

European trader treats him and his culture with respect. A mean estimate of curiosity,

understanding and knowledge of the basic elements of the culture and history. Never

present attitude of superiority. Cultural knowledge is also necessary in order to properly

assess the signals sent by a partner, i.e. to be able to read "between the lines." There is

always silence, on the part of the Indian partner is contempt or lack of interest. Just

occasionally even between close friends and contacts are able to pluck a few months.

It is also worth mentioning the approach of Indian partners to Europeans.

Of course, reliability and profit. These expectations apply to the antique business. But what is

important: The Indians will never have to make interest at any price. Working atmosphere,

the entire sheath accompanying the contacts is as important as the expectation of financial

gain.

religious issues in trade relations and business

We only need to remember here also the respect for religious behavior. Critical comments about

the cult of believers are badly received. This does not mean, of course, that it can not be spoken

critically on these subjects. In the case of our business, the manufacture of chocolate, matters of

religion should not play a greater role. So long as the chocolate is not forbidden to be eaten, our

business is not jeopardized. Unlike Western societies, in India religion, fatalism and collectivism

are all components of daily life and they need to be respected for healthy and successful

business relationship. Despite the traditional caste system being dismantled, remnants may still

be witnessed in the hierarchical structure of Indian business practices and decision-making.

There is a strong sense of tradition tied into daily business practices of laborers, making it an

attractive market for foreign businesses.

No matter what the industry is, foreign businesses should expect some degree of differences in

business norms in India. Included below are some basic business Etiquettes that the Europeans

companies should follow when developing and maintaining relationship with Indian businesses.


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Indian Culture Hinduism and the traditional caste system - In India, religion is a way of life and must be

respected in order to maintain successful business relationships. Despite the elimination of the

traditional caste system that was a direct outcome of Hinduism, attitudes still remain and both

aspects of Indian culture still influence the hierarchical structure of business practices in India

today.

Fatalism

The concept of fatalism stems from one of the most characteristic traits of Indian culture -

spirituality. The notion of Karma and that everything happens for a reason is still significant in

the decision making process of many Indians. It also influences the concept of time in India and

as a consequence business negotiations may take longer and are never rushed.

Collectivism

India's strong sense of community and group defined orientation mean a greater acceptance of

hierarchical settings. Others India, there is a noticeable lack of privacy and a smaller concept of

personal space, where several generations often live together under one roof. For Indian

business practices this places an additional importance on interpersonal contacts, avoidance of

conflict and a more indirect approach to communication.

Business practices in India ( what is worth to remember) for Meetings in India will generally begin with friendly small talk. This may include personal

questions about your family and is seen as a way of building rapport and trust before business.

a In India, the family unit is highly valued, therefore showing interest and respect towards your

Indian counterpart's family is vital for Establishing successful relationships.

In Indian culture the disagreement is rarely expressed in a direct manner. The word 'no' is

often avoided and is replaced by other non-verbal cues and indirect communication. During

the negotiations, trust and well-established relationships with your Indian counterparts must

be in place before any form of business can take place.

All these factors may initially be problematic. European business culture in this respect is quite

different. Family and work often tend to be two areas which are not mixed together. But wanting to

start business in India, we must be prepared for questions that we may seem inappropriate or

embarrassing.


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Indian business etiquette (Do's and Don'ts) • Do use titles wherever possible, such as "Professor" or "Doctor". If your Indian counterpart does not have a title, use "Mr.", "Mrs.", or "Miss". • Do not wait for a female business colleague to initiate the greeting. Indian men do not generally shake hands with women out of respect. • Do remain polite and honest at all times in order to prove that your objectives are sincere. • Do not be aggressive in your business negotiations - it can show disrespect. • Do not take large or expensive gifts as this may cause embarrassment. If you take a gift to make sure you present the gift with both hands. • Do not refuse any food or drink offered to you during business meetings as this may cause offense. In addition, it is useful to bear in mind that traditionally, Indians are vegetarians and do not drink alcohol.


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A5. Essential Contents of Selected Business Laws

INTELLECTUAL PROPERTY RIGHTS Intellectual Property refers to different types of legal monopolies over mind creations, both artistic and commercial, and the corresponding field of law. Under intellectual property law, owners are granted certain exclusive rights to a variety of intangible assets, such as musical, literary, and artistic works, discoveries and inventions, and words, phrases, symbols, and designs.

Intellectual property rights as a collective term includes the following independent IP

rights which can be collectively used for protecting different aspects of an inventive work for multiple protection:

• Patents • Copyrights • Trademarks • Registered ( industrial) design • Protection of IC layout design, • Geographical indications, and • Protection of undisclosed information

It is important to know that these rights have to be renewed from time to time for keeping them in force except in case of copyright and trade secrets. IPR have fixed term except trademark and geographical indications, which can have indefinite life provided these are renewed after a stipulated time specified in the law by paying official fees. Trade secrets also have an infinite life but they don’t have to be renewed. IPR can be assigned, gifted, sold and licensed like any other property. Unlike other moveable and immoveable properties, these rights can be simultaneously held in many countries at the same time.

Patents The term patent usually refers to a right granted to anyone who invents or discovers any new and useful process, machine, article of manufacture, or composition of matter, or any new and useful improvement thereof. A patent is not a right to practice or use the invention. Rather, a patent provides the right to exclude others from making, using, selling, offering for sale, or importing the patented invention for the term of the patent, which is usually 20 years from the filing date subject to the payment of maintenance fees. A patent is, in effect, a limited property right that the government offers to inventors in exchange for their agreement to share the details of their inventions with the public. Like any other property right, it may be sold, licensed, mortgaged, assigned or transferred, given away, or simply abandoned.

The first Indian patent laws were first promulgated in 1856. These were modified from time to time. New patent laws were made after the independence in the form of the Indian Patent Act 1970. The Act has now been radically amended to become fully compliant with the provisions of TRIPS. The most recent amendments were made in 2005 which were preceded by the amendments in 2000 and 2003. While the process of bringing out amendments was going on, India became a member of the Paris Convention, Patent Cooperation Treaty and Budapest Treaty.


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It should be underlined that a patent document is a techno-legal document and it has to be finalized in consultation with an attorney. Submission of complete specification is necessary to obtain a patent. Contents of a complete specification would include the title of the invention, the field to which the invention belongs, the background of the invention including prior art giving drawbacks of the known inventions & practices. Moreover, they include complete description of the invention along with experimental results, drawings etc. essential for understanding the invention, and claims, which are statements, related to the invention on which legal proprietorship is being sought. Therefore the claims have to be drafted very carefully.

Any time after three years from date of sealing of a patent, application for compulsory license can be made provided that reasonable requirements of public have not been met, patented invention is not available to public at a reasonably affordable price or patented invention is not worked in India. In this point, it is important to mention that among other things, reasonable requirements of public are not satisfied if working of patented invention in India on a commercial scale is being prevented or hindered by importation of the patented invention.

Copyrights Copyright is a right, which is available for creating an original literary or dramatic or musical or artistic work and it gives protection for the expression of an idea and not for the idea itself. The length of the term can depend on several factors, including the type of work, whether the work has been published or not, and whether the work was created by an individual or a corporation. In most of the world, the default length of copyright is the life of the author plus either 50 or 70 years. Copyright law does not restrict the owner of a copy from reselling legitimately obtained copies of copyrighted works, provided that those copies were originally produced by or with the permission of the copyright holder.

The Copyright Act, 1957 as amended in 1983, 1984, 1992, 1994 and 1999 governs the copyright protection in India. Moreover, India is a member of the Berne Convention, an international treaty on copyright. Under this Convention, registration of copyright is not an essential requirement for protecting the right. It would, therefore, mean that the copyright on a work created in India would be automatically and simultaneously protected through copyright in all the member countries of the Berne Convention. The moment an original work is created, the creator starts enjoying the copyright. However, an undisputable record of the date on which a work was created must be kept. When a work is published with the authority of the copyright owner, a notice of copyright may be placed on publicly distributed copies. The use of copyright notice is optional for the protection of literary and artistic works. It is, however, a good idea to incorporate a copyright notice. As violation of copyright is a cognizable offence, the matter can be reported to a police station. It is advised that registration of copyright in India would help in establishing the ownership of the work. The registration can be done at the Office of the Registrar of Copyrights in New Delhi. It is also to be noted that the work is open for public inspection once the copyright is registered.


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Industrial design rights An Industrial design right is an intellectual property right that protects the visual design of objects that are not purely utilitarian. An industrial design consists of the creation of a shape, configuration or composition of pattern or colour, or combination of pattern and colour in three dimensional form containing aesthetic value. An industrial design can be a two- or three-dimensional pattern used to produce a product, industrial commodity or handicraft.

India's Design Act, 2000 was enacted to consolidate and amend the law relating to protection of design and to comply with the articles 25 and 26 of TRIPS agreement. The new act, (earlier Patent and Design Act, 1911 was repealed by this act) now defines "design" to mean only the features of shape, configuration, pattern, ornament, or composition of lines or colours applied to any article, whether in two or three dimensional, or in both forms, by any industrial process or means, whether manual or mechanical or chemical, separate or combimed, which in the finished article appeal to and are judged solely by the eye; but does not include any mode or principle of construction.

Trademarks

A trademark or trade mark is a distinctive sign or indicator used by an individual, business organization, or other legal entity to identify that the products or services to consumers with which the trademark appears originate from a unique source, and to distinguish its products or services from those of other entities. A trademark is a type of intellectual property, and typically a name, word, phrase, logo, symbol, design, image, or a combination of these elements. A trademark is designated by the following symbols:

• ™ which is for an Unregistered trade mark, that is, a mark used to promote or brand goods • ℠ for an unregistered service mark, that is, a mark used to promote or brand services • ® for a registered trademark

When it comes to India, the Enactment of the Indian Trademarks Act 1999 is a big step forward from the Trade and Merchandise Marks Act 1958 and the Trademark Act 1940. The newly enacted Act has some features not present in the 1958 Act and these are:-

1. Registration of service marks, collective marks and certification trademarks.

2. Increasing the period of registration and renewal from 7 years to 10 years.

3. Allowing filing of single application for registration in more than one class.

4. Enhanced punishment for offences related to trademarks.

5. Exhaustive definitions for terms frequently used.

6. Simplified procedure for registration of registered users and enlarged scope of permitted use.

7. Constitution of an Appellate Board for speedy disposal of appeals and rectification

applications which at present lie before High Court.


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However, the Indian Act of 1958 did not have any reference to service marks. Service means service of any description that is made available to potential users and includes the provision of services in connection with the business of industrial or commercial matters such as banking, communication, education, financing, insurance, chit funds, real estate, transport, storage, material treatment, processing, supply of electrical or other energy, boarding, lodging, entertainment, amusement, construction, repair, conveying of news or information and advertising. Marks used to represent such services are known as service marks.

Protection of Geographical Indications A geographical indication (GI) is a name or sign used on certain products which corresponds to a specific geographical location or origin (eg. a town, region, or country). The use of a GI may act as a certification that the product possesses certain qualities, or enjoys a certain reputation, due to its geographical origin. In 1994, when negotiations on the WTO Agreement on Trade-Related Aspects of Intellectual Property Rights ("TRIPS") were concluded, governments of all WTO member countries (151 countries As of August 2007) had agreed to set certain basic standards for the protection of GIs in all member countries. There are, in effect, two basic obligations on WTO member governments relating to GIs in the TRIPS agreement:

1. Article 22 of the TRIPS Agreement says that all governments must provide legal opportunities in their own laws for the owner of a GI registered in that country to prevent the use of marks that mislead the public as to the geographical origin of the good. This includes prevention of use of a geographical name which although literally true "falsely represents" that the product comes from somewhere else.

2. Article 23 of the TRIPS Agreement says that all governments must provide the owners of GI the right, under their laws, to prevent the use of a geographical indication identifying wines not originating in the place indicated by the geographical indication. This applies even where the public is not being misled, where there is no unfair competition and where the true origin of the good is indicated or the geographical indication is accompanied by expressions such as "kind", "type", "style", "imitation" or the like. Similar protection must be given to geographical indications identifying spirits.

Article 22 of TRIPS also says that governments may refuse to register a trademark or may invalidate an existing trademark (if their legislation permits or at the request of another government) if it misleads the public as to the true origin of a good. Article 23 says governments may refuse to register or may invalidate a trademark that conflicts with a wine or spirits GI whether the trademark misleads or not.

Article 24 of TRIPS provides a number of exceptions to the protection of geographical indications that are particularly relevant for geographical indications for wines and spirits (Article 23). For example, Members are not obliged to bring a geographical indication under protection where it has become a generic term for describing the product in question. Measures to implement these provisions should not prejudice prior trademark rights that have been acquired in good faith; and, under certain circumstances — including long-established use — continued use of a geographical indication for wines or spirits may be allowed on a scale and nature as before. The concept of identifying GI and


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protecting them is a new concept in India, perhaps in most developing countries, and has come to knowledge in these countries after they signed the TRIPS Agreement.

Integrated Circuit Layout Design protection Layout-Designs(topographies) of Integrated Circuits is another field in the protection of Intellectual Property. Like most of the other forms of Intellectual Properties, IC Layout Designs are creations of the human mind. They are usually the result of an enormous investment, both in terms of the time of highly qualified experts, and financially. There is a continuing need for the creation of new layout-designs which reduce the dimensions of existing integrated circuits and simultaneously increase their functions. The smaller an integrated circuit, the less the material needed for its manufacture, and the smaller the space needed to accommodate it.

India has now in place Semiconductor Integrated Circuits Layout Design Act, 2000 to give protection to IC layout design. Layout design includes a layout of transistors and other circuitry elements and includes lead wires connecting such elements and expressed in any manner in a semiconductor IC. Semiconductor IC is a product having transistors and other circuitry elements, which are inseparably formed on a semiconductor material or an insulating material or inside the semiconductor material and designed to perform an electronic circuitry function. The term of the registration is 10 years from the date of filing.

An IC layout design cannot be registered if it is

1. Not original

2. Commercially exploited anywhere in India or in a convention country;

3. Inherently not distinctive

4. Inherently not capable of being distinguishable from any other registered layout design.

Protection of undisclosed information A Trade Secret or undisclosed information is any information that has been intentionally treated as secret and is capable of commercial application with an economic interest. It protects information that confers a competitive advantage to those who possess such information, provided such information is not readily available with or discernible by the competitors. They include technical data, internal processes, methodologies, survey methods , a new invention for which a patent application has not yet been filed, list of customers, process of manufacture, techniques, formulae, drawings, training material, source code, etc. Trade Secrets can be used to protect valuable “know how" that gives an enterprise a competitive advantage over its competitors.

Trade secret remains confidential for indefinite period of time as per the will of the proprietor provided the security and its confidentiality is not breached. There is no specific legislation regulating the protection of trade secrets in India. India follows common law approach of protection based on contract laws. It therefore becomes imperative to strengthen the confidentiality around the trade


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secret by ensuring that contractual obligations are enforced on persons who are allowed to use the trade secret, especially, when it is licensed to a third party. So, if the information constituting trade secret is leaked, legal action can be brought against the parties who have leaked it under the Law of Contracts. However, in such a case the protection of trade secret will be lost and it becomes available in public domain. Since there is no documentary evidence such as a Letters Patent or a Copyright registration or a Trademark Registration to prove that the trade secret was originally created by the proprietor, it is essential to maintain proof of creation of trade secret either by mailing the information to oneself and retaining postmarked and sealed envelope or by depositing a copy of the information with a third party that would maintain a dated copy.

When comes to our product, we are planning to declare a patent of inventing new methods of producing new flavours of chocolate by using the spices that we obtain from the Indian market. We are also thinking of buying a patent from HACHEZ, related to the production of chocolate, after we have established the collaboration. Moreover, we consider it wise to obtain the industrial design right and a trademark for our product, to assure that it is unique and easily distinguished among its competitors.

LABOUR LAW Labour law (or employment law) is the body of laws, administrative rulings, and precedents which address the legal rights of, and restrictions on, working people and their organizations. As such, it mediates many aspects of the relationship between trade unions, employers and employees. In most countries there is no distinction between laws related to unionized workplaces and those relating to particular individuals. However, there are two broad categories of labour law. First, collective labour law relates to the tripartite relationship between employee, employer and union. Second, individual labour law concerns employees' rights at work and through the contract for work. The labour movement has been instrumental in the enacting of laws protecting labour rights in the 19th and 20th centuries. Labour rights have been integral to the social and economic development since the industrial revolution.

Traditionally Indian governments at federal and state level have sought to ensure a high degree of protection for workers. So for instance, a permanent worker can be terminated only for proven misconduct or for habitual absence. In relation to the collective labour law, the Industrial Disputes Act (1947) requires companies employing more than 100 workers to seek government approval before they can fire employees or close down. In practice, permissions for firing employees are rarely granted. When comes to individual labor law, all India Organisation of Employers points out that there are more than 55 central labour laws and over 100 state labour laws. More specifically, the Contract Labour Act (1970) prohibits companies from hiring temporary workers, while women are not permitted to work night shifts.

However, In 2008, the World Bank has criticised the complexity, lack of modernisation and flexibility in Indian regulations. Many observers have argued that India's labour laws should be reformed. The


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laws have constrained the growth of the formal manufacturing sector. According to a World Bank report in 2008, heavy reform would be desirable. The executive summary stated:

India’s labour regulations - among the most restrictive and complex in the world - have constrained the growth of the formal manufacturing sector where these laws have their widest application. Better designed labour regulations can attract more labour- intensive investment and create jobs for India’s unemployed millions and those trapped in poor quality jobs. Given the country’s momentum of growth, the window of opportunity must not be lost for improving the job prospects for the 80 million new entrants who are expected to join the work force over the next decade.

In relation to labour law, our company should keep in mind the complexity of the Indian law in order to avoid any procecutions from employees or employee unions. However, as we are planning to enter in the Indian market by establishing a Joint Venture, it will be easier for us to overcome all the matters and the possible difficulties arising from the Indian labour law, as the company with which we are forming the JV has already abided by the law.

CONTRACT LAW A contract intends to formalize an agreement between two or more parties, in relation to a particular subject. Contracts can cover an extremely broad range of matters, including the sale of goods or real property, the terms of employment or of an independent contractor relationship, the settlement of a dispute, and ownership of intellectual property developed as part of a work for hire. Typically, in order to be enforceable, a contract must involve the following elements:

• A "Meeting of the Minds" (Mutual Consent): The parties to the contract have a mutual understanding of what the contract covers.

• Offer and Acceptance: The contract involves an offer (or more than one offer) to another party, who accepts the offer.

• Mutual Consideration (The mutual exchange of something of value): In order to be valid, the parties to a contract must exchange something of value. While the validity of consideration may be subject to attack on the basis that it is illusory (e.g., one party receives only what the other party was already obligated to provide), or that there is a failure of consideration (e.g., the consideration received by one party is essentially worthless), these defenses will not let a party to a contract escape the consequences of bad negotiation.

• Performance or Delivery: In order to be enforceable, the action contemplated by the contract must be completed. In a typical "breach of contract" action, the party alleging the breach will recite that it performed all of its duties under the contract, whereas the other party failed to perform its duties or obligations.

• Good Faith: It is implicit within all contracts that the parties are acting in good faith. • No Violation of Public Policy: In order to be enforceable, a contract cannot violate "public

policy". The main contract law in India is codified in the Indian Contract Act which came into effect on September 1, 1872 and extends to whole of India except the state of Jammu and Kashmir. It governs entering into contract, execution of contract, and the effects of breach of contract.


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According to the Indian Contract Act, all agreements are contracts if they are made by the free consent of parties competent to contract, for a lawful consideration and with a lawful object, and are not hereby expressly declared to be void.

Our company is thinking to sign a contract with the German HACHEZ, as mentioned previously, in order to formalize the collaboration and establish a strong multivariable chocolatemaker. Furthermore, we should sign contracts with Indian specialists and technology experts in order to start our business with a substantial portfolio. However, the contracts with HACHEZ and the employees are not subjected to the Indian contract law, as they are formed within the scope of the EU and are established in our company before it starts business in India. When we are going to sign a contract for establishing a JV with an Indian company, this contract will be subject to the Indian contract law and thus we should be well informed about the Indian Contract Act and form the contract according to its aspects.

TAXATION LAW Taxes in India are levied by the Central Government and the State Governments. Some minor taxes are also levied by the local authorities such the Municipality or the Local Council.

The authority to levy a tax is derived from the Constitution of India which allocates the power to levy various taxes between the Centre and the State. An important restriction on this power is Article 265 of the Constitution which states that "No tax shall be levied or collected except by the authority of law." Therefore each tax levied or collected has to be backed by an accompanying law, passed either by the Parliament or the State Legislature. The Central Board of Direct Taxes (CBDT) is a part of the Department of Revenue in the Ministry of Finance, Government of India. The CBDT provides essential inputs for policy and planning of direct taxes in India and is also responsible for administration of the direct tax laws through Income Tax Department. The CBDT is a statutory authority functioning under the Central Board of Revenue Act, 1963.

The major tax enactment in India is the Income Tax Act of 1961 passed by the Parliament, which imposes a tax on income of individuals and corporations. This Act imposes a tax on income under the following five heads.

• Income from house and property, • Income from business and profession, • Income from salaries, • Income in the form of Capital gains, and • Income from other sources

However, this Act is about to be repealed and be replaced with a new Act which consolidates the law relating to Income Tax and Wealth Tax, the new proposed legislation is purported to be called the Direct Taxes Code (to become the Direct Taxes Code, Act 2010). The new Act is purported to come into effect from 1st April, 2011.

The most important statutory definitions provided under the Income Tax Act, 1961 are the following:


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• The “assessment year” is the twelve-month period commencing on the first day of April every year.

• The “previous year” is the tax year immediately preceding the assessment year. A tax year runs from April 1 to March 31.

• An “assessee” is a person by whom any tax or any other sum of money (for example interest, penalty, fine, etc) is payable under the Act.

• The definition of “income” under the Act is of an inclusive nature, i.e., apart from the items listed in the definition, any receipt that satisfies the basic condition of being income is also to be treated as income and charged to income tax accordingly.

• A “person,” for income tax purposes, includes a company.

• “Business” includes any trade, commerce, or manufacturing, and includes any adventure or concern in the nature of trade, commerce, or manufacturing. The word has a large and indefinite meaning under the income tax laws.

• “Company” is given a broad definition and includes Indian companies and body corporates incorporated under the laws of a country outside India.

• An “Indian company” is a company formed and registered under the Indian Companies Act, 1956, and any other corporation established by or under Indian laws.

Our company is going to enter in the Indian market by establishing a JV. Thus is is important to mention to this point some information related to the taxation of JV. A joint venture is subjected to taxation under the provisions of Income Tax Act, 1961. It is the umbrella Act for all the matters relating to income tax and empowers the Central Board of Direct Taxes (CBDT) to formulate rules (The Income Tax Rules, 1962) for implementing the provisions of the Act. The CBDT is a part of Department of Revenue in the Ministry of Finance. It has been charged with all the matters relating to various direct taxes in India and is responsible for administration of direct tax laws through the Income Tax Department. The Income Tax Act is subjected to annual amendments by the Finance Act, which mentions the 'rates' of income tax and other taxes for the corresponding year.

Taxation of a joint venture, depends upon the agreement between the parties, forming the joint venture. If the joint venture is established in the form of a partnership firm or as a company, it is taxed accordingly i.e. as a partnership or as a company. But in all other cases, a joint venture is treated as an association of persons (AOP) or a body of individuals (BOI).

An Association of Persons (AOP) means two or more persons who join for a common purpose with a view to earn an income. The term 'person' includes any company or association or body of individuals, whether incorporated or not. The association need not be on the basis of a contract. Therefore, if two or more persons join hands to carry on a business but do not constitute a partnership they may be assessed as an AOP. But, an AOP does not mean any and every combination of persons. It is only when they associate themselves in an income-producing activity that they become an association of persons.

Body of Individuals (BOI) means a conglomeration of individuals who carry on some activity with the objective of earning some income. It would consist only of individuals. Entities like companies or firms cannot be members of a body of individuals. Income tax shall not be payable by an assessee in respect of the receipt of share of income by him from BOI and on which the tax has already been paid by such BOI.


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From all that was mentioned above, it is quite obvious that as our company is going to establish a JV with an Indian company, it becomes subject of the Indian Taxation Law and more specifically under the provisions of the Income Tax Act, 1961.


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Referencies I. BUYSA.GOV <http://www.buyusa.gov/india/en/motm.html> (approached 17.02.2010)

II. Ministry of Finance <http://ibef.org/download/Food_Processing_270608.pdf> (app. 17.02.2010)

III. Indian Industry <http://www.indianindustry.com/country-profiles/india.html> (app. 17.02.2010)

IV. chocolate industry in India: <http://www.scribd.com/doc/21338400/chocolate-industry-in-india> (approached 18.02.2010)

V. PluGGd.in: <http://www.pluggd.in/steps-to-successful-startup-savitabhabhi-case-study-297/> (approached 18.02.2010)

VI. Indian export industries: <http://www.india-exports.com/> (app.18.02.2010)

VII. Indian importers: <http://www.infodriveindia.com/India-Imports-Trade-Data.aspx> (approached 19.02.2010)

VIII. TECNOVA: <http://www.tecnovaglobal.com/index.htm> (app. 19.02.2010)

IX. Indian Import Association: <http://indianimportersassociation.com/index.htm> (app. 20.02.2010)

X. <http://www.export.gov/india/eg_main_018046.asp> (approached 19.02.2010)

XI. <http://www.kwintessential.co.uk/etiquette/doing-business-india.html> (approached 20.02.2010)

XII. <http://www.stylusinc.com/business/india/business_india.htm> (approached 21.02.2010)

XIII. <http://www.communicaid.com/cross-cultural-training/culture-for-business-and-

management/doing-business-in/Indian_business_culture.php> (approached 21.02.2010)

XIV. <http://www.eksportuj.pl/artykul/drukuj/id/219

XV. <http://www.fob.org.pl/relacja-z-projektu-csr-owego-w-indiach-258_3009.htm> (approached 21.02.2010)

XVI. <http://books.google.com/books?hl=pl&lr=&id=O37idEzAxCAC&oi=fnd&pg=RA1-PA223&dq=%22Chakraborty%22+%22Business+ethics+in+India%22+&ots=WOn1giZvXm&sig=Mecft3ZMfVMRRVHb7um32vBAM2A#v=onepage&q=%22Chakraborty%22%20%22Business%20ethics%20in%20India%22&f=false> (approached 21.02.2010)

XVII. <http://pfc.org.in/workshop/workshop.pdf> (approached 21.02.2010)

XVIII. <http://chddistrictcourts.gov.in/THEINDIANCONTRACTACT.pdf> (approached 21.02.2010)


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XIX. <http://www.expertlaw.com/library/business/contract_law.html> (approached 21.02.2010)

XX. <http://incometax.indlaw.com/> (approached 21.02.2010)

XXI. <http://www.indialaws.info/> (approached 21.02.2010)

XXII. <http://business.gov.in/manage_business/joint_ventures.php> (approached 21.02.2010)

XXIII. <http://en.wikipedia.org/wiki/Labour_law#Indian_labour_law> (approached 22.02.2010)

XXIV. <http://en.wikipedia.org/wiki/Taxation_in_India> (approached 22.02.2010)

XXV. <www.wikipedia.com> (approached 22.02.2010)


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List of Pictures

Picture 1 - Chocolate Consumption per Head - 4 -

Picture 2 - State-wise Attractiveness for Investing in Food Processing - 5 -

Picture 3 - Selection Criterias For Our Business Mode - 8 -

Picture 4 - Joint Venture Development - 13 -

Documents

Business in India and European Union...University of Tampere Faculty of Economics and Administration Department of Management Studies ASIAI003 Legal Aspects of Asian Business Business