BUSINESS ORGANIZATION

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BUSINESS ORGANIZATION
Indian Institute of Foreign Trade NEW DELHI 12TH
FEBRUARY 2005
by SAMEER RASTOGI Advocate International
Corporate Legal Consultant
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Types of Business Entities

• Sole Proprietorship
• Partnership
• Private Limited Company
• Public Limited Company
• Charitable Organization

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Sole Proprietorship
No registration required
Unlimited liability Used for small
business or by Professionals No
Separate Legal Entity
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Partnership

• Section 11 of Companies Act, 1956
• No partnership consisting of more than 20
  persons shall be formed

• Indian Partnership Act, 1932
• Section 4 Partnership is the relation between
  persons who have agreed to share profits of
  business carried on by all or any of them acting
  for all

• Unlimited Liability

• Registration not Compulsory

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Company

• Governing Act Companies Act, 1956

• Special Features of Company
• Company is a Separate Legal Entity
• It can sue and be sued in its own name
• The liability of the shareholders are limited to
  the extent of their shareholdings
• Company is distinct from its shareholders
• It can hold property in its own name

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Types of Companies in India
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Types of Companies in India
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Types of Companies in India
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Types of Companies in India
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Charitable Organization
- Trust- Society - Section 25 Company It
can do business and earn any amount of profits,
but the distribution of profits cannot be made to
Shareholders / trustee
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Regulatory Bodies in India

• Foreign Investment Promotion Board (FIPB)
• Reserve Bank of India (RBI)
• Security Exchange Board of India (SEBI)
• Registrar of Companies (RoC)
• Trade Mark Registry (TMR)
• Director General of Foreign Trade (DGFT)

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Law relating to JV Foreign Cos. in India - FDI
In India
TELECOM 49 ( 74)
INSURANCE 26 (Proposed 49)
POWER 100
PETROLEUM REFINING 100
DRUGS PHARMA 100
HOTELS 100
ROADS 100
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FDI in India
Automatic Route for FDI is not available
for Domestic Airlines Petroleum Sector (except
for private sector oil refining) Investing
companies in Infrastructure Services Sector
Defence and Strategic Industries Atomic
Minerals Print Media Broadcasting Postal
services Courier Services Establishment and
Operation of satellite Development of Integrated
Township Tea Sector
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FDI in India

• FDI is Prohibited in
• Retail Trading
• Atomic Energy
• Lottery Business
• Gambling and Betting
• Housing and Real Estate business
• Agriculture (excluding Floriculture,
  Horticulture, Development of seeds, Animal
  Husbandry, Pisiculture and Cultivation of
  vegetables, mushrooms etc. under controlled
  conditions and services related to agro and
  allied sectors) and Plantations (Other than Tea
  plantations)

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How a Foreign Company can enter into India?

• Liaison Office
• Branch Office
• Project / Site Office
• Joint Venture
• 100 Wholly Owned Subsidiary

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Liaison Office

• Permitted activities for a Liaison Office in
  India
• Representing in India the parent company/group
  companies.
• Promoting export import from/to India.
• Promoting technical / financial collaborations
  between parent / group companies and companies in
  India.
• Acting as a communication channel between the
  parent company and Indian companies.

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•  Procedure for setting up Liaison Office
• Apply in Form FNC-1 in quadruplicate to RBI
• English version of the certificate of
  incorporation / registration attested by Indian
  Embassy / Notary public in the country of
  registration.
• Latest balance sheet of the applicant company /
  firm.
• Certified photo-copy of the agency Agreement, if
  any, with parties in India.
• Photo-copy of the Agreement / draft- Agreement /
  correspondence indicating the terms of
  appointment of the proposed representative duly
  authenticated by the applicant.
• Where applicable, certified photocopy of
  Government of Indias approval for undertaking
  projects in India.
• Where applicable, certified photocopy of the
  contract / Agreement for undertaking activities /
  rendering services.

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Liaison Office

• Conditions Imposed While Granting Permission
• No commission / fee will be charged or any other
  remuneration received by the Indian office of the
  foreign company for its liaison activities in
  India.
• Except the liaison work, the office will not
  undertake any activity of a trading, commercial
  or industrial nature without the prior permission
  of RBI
• The entire expenses of the Indian office will be
  met exclusively by remittance from abroad through
  normal banking channels.

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Branch Office

• Permitted activities
• Export/Import of goods
• Rendering professional or consultancy services.
• Carrying out research work, in which the parent
  company is engaged.
• Promoting technical or financial collaborations
  between Indian companies and parent or overseas
  group company.
• Representing the parent company in India and
  acting as buying/selling agent in India.
• Rendering services in Information Technology and
  development of software in India.
• Rendering technical support to the products
  supplied by parent/group companies.

 Procedure for setting up Branch Office Same
as Liaison Office
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Joint Ventures

• Joint Ventures are of two types
• Incorporated Joint Ventures
• Contractual Joint Ventures
• a) Financial Joint Venture
• b) Technical Joint Venture
• Essentials for Joint Ventures
• Name of the JV
• Shareholding Pattern
• Funding and Financing of JV
• Constitution of Board of Directors, Powers of
  Directors, Meeting
• Transfer of shares, right of refusal, buy out
  provisions
• Non disclosure, non competition, IPRs
• Governing laws, Dispute resolution

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Joint Ventures

• Verify Limit of FDI permitted in proposed JV
• Drafting of Moa Aoa in accordance with JV
  Agreement
• Incorporation of JV company
• Private Public JV Company

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100 Wholly Owned Subsidiary

• Verify FDI for 100 WOS
• Incorporation of WOS
• Private Public WOS

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