Corporate Laws in India
A company incorporated in India under the Companies Act, 1956, being a legal personality, has to obey all laws enacted by the Government of India for its creation, continuation and association with outside world parties.
The main laws that will affect the existence of a company in the corporate sector are:
-The Indian Companies Act of 1956;
-Foreign Exchange Management Law, 1999;
-Laws on Foreign Investment in India;
-Laws on Financial Systems and Capital Markets;
-Immigration Laws; Y
-Tax Laws of India.
COMPANIES ACT
The existence of a legal framework is perhaps the most significant aspect of the business environment. Not an exception, the Indian company law, largely based on its English counterpart, streamlines the procedure for the regulation of Indian companies and branches of foreign companies operating in India.
Design and Types
As understood under the Companies Act 1956, a company is an incorporated association registered under the Act, having an independent entity distinct from its constituent members. Companies thus constituted may exist as public or private companies with or without limited liability.
Incorporation
The promoters, deciding the nature of the company to be listed, can initiate the incorporation of a company, request the availability of the name, prepare the memorandum and article of association and file it with the Registrar of the company (ROC), who after examining the documents issues the certificate of incorporation.
MoA and AoA
Memorandum of Association (MoA) composed of the fundamental parameters on which the company is promulgated that includes clauses of name, registered office, objects, responsibility and subscription. Similarly, the Articles of Association (AoA) constitute the rules and regulations that govern the management of its internal affairs and the conduct of business, including provisions relating to the company’s share capital, the rights of various shareholders, the transfer of shares , etc.
Social capital
Shares can be defined as indivisible units of fixed amounts into which the company’s capital is divided. In general, a public company is entitled to issue two types of shares: equity and preferred.
FOREIGN EXCHANGE MANAGEMENT LAW
The object of this Act is to help Indian companies to have foreign partnerships in Indian companies and Indian partnerships in foreign companies in the form of investments, collaborations, mergers and acquisitions and joint ventures etc.
Foreign Investment in India:
► As an Indian company
A foreign company can start operations in India by incorporating a company under the Companies Act, 1956 through:
or joint ventures
o Wholly owned subsidiaries
Foreign participation in such Indian companies may be up to 100%, depending on the requirements of the investor, subject to participation limits with respect to the area of activities under the Foreign Direct Investment policy.
Other options are:
-Joint project
– Wholly owned subsidiary
► As a foreign company
Foreign companies can establish their operations in India through:
o Liaison Office / Representative Office:
o Project Office;
Branch office;
o Branch ‘independently’.
► Automatic Route
Under the existing policy, FDI is allowed up to 100% under the automatic route in all activities/sectors except for a few selected sectors, which require prior Government approval:
► Government Route
FDI activities not covered by the automatic route require the prior approval of the Government and are considered by the Foreign Investment Promotion Board (FIPB). The application can be made online or on plain paper accompanied by all the relevant documents. Approvals are generally granted on an expedited basis.
THE FINANCIAL SYSTEM
India’s financial system is regulated by the Government of India to raise capital for the corporate sector from the Indian capital market and by the Reserve Bank of India to regulate foreign exchange lending in the form of external business loans. The Securities and Exchange Board of India is an important and independent statutory authority created by the Central Government to regulate the raising of capital through public offering of shares.
BANKING
Foreign Direct Investment (FDI) in India is allowed in the banking sector, however, there is a limit for FDI in the banking sector in India.
Foreign investment by transferring shares of 5% or more of the paid-in capital of a private sector banking company requires prior approval from the RBI. Whenever applicable, FDI in banking companies must comply with the provisions regarding the holding of shares and the transfer, etc.
Financial institutions:
The Indian financial system allows an Indian company to raise foreign currency resources abroad by issuing ADR/GDR, Foreign Currency Convertible Bonds (FCCB). India also encourages foreign institutional investors.
Fusions and acquisitions:
In case of mergers and acquisitions, the main aspect is the acquisition of shares in the Indian entity. An Indian company by issuing ADR or GDR can issue shares.
IMMIGRATION LAWS
A foreigner is a person born in or coming from a foreign country. The entry of stay, movements and exit of foreigners is regulated by the Immigration Acts passed by the Parliament of India and the regulations framed therein by the Central Government from time to time.
The relevant laws applicable for various purposes to foreigners visiting India are:
o Passport (Entry into India) Act, 1967
o The Aliens Act of 1946 (as amended from time to time)
o The Citizenship Act of 1955 (as amended from time to time)
o Immigration (Carriers Liability) Act, 2000
o The Illegal Migrants (Determination by Courts) Act, 1983
Types of Visas:
(1) Tourist Visas;
(2) Group visas;
(3) Transit Visas;
(4) Business Visa;
(5) Student visa;
(6) conference visa;
(7) Employment Visa;
(8) Recreation.
The intent behind the aforementioned immigration laws is to see that genuine entrepreneurs and business enterprises come to participate in the flourishing economy of this country by participating in the economic activities of this country.
TAX SYSTEM IN INDIA
India has a well-developed tax structure with clearly delineated authority between central and state governments and local agencies. The central government collects income taxes (except agricultural income tax, which can be collected by state governments), customs duties, the central consumption tax, and services.
Value Added Tax (VAT), (Sales Tax in States where VAT is not yet in force), stamp duty, State Special Taxes, territorial income and tax on professions are collected by the state governments. Local bodies are empowered to collect taxes on property, attribution and public services such as water supply, drainage, etc.
In the last 10 to 15 years, the Indian Tax System has undergone huge reforms to be on par with the International Tax Systems. Tax rates have been streamlined and tax laws have been simplified, resulting in better compliance, easier tax payment and better enforcement. Since April 1, 2005, most state governments in India have replaced sales tax with VAT.
LAW ENFORCEMENT AGENCIES IN INDIA
The three-tiered Indian judicial system comprising the Supreme Court (New Delhi) at the head, the High Courts at the head of the State judicial system, followed by the District and Sessions Courts in the judicial districts, form the backbone of all law, including business law. Laws.
The Supreme Court
The country’s highest court enjoys original, appellate and advisory jurisdiction.
the superior courts
The High Courts are generally the last ordinary court of appeal. The High Courts of Mumbai, Chennai, Kolkata and Delhi enjoy original jurisdiction beyond a certain financial limit (eg Rs.20 lakhs and more in the case of Delhi).
The Subordinate Courts
This segment of the Indian court system is made up of (a) district courts, empowered to hear appeals from courts of original civil jurisdiction as well as having original civil jurisdiction under many statutes (b) sessions courts are courts of original jurisdiction penal, with the same scope of powers. The courts of specific original jurisdiction are the Civil Courts, of the Judicial Magistrates; Courts of Minor Causes and Metropolitan Peace Courts.
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