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FDI in India

Law Senate Law Firm has strong experience in handling high value foreign investment proposals from Foreign Companies and foreign investors who are investing in India.

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FDI in India

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  1. Investing inINDIA Presented By S Ravi Shankar Law senate Law Firm – New Delhi & Mumbai ravi@lawsenate.com

  2. Government Structure

  3. 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

  4. 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 

  5. General Business models of FDI • Branch office • Liasion office • Project office  • Joint venture Company  • 100% Subsidiary of a Foreign Company 

  6. 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 

  7. Investment routes

  8. 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

  9. 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

  10. 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.,

  11. 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 

  12. 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

  13. 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

  14. 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

  15. Investment Flow Chart

  16. Government Investment Promotion Schemes

  17. Government Promotion Schemes

  18. 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.

  19. Dispute Resolution options

  20. 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

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