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Investing in INDIA
Presented By S Ravi Shankar
Law senate Law Firm – New Delhi & Mumbai
Government Structure
Central
State
Regulatory
Statutory bodies
Local
Government Structure in india
– Government of India
– Government of the State ( Maharashtra)
– Local Bodies (Pune Munipality)
– Statutory Bodies
– Investment Promotion Board
– Regulatory Bodies
– Securities Exchange Board of India
– Reserve Bank of India
Powers of the governments
– Constitution of India
– Central List (Customs Duty, Central Excise Duty, Central Value Added Tax, Income Tax, Foreign exchange regulations, Visas etc.,)
– State List (Labour laws, Value added Tax, Electricity, Security)
– Concurrent List (Environment laws)
– Powers of Statutory Bodies (Reserve Bank of India)
– Local Body powers
General Business models of FDI
– Branch office
– Liasion office
– Project office
– Joint venture Company
– 100% Subsidiary of a Foreign Company
100% Subsidiary of a Foreign Company
– Permitted in all fields where 100% Foreign investment is permitted by Government of India
– 100% export units
– Manufacturing except the items reserved for Micro & Small scale Sector
– Manufacturing except items which are reserved
– 100% profit after deduction of taxes repatriable to the Mother Company
Investment routes
Automatic Government
Join Venture Company
– Joint venture company is a Company formed by two or more share holders
– Partnership Company
– Limited Liability Partnership (LLP)
– Private Limited Company
– Public limited Company
Private Limited Company
– A minimum of two share holders
– A Maximum of 200 Share holders
– A minimum of two Directors
– Minimum authorised Capital 2200 USD
– Foreign Nationals also have to get a DIN (Director Identification number) to become a Director
– Foreign Nationals can be Directors
– KYC required for all share holders
– KYC (Know your customer) norms can be full filled from any foreign country
Private limited company
– Shares of a Private Limited Company can not be listed in a Stock Exchange
– Required Documents Address Proof of Share holders, identity proof of share holders, Address of the Registered office, Memorandum of Association, KYC, DIN etc.,
Governing bodies of a Company– General Body
– Board of Directors
– General Body - Forum of all share holders of the Company
– Powers of the General Body includes
– Powers to elect the Directors
– Adopt the Audited Finance Statements
– Change in Memorandum & Articles of Association
– Appointment of Auditors
– Issuance of Shares
Powers of the board of Directors– Board of Directors do the Day to Day Management of the Company
– Borrowing of funds
– Investment Decisions
– Diversification decisions
– Office Management
– Reporting & Compliances
– Absence in two meetings can lead to termination of a Director from the board
– Powers of the Board can be restricted by the General Body
Taxation in India
– Corporate Tax- Income Tax - 30%
– Dividend Disbursement tax - 15%
– Short Term Capital Gains Tax - 30%
– Long Term Capital Gains Tax - 10-15%
– Central Excise Duty - Approx 23%
– VAT - 12-14-5%
– Customs duty – Depends on the item/ use
Labour Laws in India
– Regular Labours are protected by Industrial Disputes Act
– Enquiry, Disciplinary Action, Suspension, retrenchment, removal etc., are allowed by law
– Contract Labour system is legal in India
– Industrial Disputes Act apply only to Labours (Workmen)
– There is no protection for officer category employees
– Employees provident Fund, Employees State Insurance etc., are mandatory
Investment Flow Chart
Inve
stm
ent
Joint Venture agreement
Memorandum & Articles of the Company
Incorporation of the Company
Government Investment Promotion Schemes
State SchemesIndustrial EstatesCentral Schemes
Government Promotion Schemes
Tax Holidays
• Tax Free period• Tax
reimbursement
Rates
• Special rates for power
• Subsidy on investment
Others
• Discounted Land
• Duty free Import
Exit Options
– Exit options are decided and incorporated into the Investment contract between the parties
– Shares of the Exiting Partner can be Sold to Third parties
– Shares of the Exiting Partner can be sold to JV Partners
– Liquidation of the Company
– Full amount realized from Exit can be repatriated to the country of investor.
Dispute Resolution options
Arbitration
Mediation
Court Litigation
Dispute Resolution
– International Arbitration Clauses are preferred because Court litigation takes long time in India
– India is a New York Convention country hence India & China recognize the arbitration awards passed in each other.
– India has good Arbitration Institutions like ICA, IDAC India, DIAC etc.,
– CITAC, SHIAC & BAC Arbitration Centre awards are recognized in India
– ICC, SIAC, HKIAC, LCIA are popular in India
