BUSINESS ORGANIZATION

 Sole Proprietorship  Partnership  Private Limited Company  Public Limited Company  Charitable Organization Types of Business Entities

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

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

Governing Act – Companies Act, 1956 Company Company 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 DESCRIPTIONSPRIVATE COMPANYPUBLIC COMPANY Definition Which by its article restricts: 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 Which is not * private Governing Laws Companies Act, 1956 SEBI Act, 1992 and allied laws.

Types of Companies in India DESCRIPTIONSPRIVATE COMPANYPUBLIC COMPANY Incorporation Time 22 to 3 weeks 2 to 3 weeks Minimum Paid up Capital INR 1,00,000/- INR 5,00,000/- Maximum No. of shareholders 50 (Fifty) No limit Minimum No. of Shareholders 2 (Two) 7 (Seven) Transferability of Shares RestrictedFreely. If company is listed then through stock exchange(s) Minimum No. of Directors 2 3

Types of Companies in India DESCRIPTIONSPRIVATE COMPANYPUBLIC COMPANY Whether a Foreigner can be Director YYes Yes Whole Time Director (WTD) / Managing Director (WTMD): Appointment 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 WTD / WTMD: Remuneration No restrictionAs per schedule XIII, otherwise permission of Central Government. Foreigner as WTM D / WTD No restrictionWith the approval of Central Government

Types of Companies in India DESCRIPTIONSPRIVATE COMPANYPUBLIC COMPANY Loan to Director etc. YYesWith the previous approval of Central Government Contracts with Director etc. YesWith the consent of Board, If paid up capital of the company is (One) 1 Cr. or more, approval of Central Govt. is necessary Loan, Investment & Guarantee by the company No restriction Some restrictions

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

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%

FDI in India 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 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) FDI in India FDI in India

How a Foreign Company can enter into India? Liaison Office Liaison Office Branch Office Branch Office Project / Site Office Project / Site Office Joint Venture Joint Venture 100 % Wholly Owned Subsidiary 100 % Wholly Owned Subsidiary

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

Procedure for setting up Liaison Office Procedure for setting up Liaison Office Apply in Form FNC-1 in quadruplicate to RBI 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. 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. Latest balance sheet of the applicant company / firm. Certified photo-copy of the agency Agreement, if any, with parties in India. 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. 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 Government of India’s approval for undertaking projects in India. Where applicable, certified photocopy of the contract / Agreement for undertaking activities / rendering services. Where applicable, certified photocopy of the contract / Agreement for undertaking activities / rendering services.

Liaison Office Conditions Imposed While Granting Permission 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.

Branch Office Permitted activities Export/Import of goods Export/Import of goods Rendering professional or consultancy services. Rendering professional or consultancy services. Carrying out research work, in which the parent company is engaged. 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. 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. 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 services in Information Technology and development of software in India. Rendering technical support to the products supplied by parent/group companies. Rendering technical support to the products supplied by parent/group companies. Procedure for setting up Branch Office – Same as Liaison Office

Joint Ventures Joint Ventures are of two types Joint Ventures are of two types a) Incorporated Joint Ventures b) Contractual Joint Ventures a) Financial Joint Venture b) Technical Joint Venture Essentials for Joint Ventures 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 Verify Limit of FDI permitted in proposed JV Verify Limit of FDI permitted in proposed JV Drafting of Moa & Aoa in accordance with JV Agreement Drafting of Moa & Aoa in accordance with JV Agreement Incorporation of JV company Incorporation of JV company Private & Public JV Company Private & Public JV Company

100% Wholly Owned Subsidiary Verify FDI for 100% WOS Incorporation of WOS Private & Public WOS