Doing Business in India

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Doing Business in India - Global Risks in Entity Management

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  • Federal Republic consisting of 28 states and 7 union territoriesTotal area: 3,287,263 sq km, country comparison to the world: 7, slightly more than one-third the size of the USPopulation: 1.2 billion (Urban 30%, Rural 70%)Age structure: 0-14 years: 29.7% (male 187,450,635/female 165,415,758)15-64 years: 64.9% (male 398,757,331/female 372,719,379)65 years and over: 5.5% (male 30,831,190/female 33,998,613) (2011 est.)Median age: total: 26.2 yearsmale: 25.6 yearsfemale: 26.9 years (2011 est.)Decline in GDP FY 2012 – 5%Projected GDP FY 2013 – 5.7%(Reserve Bank of India, policy update 3 May 2013) TransportationRailways 64,460 KmRoadways 42,00,000 KmWaterways 14,500 KmNo. of Airports 454English is the most important language for national, political, and commercial communication – Approximately 350 million can read, write and speak English.
  • AgentDistributorFranchisePartnership Firm – only permitted for NRIs and PIOs subject to certain limitationsProprietary concern – only permitted for NRIs and PIOs subject to certain limitationsProhibited in trusts other than VCF
  • Indian Rupee is convertible on Current Account since 2000Convertibility on Capital Account, a gradual process, Asian Currency CrisisAllotment to be reported in Form FC-GPR Part A in 30 days
  • Doing Business in India

    1. 1. Nitin ShingalaRegional Director, IndiaTMF GroupJane NivenRegional General Counsel, Asia PacificJones Lang LaSalleJoe DiLandroDirector of Sales, North AmericaComputershare Governance ServicesMay 15 & 22, 2013Doing Business in IndiaGlobal Risks in Entity Management
    2. 2. Today’s Agenda› Welcome to Doing Business in China, India & Brazil webinars› Register at cgs.computershare.com› India, at a Glance› Entry Options in India› FDI & Foreign Ownership› Corporate Regulations & Compliance› Client Examples› Managing Compliance Concerns› Questions & CommentsDoing Business in India: Global Risks in Entity Management2
    3. 3. Speaker ProfilesNitin Shingala, Regional Director, India, TMF Group› Leads a team specializing in providing tax, accounting, corporate compliance andrelated outsourced business services to international companies operating in India› Previously ran his own accountancy firm for 17 years before it merged with TMF Groupand also served as Finance Director for IDEX Corporation, which is listed on NYSE› Has contributed several articles in various professional magazines and financialnewspapers on the subject of tax and compliance in IndiaJane Niven, Regional General Counsel, Jones Lang LaSalle› Head of Legal & Compliance in Asia Pacific; leads team of 16› Managing legal issues for the 27,000-strong business across 13 countries› Has lived and worked in Asia for over 20 years and regularly speaks at compliance andanti-corruption conferences in the regionJoe DiLandro, Director of Sales, CGS, North America› Leads team responsible for marketing of compliance suite of governance products:global entity management, corporate board portals, and SEC filings software› Governance engagements at hundreds of Fortune 1000 companiesDoing Business in India: Global Risks in Entity Management3
    4. 4. Fundamentals intact, Driving force in AsiaIndia, At A Glance› GDP $1.848 trillion, growing at 6.86%(2011 World Bank)› 1.2 billion people, estimated 350 millionEnglish speakers/users› Attractive market – large and growing› Stock market capitalization: $1.175 trillion(BSE)› Listed companies: 5,211 (The WorldFederation of Exchanges March 2013)› UNCTAD World Investment Report 2012:› 3rd most favoured destination after Chinaand the USDoing Business in India: Global Risks in Entity Management4
    5. 5. Foreign Direct Investment In IndiaDoing Business in India: Global Risks in Entity Management5
    6. 6. Entry Options In IndiaAs aForeignCompanyForeignDirectInvestment(FDI)LiaisonOffice(LO)BranchOffice(BO)ProjectOffice(PO)New/ExistingCompanyLimitedLiabilityPartnership(LLP)Foreign Exchange Law &Regulations require prior approval,restrict activitiesSubject to FDI RegulationsForeignPortfolioInvestmentFIIsQFIs, NRIs,PIORegulated by ForeignExchange Law & Regulationsand Securities ExchangeBoard of IndiaMost common mistake: Hiring employees without legal presenceDoing Business in India: Global Risks in Entity Management6
    7. 7. Foreign Direct Investments RegulationsPermitted SectorsAutomatic Route100% permitted in most sectors74%, 49%, 26%, in certain key sectorsPost facto intimation in 30 days - receiptof funds, issue of sharesGovernment Route(With prior FIPB approval)Sectors sensitive for FDIPrior approval requiredKey sector ceiling 74%, 49%, 26%, 20%LLPsSystematic transition ~ closed door to open economyDoing Business in India: Global Risks in Entity Management7
    8. 8. Foreign OwnershipDoing Business in India: Global Risks in Entity Management8
    9. 9. Company Incorporated In IndiaCompany incorporated in IndiaPrivate Limited Company(Pvt. Ltd.)- Shareholders: Minimum 2, Maximum 50- Directors: Minimum 2- Authorized capital: Minimum INR100,000 (approx. Euro 1,500)- No offer shares to public or outsiders- Lesser disclosure and compliancePublic Limited Company(Ltd.)- Shareholders: Minimum 7- Directors: Minimum 3- Authorized capital: Minimum INR500,000 (approx. Euro 7,700)- Appropriate to raise equity frominvestors in India- Elaborate disclosure and complianceFlexibility in operations, cumbersome exit procedureDoing Business in India: Global Risks in Entity Management9
    10. 10. Business RegistrationsCentral Government:› Income-tax:› Permanent Account Number (PAN)› Tax deduction Account Number (TAN) for withholding tax› Import-Export Code› Manufacturing: Excise duty, Factory, Environment› Rendering services: Service-tax› Social security: Provident Fund, ESICState Government:› Central Sales Tax & State VAT› Profession tax› Shop & EstablishmentFactor additional time to kick start local operationsDoing Business in India: Global Risks in Entity Management10
    11. 11. Foreign Exchange Regulations› Reserve Bank of India (RBI) is the Regulatory Authority› Convertibility of Indian Rupee› Full on Current Account with few restrictions› Partial on Capital Account› Foreign Direct Investment (FDI) Reporting:› 30 days from date of receipt› Adherence to Pricing Guideline required› Allotment of shares within 180 days› Allotment to be reported in 30 days› External Commercial Borrowings (ECB)› Permitted only for specific end use› Subject to minimum tenure and cap on interest rates› Foreign Currency Accounts permitted only to ExportersCross border loans require special attentionDoing Business in India: Global Risks in Entity Management11
    12. 12. Annual Corporate ComplianceBoard Meetings› One in each quarter i.e. 4 in a year› No restriction on place of meeting› Video conferencing permitted subject to rules, minimum one meeting inperson is required in a yearAnnual GeneralMeeting (AGM)› Within six months from end of financial year or within 15 months from thedate of last AGM› Physical meeting to be held in the same city where Registered office is locatedRegistrar ofCompanies› Audited financials within 30 days from AGM› Compliance certificate within 30 days from AGM (If paid up capital is morethan 1 million and up to 50 million)› Annual return within 60 days from AGMReserve Bank ofIndia› Annual Return on foreign liabilities and assets by July 15Directors› General notice of disclosure of interest› Declaration of continued non-disqualifiedCompliance made easy with online e-filingDoing Business in India: Global Risks in Entity Management12
    13. 13. Companies Bill, 2012: Key Changes› Compulsory appointment of one Resident Director› Financial Year to compulsorily end as on the 31st day of March every year, a differentfinancial year only with approval of the National Company Law Tribunal› One Person Company permitted› Outbound mergers now permitted› Mandatory rotation of auditors for listed companies and other prescribed classes ofcompanies after 5 years› Compulsory CSR obligations for companies with specified size› at least 2% of its average net profits during three immediately precedingfinancial years› Secretarial Standards given statutory recognition, mandatory Secretarial Audit forcompanies having specified size› Class Action in case of misleading prospectus, Disgorgement provisionsCorporate law reforms in processDoing Business in India: Global Risks in Entity Management13
    14. 14. Some Practical Realities…› Major acquisition took 6 months from signing MOU to completion; but the taskof merging the two companies which required High Court approval, tookanother 18 months› Tax authorities in each state have different requirements depending on theservices you are supplying. A company may find itself issuing multiple versionsof invoices especially if it is supplying or buying services across states› Licensing is complex and multi-layered. Some services may require federal andstate licenses while others, only need local city-issued licenses. Keeping all thelicenses up to date is a full time job. Allowing a single licence to lapse can bevery expensive and time consuming to rectify› Employment related issues are myriad especially where significant staff isrequired. Do not underestimate the impact of employee friendly legislation andcourts14 Doing Business in India: Global Risks in Entity Management
    15. 15. Subsidiary Governance & ComplianceHow do you manage the Compliance Risks?› Is there professional firm assigned?› Are local rules being followed?› Entity setup in accordance with founding documents?› Are filings being managed?› When have entities been reviewed?Doing Business in India: Global Risks in Entity Management15
    16. 16. Risks & Concerns: How Are They Managed?Compliance Risk ConcernsFormation Is there a formal workflow approval process?Organizational Notification Who else needs to know?Board Details/Formation Who needs to understand this?Jurisdictional Rules Does the organization understand what is required?Necessary Filings Are there penalties, requirements to consider?Registered Capital How is this managed?Intellectual Property Protection How do you confirm these are protected?Ongoing Maintenance Can you verify entity information is accurate?Doing Business in India: Global Risks in Entity Management16
    17. 17. Approval Process In IndiaCatherineA GEMSapprover forall legalentitiesReviews theFormation RequestApprovesor RejectstheRequestfor thelegalentityAdamA GEMS updater ofdata held forIndian legalentitiesForms thelegal entityandsubmitstheRequestHow does the organization Approve Formations?Doing Business in India: Global Risks in Entity Management17
    18. 18. Verifying Data Accuracy: Ongoing MaintenanceHow do you ensure Ongoing Compliance?Doing Business in India: Global Risks in Entity Management18
    19. 19. Compliance ModuleDo you know the entityis in Good Standing?› Is the entity in compliancewith internationaljurisdictional rules?› Have you completednecessary filings?› Is the entity in compliancewith the by-laws?› Does it have a completedata record?Doing Business in India: Global Risks in Entity Management19
    20. 20. Benefits of a Compliance Dashboard› Continious audits using self-defined parameters› Conduct validity checks› Compliance monitoring› Detect and resolve issues in time› Integrated Notification Manager & Task-Manager› Enforce compliance standards› Flexible user screens, report-wizards,integration of business processesAuditDetect& EditImplementSecurity(RiskManagement)Govern(CorporateGovernance)TransparencyDoing Business in India: Global Risks in Entity Management20
    21. 21. What Other Information Needs to Be Shared?GEMSGlobal EntityManagement SystemLegalDepartmentFinanceDepartmentComplianceManagementBankingDepartmentAuditorsTaxDepartmentInvestorsRelationsEntityManagementTrade MarksDepartmentWho needs current information within a company?Doing Business in India: Global Risks in Entity Management21
    22. 22. Webinar Series: China, India & Brazil› Doing Business in India, May 15 @ 1 pm EDT› Doing Business in India, May 22 @ 1 pm GMT› Doing Business in Brazil, June 19 @ 1 pm EDT› Doing Business in Brazil, June 26 @ 1 pm GMT› Register at cgs.computershare.com› Doing Business in China webinar now on Computershare YouTubeDoing Business in India: Global Risks in Entity Management22
    23. 23. Questions & CommentsThank you for joining us. What questions do you have?› Joe DiLandroComputershare Governance Servicesjoe.dilandro1@computershare.com› Nitin ShingalaTMF Groupnitin.shingala@tmf-group.com› Jane NivenJones Lang LaSallejane.niven@ap.jll.comRegister for upcoming webinars at cgs.computershare.com.Doing Business in India: Global Risks in Entity Management

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