Vinita Bahri-Mehra presented a detailed look at higher education in India during a group presentation titled "Roundtable Discussions with Experts" at the NACUA Annual Conference on June 29, 2015. She discussed issues important to colleges and universities, such as regulatory governance, strategic academic models and key legal issues to consider in global education.

1. Roundtable Discussions with
Experts - India
Vinita Bahri-Mehra
Kegler Brown Hill + Ritter Co., L.P.A.

2. Higher Education in India
• Higher education offerings that are regulated are
Diploma Courses, Bachelor’s/Undergraduate Degrees,
Master’s/Post-Graduate Degrees and Pre-Doctoral
Programs.
• Higher education regulated at both National and State
levels.
• An educational institution in India needs to be setup in
the form of a Trust, Society or a Section 8 Company (pka
Section 25 Company).
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3. Regulatory Governance
Higher Education
Technical
Education
Non-Technical
Education
University
Grants
Commission
(UGC)
All India Council
for Technical
Education
(AICTE)
which has
Foreign
University
Regulations
Distance
Education
Council
(DEC)
Statutory
Councils
(e.g., the
MCI, BCI)
UGCDEC
GOVERNED BY GOVERNED BY
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4. Regulatory Governance
Higher Education
Avenues
Universities
Deemed
Universities
Colleges
Private Universities
(Unitary Institute)
UGC UGC
Universities
AICTE
Established by a
State Act, which
may require
compliance with
UGC & AICTE
Rules
GOVERNED
BY
GOVERNED
BY
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5. Some Educational Delivery Models in
India – Strategic Academic Models
(mostly unregulated sectors)
• Education Services
• Franchising
• Distance Learning Arrangements
• Twinning Arrangements
• Vocational Training
• Tutoring and Test Preparation Services
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6. Structures Commonly Adopted
by Universities Operating
in Unregulated Sectors
• License deals with Indian educational institutes
• Services Arrangement
• Setting up knowledge/research centers
• Online programs
• Setting up entities
– Liaison Office
– Branch Office
– A private limited company
– A Section 8 company (not-for-profit)
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7. Key Legal Issues
• Are non-compete and non-solicitation clauses
applicable?
• Contract enforcement?
• What is the tax incidence on profits and gains and
whether any tax breaks are provided by government?
Are repatriation of investments and profits allowed?
• Are there any labor issues to consider?
• What should be done to protect one’s IP?
• What law should govern the contract and which courts
should have jurisdiction to adjudicate on disputes?
• What mechanism of dispute resolution is preferable?
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8. Key Legal Issues
Intellectual Property (IP) Protection:
• Trademark registration.
• Separation of IP issue:
– If a joint trademark is created separation of
brand in case of divorce between U.S.
University and Indian University would be tricky;
and
– ownership of such joint trade mark?
– If new IP is created, based in whole or in part
on the IP that was licensed, who owns it? How
will it be used?
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9. Key Legal Issues
Copyright of Materials:
• Because of Berne Convention, U.S.
University’s registered copyright material
created in U.S. is automatically protected in
India. However, need to evaluate:
– if U.S. University’s materials are amended upon
inputs from Indian University, who will own such
amended materials; and
– whether materials fully developed with inputs
from Indian University would be owned by
Indian University or U.S. University.
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10. Key Legal Issues
Contracts:
• Trade-Secrets and Confidential Information protection through
confidentiality agreements.
• Structure arrangements to ensure protection of equitable
rights (e.g., non-compete, exclusivity, right of first refusal &
indemnification).
• Dispute Resolution and Governing Law.
• Termination/Exit Strategy.
• Litigation vs. Arbitration.
• Protecting Account Receivables: Standby irrevocable Letter of
Credit, Bank Guarantees and/or Indemnification.
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11. Key Legal Issues
Contract Negotiations:
• Negotiations: Contract negotiations can be expected to go
more slowly in India – particularly if dealing with India
bureaucracy.
• Different Approach to Communication: Indian parties may not
disagree with you directly about contractual issues. Instead,
they may suggest that the matter be discussed at another
time or find some way to avoid an outright negative response.
• Flexibility: It is recommended that U.S. Universities build
considerable flexibility into their approach so that prices and
other contract conditions can be adjusted.
• Believe: Relationships and respect. Building a lasting and
trusting relationship is very important for a successful
business venture in India.
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12. Key Legal Issues
• U.S. Tax Issue: Unrelated Business Income Tax (UBIT) – IMPACT?
• Exchange Control Regulations: Compliance with Reserve Bank of
India’s (RBI) Exchange Control Regulations – Repatriation of Funds.
• Labor Laws:
– “At will” employment is recognized.
– Compliance required at federal and state levels.
– Enforceability of non-compete and non-solicitation. Post-
termination of employment is difficult.
• Due Diligence: Legal, financial and structuring of transactions.
• Be Prepared For Ongoing Regulatory/Statutory Compliance
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13. Key Legal Issues
Taxation
• Dividends declared can be repatriated freely through an
authorized Indian bank.
• Dividends are tax-free in the hands of shareholders.
– A distribution tax of 16.66% is payable by company.
• Corporate tax rate for foreign companies is 41.2%. For
domestic companies, 30.99%.
• Withholding tax on royalties/technical fees/interest
income.
– Domestic tax law – 25% [effective AY 2015-2016
(under new budgets), it will become 10%].
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14. Key Legal Issues
Taxation
• Indo-U.S. DTAA – 10% for right to use of any industrial,
commercial or scientific equipment.
– 20% in any other case (First five years of agreement).
– 15% in any other case (subsequently).
– Computed on “gross amount.”
• Submission of a Tax Residency Certificate (TRC) a must.
• Furnishing of PAN required to receive payments.
• Currently, tax rate of domestic law could be utilized
as it is less than DTAA.
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15. Key Legal Issues
Taxation
• Service tax rate is 14% (per the budget proposal)
– Computed on the “Gross Amount” charged by the service
provider.
• Sales Tax Rate (VAT): Varies from state to state, depending upon
classification of goods. Two basic rates are 5% and 14.5%.
• Sales Tax Rate (CST): Levied at 2%
• Excise Tax: Imposed on goods manufactured locally. Varies from 8-
10% – 12%.
• Custom Duties:
– Peak rates reduced from 350% (June 1991) to an average
10% currently for some products.
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16. Key Legal Issues
Important Taxation Issues
• India’s tax code has elaborate Transfer Pricing Regulations.
• All entities having an aggregate value of international
transactions in a financial year exceeding INR 15 crs (i.e. approx.
U.S. $3.3 mn) subject to compulsory transfer pricing scrutiny by
the Indian tax authorities.
• Rules govern minimum profit margin to be maintained by Indian
companies in transactions involving associate enterprises
• Avoidance of Permanent Establishment (“PE”) status
is critical.
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17. International Partnerships Conclusion
• Although India’s existing educational regulations appear
regressive, government’s intent to open up the education
sector for investment and collaboration is progressive.
• Institutions must approach their relationship-building
initiatives with care. All too often, universities sign a
Memorandum of Understanding without devoting the
appropriate resources or energies to sustain effective
collaborations.
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18. International Partnerships Conclusion
• Universities should think about how strategic alliances
may fit in with their larger vision and goals for the future,
seek out best practices in identifying partners, and
in designing, executing, growing and evaluating
programs.
• THINK GLOBAL! ACT LOCAL! – It’s important to bridge
the gap between U.S. academia and local country’s
education industry practices.
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19. Legal Advice
This presentation is designed to provide an overview of a
number of legal principles and considerations.
As each legal issue is fact dependent, this presentation
should not be used or viewed as legal advice, and your
legal counsel should be consulted on the application of
your particular factual situation to the current law.
Copyright: 2015 Kegler Brown Hill + Ritter Co., L.P.A.
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20. Thank You
Vinita Bahri-Mehra, Esq.
Director + Chair, Asia Pacific Practice
Kegler Brown Hill + Ritter Co., L.P.A.
65 E. State Street, Suite 1800
Columbus, Ohio 43215, USA
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Direct Dial: 1 614 225 5508
Fax: 1 614 464 2634
Email: vmehra@keglerbrown.com
Web Address: keglerbrown.com