Doing Business in India - RSM Austria

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CHAPTER 3 BUSINESS ENTITIES 1.0 FORMS OF BUSINESS ENTITIES The principal forms of business organizations in India, apart from government organizations and sole proprietary concerns are: i. Companies - public and private ii. Branches of foreign companies iii. Liaison/Branch/Project offices of foreign companies iv. Partnerships v. Trusts vi. Limited Liability Partnerships (LLP) 1.1 Companies At present, the legislative provisions governing companies are contained in the Companies Act, 1956. Companies in India are broadly classified into public sector companies’ viz. with predominant government shareholding and private sector companies’ viz. with predominant private shareholding. Private sector companies may further be classified as public limited companies or private limited companies. Companies can also be classified into companies limited by shares, companies limited by guarantee and unlimited liability companies. However, for business purposes, generally companies limited by shares are used and consequently, the discussion regarding companies in this guide is pertaining to such companies. The shares of public companies may or may not be listed on stock exchanges in India. (e.g. The National Stock Exchange of India Ltd (NSE), Bombay Stock Exchange Ltd (BSE), etc.) The regulatory provisions for private limited companies are less stringent than those relating to public limited companies. Public limited companies whose shares are listed on stock exchanges are subject to the regulations of the Securities and Exchange Board of India (SEBI) and the respective stock exchanges. Private companies that are subsidiaries of public companies (i.e. where shareholding of Public companies is more than 50%) are however treated at par with public companies. Shares of public limited companies are freely transferable, whereas it is subject to restrictions in case of private limited companies. However, transfer of shares to nonresidents is regulated by Foreign Exchange Management Act, 1999. The system of depository has been introduced by the Depositories Act and Securities Exchange Board of India (Depository & Participants) Regulations, 1996 which has smoothened the transfer of shares in case of listed companies. 22 DOING BUSINESS IN INDIA
1.2 Regulations The financial reporting environment in India is stringently regulated by the government, through various regulators and government agencies. There are a large number of mandatory compliances, the failure of which can lead to penalties and other more severe consequences. The Indian legal system is constituted by a framework of various laws and enactments based on Common Law and include the following acts that contain provisions and guidelines for the primary functioning of the corporates in India: Companies Act 1956; Chartered Accountants Act 1949; Reserve Bank of India Act 1934; Income Tax Act 1961; Securities and Exchange Board of India Act 1992; Securities Contract (Regulation) Act 1956; Banking Regulation Act 1949; Insurance Act 1938. The various regulators that influence financial reporting in India include: Ministry of Corporate Affairs (Regulator for all corporate enterprises); Securities and Exchange Board of India or SEBI (Regulator for all listed companies); Reserve Bank of India or RBI (Regulator for all Banking and Finance entities); Insurance Regulatory and Development Authority or IRDA (Regulator for all Insurance companies); Institute of Chartered Accountants of India or ICAI (Regulator for Chartered Accountants and auditors). 1.3 Branches of Foreign Companies (Branch Office) Foreign companies engaged in manufacturing and trading activities abroad have been allowed to set up branch offices in India. Permission for setting up branch offices is granted by RBI on a case-to-case basis. Application for permission to set up branches is to be made with the Authorized Dealer Category I bank (AD) along with the requisite documents, which would then be submitted with the RBI along with recommendations and suggestions of the AD. The essential parameters considered by RBI on such an application is the worldwide operating history of the foreign company, proposed activities in India, profit making track record of the foreign company in the home country and its net worth. The additional criteria to be satisfied for eligibility regarding track record and net worth are as under: DOING BUSINESS IN INDIA 23
Page 1: International global excellence in
Page 4 and 5: Doing business in India
Page 6 and 7: Marine Drive, Mumbai
Page 8 and 9: Contents Hawa Mahal, Jaipur
Page 10 and 11: Education .........................
Page 12 and 13: SIGNIFICANT COMPANY LAW REGULATIONS
Page 14 and 15: ANNEXURE 1 Sectors Prohibited for F
Page 16 and 17: Chapter 1 India - A Profile Golden
Page 18 and 19: 2.2 Language India is a land of man
Page 20 and 21: 5.2 Communication The Indian teleph
Page 22 and 23: 7.5 Public Holidays The statutory p
Page 24 and 25: CHAPTER 2 INDIAN BUSINESS AND INVES
Page 26 and 27: This resulted in a fall in the Bomb
Page 28 and 29: 4.3.3 Designs After expiry of three
Page 30 and 31: non-banking finance activities viz.
Page 32 and 33: trading in derivative based on BSE
Page 34 and 35: same as those where concessional fi
Page 36 and 37: 10.3 Low Research and Development C
Page 40 and 41: Sr. No. Criteria Requirements 1 Tra
Page 42 and 43: The project is funded by inward rem
Page 44 and 45: cause the disassociation of the par
Page 46 and 47: 2.1.2 MOA 2.1.3 AOA Companies for r
Page 48 and 49: paid up equity capital can be less
Page 50 and 51: The requirements for public and pri
Page 52 and 53: 3.0. STATUTORY REQUIREMENTS FOR COM
Page 54 and 55: 3.4 Online Filing System Ministry o
Page 56 and 57: Section Nature of default 168 Defau
Page 58 and 59: 4.0 SIGNIFICANT COMPANY LAW REGULAT
Page 60 and 61: 4.7 Audit Committees For better cor
Page 62 and 63: The meetings of the board are requi
Page 64 and 65: Chapter 4 Human Resources Kathakali
Page 66 and 67: Employee benefit What is it? Applic
Page 68 and 69: Employee benefit D e p o s i t L i
Page 70 and 71: 2.5 The Equal Remuneration Act, 197
Page 72 and 73: The Factories Act safeguards agains
Page 74 and 75: CHAPTER 5 FOREIGN INVESTMENT IN IND
Page 76 and 77: 2.3 Prohibition on investments 2.3.
Page 78 and 79: ii. Subject to compliance with the
Page 80 and 81: ii. iii. iv. The NRI investor has t
Page 82 and 83: ii. On repatriation basis An NRI ca
Page 84 and 85: Indian company can issue ESOPs to e
Page 86 and 87: ii. iii. iv. The foreign equity aft
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vi. Branch Offices have to submit A
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ii. ECB up to US$ 20 million or equ
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3.2 Approval Route 3.2.1 Eligible B
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3.2.6 End Use not permitted i. Util
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issued by Reserve Bank from time to
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Sr. No. Sector/Activity FDI Cap / E
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Sr. No. II C POWER Sector/Activity
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Sr. No. 29. Sector/Activity Telecom
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Chapter 6 Taxation System India Gat
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Entity Domestic Company Financial y
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**** Mutual funds, other than equit
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interest deductible is restricted t
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2.4 Tax Relief In order to encourag
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Section Details of Exemption / Dedu
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Section 35 DDA 54G 54GA 54EC 10(34)
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Sr. No. Nature of activity and loca
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Sr. No. xviii Nature of activity an
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No deduction under 80IA, 80IB, 80IA
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Tax is payable in advance on income
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3.1.2 Other Non-corporate Entities
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the Finance Act 2010, 'bullion' is
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Rs. 40,00,000. The scheme is applic
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4.5 Income of Offshore Funds Income
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7.3 Advance Rulings The Indian gove
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9.0 INDIRECT TAXES 9.1 Goods and Se
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on goods manufactured and vice vers
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Annexure I Double Taxation Avoidanc
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Sr. No. Country Dividend [Note 1] T
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ANNEXURE II: TAX DEDUCTION AT SOURC
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NOTES 142 DOING BUSINESS IN INDIA
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