BUSINESS ORGANIZATION
Types of Business Entities Ø Sole Proprietorship Ø Partnership Ø Private Limited Company Ø Public Limited Company Ø Charitable Organization
Sole Proprietorship No registration required Unlimited liability Used for small business or by Professionals No Separate Legal Entity
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
Company • Governing Act – Companies Act, 1956 Special Features of Company a) Company is a Separate Legal Entity b) It can sue and be sued in its own name c) The liability of the shareholders are limited to the extent of their shareholdings d) Company is distinct from its shareholders e) It can hold property in its own name
Types of Companies in India DESCRIPTIONS Definition PRIVATE COMPANY PUBLIC COMPANY Which by its article restricts: Which is not * private Numbers of members to 50 Transfer of shares Cannot give Invitation to public to subscribe its debenture, shares etc. Acceptance of deposits from person other than its shareholders and directors Governing Laws Companies Act, 1956 SEBI Act, 1992 and allied laws.
Types of Companies in India DESCRIPTIONS PRIVATE COMPANY PUBLIC COMPANY Incorporation Time 22 to 3 weeks 2 (Two) 7 (Seven) 50 (Fifty) No limit INR 1, 000/- INR 5, 000/- Restricted Freely. If company is listed then through stock exchange(s) 2 3 Minimum No. of Shareholders Maximum No. of shareholders Minimum Paid up Capital Transferability of Shares Minimum No. of Directors
Types of Companies in India DESCRIPTIONS PRIVATE COMPANY Whether a Foreigner can be Director YYes Whole Time Director (WTD) / Managing Director (WTMD): Appointment WTD / WTMD: Remuneration Foreigner as WTM D / WTD PUBLIC COMPANY Yes Appointment not compulsory and No restriction on appointment Appointment : Not compulsory, If paid up capital < Rs. 5 Cr. Compulsory. If paid up capital => Rs. 5 Crs No restriction As per schedule XIII, otherwise permission of Central Government. No restriction With the approval of Central Government
Types of Companies in India DESCRIPTIONS Loan to Director etc. Contracts with Director etc. PRIVATE COMPANY YYes With the previous approval of Central Government Yes With the consent of Board, If paid up capital of the company is (One) 1 Cr. or more, approval of Central Govt. is necessary No restriction Some restrictions Loan, Investment & Guarantee by the company PUBLIC COMPANY
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
Regulatory Bodies in India l Foreign Investment Promotion Board (FIPB) l Reserve Bank of India (RBI) l Security Exchange Board of India (SEBI) l Registrar of Companies (Ro. C) l Trade Mark Registry (TMR) l Director General of Foreign Trade (DGFT)
Law relating to JV & Foreign Cos. in India - FDI In India TELECOM – 49% INSURANCE – 26% POWER ( 74%) (Proposed – 100% PETROLEUM REFINING – 100% DRUGS & PHARMA – 100% HOTELS – 100% ROADS – 100% 49%)
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
FDI is Prohibited in • • • FDI in India 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)
How a Foreign Company can enter into India? l Liaison Office l Branch Office l Project / Site Office l Joint Venture l 100 % Wholly Owned Subsidiary
Liaison Office Permitted activities for a Liaison Office in India Representing in India the parent company/group companies. l Promoting export import from/to India. l Promoting technical / financial collaborations between parent / group companies and companies in India. l Acting as a communication channel between the parent company and Indian companies. l
Procedure for setting up l l l l 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 India’s approval for undertaking projects in India. Where applicable, certified photocopy of the contract / Agreement for undertaking activities / rendering services.
Liaison Office Conditions Imposed While Granting Permission Ø 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. Ø Except the liaison work, the office will not undertake any activity of a trading, commercial or industrial nature without the prior permission of RBI Ø The entire expenses of the Indian office will be met exclusively by remittance from abroad through normal banking channels.
Branch Office Permitted activities l l l l 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
Joint Ventures l Joint Ventures are of two types a) Incorporated Joint Ventures Contractual Joint Ventures a) Financial Joint Venture b) Technical Joint Venture b) l 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, IPR’s Governing laws, Dispute resolution -
Joint Ventures l Verify Limit of FDI permitted in proposed JV l Drafting of Moa & Aoa in accordance with JV Agreement l Incorporation of JV company l Private & Public JV Company
100% Wholly Owned Subsidiary n Verify FDI for 100% WOS n Incorporation of WOS n Private & Public WOS
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