Doing Business in India - RSM Austria

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4.7 Audit Committees For better corporate governance constitution of an audit committee in case public companies (listed and unlisted) having paid-up capital of not less than Rs. 50 million (US$ 1.11 million) has been prescribed. Audit Committee should consist of not less than three directors and such number of other directors as the Board may determine. Two-thirds of the total number of the members of the committee should be directors, other than managing or whole-time director. The recommendations of the Audit Committee on any matter relating to financial management including the audit report, are binding on the Board of Directors. In case the Board of Directors do not accept the recommendation of the Audit Committee, it shall record the reasons thereof and communicate such reasons to the shareholders. 4.8 Producer Companies A new concept has been introduced in the Companies Act, 1956 enabling incorporation of co-operative societies as producer companies and conversion of existing cooperatives into companies, on optional basis. 4.9 Takeovers The SEBI (Substantial Acquisition of Shares and Takeovers) Regulations 1997, popularly known as the Takeover Code, contains the guidelines to be followed by the acquirers of controlling stakes in a listed company. The key features of the Takeover Code are: Any person, who along with persons acting in concert, acquires 15% or more of the equity shares of a listed company, is required to make an open offer to the public shareholders to acquire at least 20% more equity shares. The price at which the open offer is made has to be the highest of: The negotiated price at which the 15% block has been purchased. The price paid by the acquirer or persons acting in concert with him for acquisition, if any, including by way of allotment in a public or rights or preferential issue during the twenty-six week period prior to the date of public announcement, which ever is higher. The price computed on the basis of the average of the weekly high and low of the closing prices of the shares of the target company as quoted on the stock exchange where the shares of the company are most frequently traded during the twenty-six weeks or the average of the daily high and low of the closing prices of the shares as quoted on the stock exchange where the shares of the company are most frequently traded during the two weeks preceding the date of public announcement, whichever is higher: An open offer is also required in cases where the acquisition leads to change of control over the target company, irrespective of the quantum of stake acquired. This provision also gets triggered in case of indirect acquisitions, ie where there is change of control over an Indian company 44 DOING BUSINESS IN INDIA
pursuant to a global transaction involving the holding company of the target company. Certain types of acquisitions, such as sale of shares amongst promoters, inter-se are exempt from application of the Takeover Code. Promoters may also use the “creeping acquisition” route to acquire up to 5% shares in any financial year (ending on 31 March) till they reach 75%. Even promoters have to make an open offer in case their shareholding pursuant to a creeping acquisition exceeds 75%. While ensuring compliance with the Takeover Code, the requirements of the listing agreement also have to be kept in mind, ie the public shareholding (non-promoter shareholding) should not go below 25% or 10% as provided in listing agreement. If it does, then the promoters have to take steps to increase the public holding to the minimum level within six months either through fresh issue of shares or sale of part stake by promoters. Companies who are not able to comply with this requirement have to seek de-listing of their shares. A listed company seeking to de-list can do so after the public holding falls below 25% or 10% as provided in listing agreement. SEBI has mandated that if a promoter plans to buy out equity in a bid to de-list the company, it must use the reverse book-building process that will permit the shareholders (institutional and retail) to discover the exit price. Promoters are defined as any person or persons who are directly or indirectly in control of the company or any person or persons named as “promoters” in the offer document or in the shareholding pattern disclosed by the company to the exchanges. A promoter or every person forming part of the promoter group of any company shall, disclose details of shares of that company pledged by him, if any, to that company. The company shall disclose the information received as above from a promoter or promoter group to all the stock exchanges, on which the shares of company are listed, within seven working days of the receipt thereof, if, during any quarter ending of any year either aggregate number of such shares exceeds twenty five thousand; or one per cent of total shareholding or voting rights of the company, whichever is lower. 5.0 Corporate Governance The Companies Act and the listing agreement executed between the company and the stock exchange contain several requirements relating to corporate governance. The main requirements are: At least 50% of the board of director should be non-executive. One third of the board or one half should be of independent directors depending upon the position of the chairman. All fees/compensation, if any paid to non-executive directors, including independent directors is required to be fixed by the board and approved by the shareholders. DOING BUSINESS IN INDIA 45
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International global excellence in
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Doing business in India
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Marine Drive, Mumbai
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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 38 and 39: CHAPTER 3 BUSINESS ENTITIES 1.0 FOR
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 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
Page 88 and 89: vi. Branch Offices have to submit A
Page 90 and 91: ii. ECB up to US$ 20 million or equ
Page 92 and 93: 3.2 Approval Route 3.2.1 Eligible B
Page 94 and 95: 3.2.6 End Use not permitted i. Util
Page 96 and 97: issued by Reserve Bank from time to
Page 98 and 99: Sr. No. Sector/Activity FDI Cap / E
Page 100 and 101: Sr. No. II C POWER Sector/Activity
Page 106 and 107: Sr. No. 29. Sector/Activity Telecom
Page 108 and 109: 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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RSM International Executive Office,
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