| A company incorporated in India under the Companies | | | | raising of capital through offer of shares to the public. |
| Act, 1956, being a legal personality, has to obey all the | | | | BANKING |
| laws enacted by the Government of India for its | | | | Foreign Direct Investment (FDI) in India is permitted in |
| creation, continuation and association with the parties | | | | the banking sector, however, there is a limit for FDI in |
| of the outside world. | | | | the banking sector in India. |
| The main laws which will impinge upon the existence | | | | Foreign investment by way of transfer of shares of |
| of a company in the corporate sector are: | | | | 5% and more of the paid up capital of a private sector |
| -The Indian Companies Act, 1956; | | | | banking company, requires prior approval of RBI. |
| -Foreign Exchange Management Act, 1999; | | | | Wherever applicable, FDI in banking companies should |
| -Laws on Foreign Investment in India; | | | | confirm to provisions regarding shareholding and |
| -Laws on Financial Systems and Capital Markets; | | | | transfer etc. |
| -Immigration Laws; and | | | | Financial Institutions: |
| -Taxation laws of India. | | | | The financial system in India allows an Indian corporate |
| COMPANIES ACT | | | | to raise foreign currency resources abroad by issuing |
| The existence of a legal framework is perhaps the | | | | ADR/GDR, Foreign Currency Convertible Bonds |
| most significant aspect of the corporate environment. | | | | (FCCBs). India also encourages foreign institutional |
| Not being an exception, the Indian company law, largely | | | | investors. |
| based on its English counterpart, streamlines the | | | | Mergers & Acquisitions: |
| procedure for regulation of Indian companies & | | | | In case of mergers and acquisitions, the primary |
| branches of foreign companies operating in India. | | | | aspect is the acquisition of shares in the Indian entity. |
| Concept & Types | | | | An Indian corporate through the issue of ADRs or |
| As understood under Companies Act, 1956 a | | | | GDRs can issue shares. |
| company is an incorporated association registered | | | | IMMIGRATION LAWS |
| under the act, having an independent entity distinct | | | | A foreigner is a person born in or coming from a |
| from the members constituting it. Companies so | | | | foreign country. The entry of foreigners' stay, |
| incorporated can exist as public or private companies | | | | movements and departure is regulated by the |
| with or without limited liability. | | | | Immigration Laws passed by the Indian Parliament and |
| Incorporation | | | | rules framed there under by the Central Government |
| The promoters, deciding the nature of company to be | | | | from time to time. |
| floated, can initiate incorporation of a company, by | | | | The relevant laws as applicable for various purposes |
| making application for availability of the name, prepare | | | | to foreigners visiting India are:o The Passports (Entry |
| memorandum & article of association and file it | | | | into India) Act, 1967o The Foreigners Act, 1946 (as |
| with Registrar of Company (R.O.C.), who after | | | | amended from time to time)o The Citizenship Act, |
| scrutinizing the documents issues the certificate of | | | | 1955 (as amended from time to time)o The Immigration |
| incorporation. | | | | (Carriers' Liability) Act, 2000o The Illegal Migrants |
| MoA &AoA | | | | (Determination By Tribunals) Act, 1983 |
| Memorandum of association (MoA) comprises of the | | | | Types of Visas: |
| fundamental parameters upon which company is | | | | (1) Tourist Visas; |
| enacted which includes clauses of name, registered | | | | (2) Collective Visas; |
| office, objects, liability & subscription. Similarly, | | | | (3) Transit Visas; |
| articles of association (AoA) constitute the rules & | | | | (4) Business Visa; |
| regulations that govern the management of its internal | | | | (5) Student Visa; |
| affairs & conduct of business including provisions | | | | (6) Conference Visa; |
| relating to share capital of the company, rights of | | | | (7) Employment Visa; |
| various shareholders, transmission of shares etc. | | | | (8) Recreation. |
| Share Capital | | | | The intention behind the above immigration laws is to |
| Shares may be defined as indivisible units of fixed | | | | see that genuine entrepreneurs and business |
| amounts into which the capital of the company is | | | | enterprises come to participate in the blooming |
| divided. Generally, a public company is entitled to issue | | | | economy of this country by participating in the |
| two kinds of shares-equity & preference. | | | | economic activities of this country. |
| FOREIGN EXCHANGE MANAGEMENT ACT | | | | TAXATION SYSTEM IN INDIA |
| The object of this Act is to help corporate India to | | | | India has a well-developed tax structure with clearly |
| have foreign associations in Indian companies and | | | | demarcated authority between Central and State |
| Indian associations in foreign companies in the form of | | | | Governments and local bodies. Central Government |
| investments, collaborations, mergers & acquisitions | | | | levies taxes on income (except tax on agricultural |
| and joint ventures, etc. | | | | income, which the State Governments can levy), |
| Foreign Investment in India: | | | | customs duties, central excise and service tax. |
| ► As an Indian company | | | | Value Added Tax (VAT), (Sales tax in States where |
| A foreign company can commence operations in India | | | | VAT is not yet in force), stamp duty, State Excise, |
| by incorporating a company under the Companies Act, | | | | land revenue and tax on professions are levied by the |
| 1956 through:o Joint Ventureso Wholly Owned | | | | State Governments. Local bodies are empowered to |
| Subsidiaries | | | | levy tax on properties, octroi and for utilities like water |
| Foreign equity in such Indian companies can be up to | | | | supply, drainage etc. |
| 100% depending on the requirements of the investor, | | | | In last 10-15 years, Indian Taxation System has |
| subject to equity caps in respect of the area of | | | | undergone tremendous reforms to come at par with |
| activities under the Foreign Direct Investment policy. | | | | International taxation Systems. The tax rates have |
| Other options are: | | | | been rationalized and tax laws have been simplified |
| -Joint Venture | | | | resulting in better compliance, ease of tax payment |
| -Wholly Owned Subsidiary | | | | and better enforcement. Since April 01, 2005, most of |
| ► As a foreign company | | | | the State Governments in India have replaced sales |
| Foreign Companies can set up their operations in India | | | | tax with VAT. |
| through:o Liaison Office / Representative Office:o | | | | LAW ENFORCEMENT AGENCIES IN INDIA |
| Project Office; | | | | The three-tiered system of Indian judiciary comprising |
| Branch Office;o Branch Office on a 'Stand Alone | | | | of Supreme Court (New Delhi) at its helm, High Courts |
| Basis'. | | | | standing at the head of State judicial system followed |
| ► Automatic Route | | | | by District and Sessions Courts in the judicial districts, |
| Under the existing policy, FDI up to 100% is allowed | | | | form the backbone of all laws, including Business Laws. |
| under the automatic route in all activities/sectors | | | | The Supreme Court |
| except the some selected sectors, which require the | | | | The apex court of the country enjoys original, appellate |
| prior approval of the Government: | | | | & advisory jurisdiction. |
| ► Government Route | | | | The High Courts |
| FDI activities not covered under the automatic route | | | | The High Courts are generally the last court of regular |
| require prior Government approval & are | | | | appeal. The High Courts of Mumbai, Chennai, Kolkata |
| considered by the Foreign Investment Promotion | | | | & Delhi enjoy original jurisdiction beyond a certain |
| Board (FIPB). An application can be made online or on | | | | financial limit (For instance, Rs.20 lakhs & above in |
| a plain paper accompanied by all the relevant | | | | case of Delhi). |
| documents. The approvals are generally granted | | | | The Subordinate Courts |
| expeditiously. | | | | This segment of the Indian judicial system comprises |
| THE FINANCIAL SYSTEM | | | | of (a) District Courts, empowered to hear appeals |
| The financial system in India is regulated by the | | | | from courts of original civil jurisdiction besides having |
| Government of India for raising capital for the | | | | original civil jurisdiction under many enactments (b) |
| corporate sector from the Indian capital market and by | | | | Sessions Court are courts of criminal jurisdiction, having |
| the Reserve Bank of India for regulating the foreign | | | | the similar scope of powers. The courts of specific |
| exchange loans in the form of external commercial | | | | original jurisdiction are courts of Civil judges, of Judicial |
| borrowings. The Securities and Exchange Board of | | | | Magistrates; Small Causes courts & Courts of |
| India is an important and independent legal authority | | | | Metropolitan Magistrates. |
| created by the Central Government for regulating the | | | | |