Firm Profile > Economic Laws Practice > Mumbai, India

Economic Laws Practice
109A, 1ST FLOOR, DALAMAL TOWERS
FREE PRESS JOURNAL ROAD, NARIMAN POINT
MUMBAI 400 021
India

Dispute resolution Tier 1

The 'thorough and quick' litigation team at Economic Laws Practice frequently handles commercial, white-collar crime and tax-related disputes in the Supreme Court, high courts and commercial courts, in addition to advising clients on regulatory matters in various tribunals, including the National Green Tribunal and the Telecom Disputes Settlement Appellate Tribunal. Practice head Naresh Thacker recently acted for L&T Sapura Shipping in a high-value dispute before the Bombay High Court concerning the cancellation of an essentiality certificate in relation to the import of goods. Associate partner Alok Jain joined the firm in 2018. Ashish Prasad has notable expertise advising clients in the energy sector on major disputes, in addition to a wealth of experience handling IP enforcement actions. He is currently acting for the Power Development Department of the state of Jammu and Kashmir in a claim for losses arising from the abandonment of a hydroelectric power plant project. MP Devnath has joined Seetharaman & Associates.

Practice head(s):

Naresh Thacker

Other key lawyers:

Testimonials

‘The first distinguishing factor of ELP’s litigation practice is the speed with which they take over any matter and come back with the preliminary response. They are also adept at handling the matter independently by forging good relations with stakeholders from different areas.’

Key clients

Multiplex Association of India

Larsen & Toubro Sapura Shipping Private Limited

Heligo Charters

SNC Lavalin Infrastructures

Welspun Enterprises

L&T Construction

Hindalco Industries

JSW Steel

Seabird Marine

Meridian Shipping Agency

Allcargo Global Logistics

Mundra International Container Terminal

Forbes & Company

Honeycomb Logistics .

Welspun Global Brands

Honeywell Automation India

Boskalis International BV

Larsen and Toubro Limited

L&T Hydrocarbon Engineering Limited

J Ray McDermott SA

Tata Sons Ltd.

Advanced MedTech Solutions Private Limited

Adani Enterprises Ltd.

Oakwood Management Services India Pvt. Ltd.

Dubai Port World

Gateway Terminals India Pvt. Ltd.

Centrient Pharmaceuticals India Pvt. Ltd

SNC Lavalin Engineering India Pvt. Ltd.

Projects and energy Tier 1

With a strong understanding of regulatory issues, Economic Laws Practice provides comprehensive legal services covering all issues from the inception of a project up to financial close, construction and operation. The firm fields a team with multi-disciplinary knowledge which is able to offer its expertise in transaction and investment structuring coupled with a deep understanding of project documentation. The practice stands out for its experience in acting as foreign counsel to multinational clients in other jurisdictions, as well as for its proven track record handling infrastructure disputes. The team's advice spans all sectors of projects, energy and infrastructure, with a recent foray into the field of nuclear energy. Sujjain Talwar has extensive experience in private sector participation initiatives concerning infrastructure projects in India and abroad. Joint ventures and private equity transactions in the infrastructure and hospitality space are some of Aakanksha Joshi's areas of expertise.

Practice head(s):

Sujjain Talwar; Aakanksha Joshi; Babu Sivaprakasam; Naresh Thacker; Ashish Prasad

Key clients

SAMHI Hotels Private Limited

BLA Power Private Limited

Turner Project Management India Private Limited

Nuclear Power Corporation of India Limited

L&T

Dubai Ports World

Welspun Enterprises Limited

Stellar Value Chain Private Limited

CRH Plc

Fomento Resorts and Hospitality

Island Star Mall Developers Private Limited

Chips Health Limited

Exide Industries Limited

INKEL Limited

Integrated Mumbai Business Park (India) Private Limited

Hindustan Ports Private Limited

Doit Smart Infrastructure (India) Private Limited

Tax Tier 1

Rohit Jain leads the tax practice at Economic Laws Practice, which offers the full suite of transactional, advisory and litigation support. Recent direct tax issues involved transfer pricing structuring and disputes while Nishant Shah led on indirect issues pertaining to GST transition strategy, customs tax, central sales tax and state levies. The firm routinely represents big-ticket global clients before all court levels in disputes concerning tax classification, valuation, exemption and refunds. Investigations by the Directorate of Revenue Intelligence and other authorities are regularly handled and niche expertise with issues concerning classifications under the SCOMET list is also provided. Exemplifying the firm's steady growth, a suite of partner promotions were made including Harsh Shah and Jitendra Motwani in Mumbai.

Practice head(s):

Rohit Jain; Nishant Shah

Key clients

Warner Bros. Pictures

Schneider Electric India

Fiat

Bank of America

Google

BMW

Citibank

Juniper Networks

Parker Hannafin India

Flipkart

WS Retail Services

Vedanta Group

Sterlite Group

JSW Group

Bharat Petroleum Compan

Bontaz Automotive India

BP Exploration (Alpha)

Reliance ADAG Group

GlaxoSmithKline

IBM India

Jet Airways (India)

Johnson & Johnson

Tetra Pak India

Atlas Copco (India)

WTO/international trade Tier 1

Economic Laws Practice has extensive experience acting in investigations defending the interests of several stakeholders from being adversely impacted by anti-dumping, countervailing and subsidy and safeguard duty measures. Export control regulation, sanctions, customs litigation and the establishment and operation of Free Trade Zones are other areas of expertise for the department. The team is jointly headed by Sanjay Notani, whose specialisms include countervailing and safeguard duty proceedings pertaining to inbound and outbound levy of duties, and managing partner Suhail Nathani, who has over 25 years of experience in the field.

Practice head(s):

Suhail Nathani; Sanjay Notani

Other key lawyers:

Ambarish Sathianathan; Parthsarathi Jha

Testimonials

‘ELP has very good in-house trade lawyers who can handle WTO disputes and other trade related issues. They complete their work on time without compromising on quality.’

‘Parthasarathy Jha is a very intelligent lawyer with a good speaking abilities. He has worked very hard for India’s WTO disputes.’

Key clients

National Aluminium Company Limited, India

Vedanta Limited

Shin-Etsu Chemical Co., Ltd., Japan

Tosoh Corporation

Mitsui and Co., Ltd.

Qatar Chemicals and Petrochemical Marketing and Distribution Co. (Muntajat) Q.J.S.C.

Qatar Vinyl Company Ltd. Q.S.C, Qatar

Tricon Overseas Inc.

Hiranyavarnaam Chemicals & Alkalis PTE Ltd.

ATC Tires Pvt. Ltd.

Sumitomo Chemical Co., Ltd.

B.R. Chemicals Co., Ltd.

East West Corporation

Black Rose Industries Ltd

Soda Sanayii A.S

Hindustan Unilever Limited

Sasol Africa (Pty) Ltd

Sasol Middle East FZCO

C. J. Shah and Company

Oerlikon Business Services GmbH

Government of India

Invista Group

Indian Metallurgical Coke Manufacturers’ Association (IMCOM)

Adani Power Maharashtra Limited and Adani Power Rajasthan Limited

Amazon

Huntsman International (India) Private Limited

Mitsubishi Electric Corporation

Antitrust and competition Tier 2

The significant bench strength of Economic Laws Practice (including noted individuals Suhail Nathani and Ravisekhar Nair) is well placed to act on high-profile competition disputes before the CCI, COMPAT and NCLAT. Multinational and domestic clients in sectors such as IT, pharmaceuticals, energy, media and automobiles frequently instruct the team on disputes concerning anti-competitive breaches, abuse of dominance and cartelisation, in both defence and initiation proceedings. The team also provides expertise on the merger control side (including Phase II applications) as well as advising on competition compliance audits.

Practice head(s):

Suhail Nathani; Ravisekhar Nair

Key clients

Google

Novartis India

Novartis Healthcare

APM Terminals Management

Gateway Terminals India

Johnson Controls

Dalmia Bharat Sugar & Industries

Maersk Line

Worldline India

Polycab Wires

National Egg Co-ordination Committee

Pidilite Industries

Mankind Pharma

Dell International Services

E.I. DuPont

Agrocorpex India

Banking and finance Tier 2

With particular investment in real estate and construction, Economic Laws Practice remains active in project financing mandates in these sectors, where they act as lender’s counsel. The group has notable further expertise representing asset reconstruction companies and advising borrowers and lenders on debt restructuring and refinancing, as well as insolvency proceedings before the NCLT. Senior associate Dhrupad Vaghani has considerable experience in the resolution of stressed and non-performing assets under various schemes of the RBI; recently he acted alongside practice head Babu Sivaprakasam to advise Phoenix ARC on its application to initiate insolvency proceedings against Blue Horizons Hotels, subsequent to which the client made a full recovery.

Practice head(s):

Babu Sivaprakasam

Other key lawyers:

Testimonials

“The team has in-depth understanding of banking & finance sector especially in real estate sector. They are very proactive and provide us with multiple options for every issue.”

Key clients

DBS Bank Limited and DBS Bank Singapore

Aditya Birla Finance Limited

Tata Capital Financial Services Private Limited

Tata Capital Housing Finance Limited

Tata Cleantech Capital Limited

State Bank of India

National Bank for Agriculture and Rural Development

IDFC Bank Limited

Piramal Capital and Housing Finance Private Limited

IndusInd Bank Limited

Yes Bank Limited

ICICI Bank Limited

Ujjivan Small Finance Bank

Industrial and Commercial Bank of China (ICBC)

HDFC Limited

SAMHI Hotels Private Limited

IDFC Private Equity Co. Limited

Bandhan Bank Limited

Mannapuram Group

Hiranandani Group

Westpac Banking Corporation

Indostar Home Finance Limited

Global Vectra Helicorp Limited

Catholic Syrian Bank

L&T Infrastructure Company Limited

Indian Overseas Bank

Edelweiss ARC

Bank of Baroda

ILFS Financial Services Limited

RattanIndia Finance Private Limited

Corporate and M&A Tier 2

Economic Laws Practice s 'highly competent' team advises corporations and investors on all aspects of mergers and acquisitions, including due diligence, deal structuring and regulatory compliance, in addition to advising clients on demergers, joint ventures, corporate reorganisations and governance issues.  Darshan Upadhyay, noted by one client for his 'focused approach and ability to always see the big picture', leads on the majority of the firm’s high value transactions, bringing notable expertise in relation to exchange control regulations, SEBI regulatory proceedings and insolvency proceedings. In a recent mandate he advised Johnson Controls Marine & Refrigeration India Limited on its merger with Johnson Controls Private India Limited, requiring authorisation under the Companies Act, 2013.

Practice head(s):

Suhail Nathani; Sujjain Talwar

Other key lawyers:

Key clients

SAMHI Hotels Private Limited

Stellar Value Chain Solutions Private Limited

Future Lifestyle Fashions Limited (FLFL)

Thriveni Earthmovers Private Limited

Johnson Controls Marine and Refrigeration India Limited and Johnson Controls (India) Private Limited

Google India Private Limited

Accel Frontline Limited

Orissa Stevedores Limited

JSW Steel

Multi – Act Group

Innovative Logistics Service Private Limited

Mayfield India II, Ltd. and IL&FS Investment Managers Limited

Dispute resolution: arbitration Tier 2

Economic Laws Practice has particular expertise in arbitration proceedings arising from construction projects, but also acts for clients, including major corporations and public bodies, in the energy, power, oil and gas, and banking sectors in breach of contract mandates, tax matters and EPC disputes.

Practice head(s):

Naresh Thacker

Testimonials

‘The team at ELP is knowledgeable, experienced and efficient. They work with painstaking attention to detail and have a problem-solving approach.’

‘Naresh Thacker and Alok Jain are both extremely professional, responsive and personable.’

Key clients

Heligo Charters Pvt Ltd

Power Development Department, State of Jammu and Kashmir

State of Jammu and Kashmir

G. R. Engineering Private Limited

Honeywell Automation India Limited

Investment funds Tier 2

The private equity and venture capital team at Economic Laws Practice has a strong client list of joint venture investors for which the team handles the full range of transactional support from structuring and negotiations to target due diligence and exit strategy. The team includes Suhail Nathani, Sujjain Talwar (joint practice heads) and Darshan Upadhyay, who supply ongoing support during a fund’s cycle, providing advice on regulatory changes, tax implications, corporate governance and compliance with investment agreements.

Practice head(s):

Suhail Nathani; Sujjain Talwar

Other key lawyers:

Key clients

Samara Capital Partners Fund II and Samara Alternate Investment Fund

Samara Capital

Mayfield FVCI

SD Corporation

Mayfield India II

Seven Islands Shipping

Multi-Act Trade & Investments

Coventry Properties

Stellar Value Chain Solutions

Ambit Pragma Fund

Edelweiss

Google Capital

New Silk Route Advisors

New Vernon Private Equity

Oman India Joint Investment Fund

Piramal Enterprises

Somerset Indus Capital Partners

State Bank of India/ The Neev Fund

Impresario Entertainment and Hospitality

Celox Pandion

Samara Capital Partners Fund II and Samara Alternate Investment Fund

Samara Capital

Seven Islands Shipping Limited

Multi-Act Trade & Investments

Coventry Properties

Stellar Value Chain Solutions

Ambit Pragma Fund

Google Capital

New Silk Route Advisors

New Vernon Private Equity

Oman India Joint Investment Fund

Piramal Enterprises

Somerset Indus Capital Partners

Restructuring and insolvency Tier 3

The insolvency and restructuring group at Economic Laws Practice is made up of a cross-practice team with experience across banking and finance, dispute resolution, corporate and tax. The team undertakes work ranging from distressed M&A transactions, debt restructuring and recoveries to equity capital raising and open offers. Recent activity includes advising insolvency professionals and operational creditors in insolvency proceedings under the IBC.  Babu Sivaprakasam has experience in representing stakeholders under the IBC, as well as in the resolution of stressed and non-performing assets under various schemes. Other names to note include Sujjain Talwar and Darshan Upadhyay, who assists clients with the preparation of resolution plans as well as regulatory issues.

Practice head(s):

Sujjain Talwar; Darshan Upadhyay; Babu Sivaprakasam

Other key lawyers:

Bhavin Gada; Mitesh Jain; Aditya Khadria

Key clients

Videocon Group Companies

SAMHI Hotels Private Limited

Diamond Forever International

Catholic Syrian Bank

Edelweiss Asset Reconstruction Company Limited

Phoenix ARC Private Limited

CRH Plc

State Bank of India

Real estate and construction Tier 4

The real estate and construction practice at Economic Laws Practice handles due diligence and provides transactional support. The team's broad service offering covers foreign and domestic investments, land acquisitions, joint development arrangements and leasing, as well financing for various types of properties, such as slum rehabilitation projects, mega food parks, logistics projects and integrated townships. Practice head Babu Sivaprakasam brings deep experience in finance matters to the table, while Aakanksha Joshi focuses on transactional work.

Practice head(s):

Babu Sivaprakasam; Bhavin Gada; Aakanksha Joshi

Other key lawyers:

Aditya Khardia; Yogesh Pirthani

Key clients

Hiranandani Group

Johnson Controls (India) Private Limited

Piramal Finance Limited

Aker Powergas Private Limited

Gujarat Agro Infrastructure Mega Food Park Private Limited

Indusind Bank Limited

Konark Karia Group

My Own Eco Energy Private Limited

Raaga Mayuri Agro Vet Private Limited

Stellar Value Chain Solutions Private Limited

Tata Starbucks Private Limited

Manappuram Foundation

Cremica Food Park Private Limited

Krishi technologies Private Limited

Polycab India Limited

Hiranandani Group

Johnson Controls (India) Private Limited

Piramal Finance Limited

The firm: Economic Laws Practice (ELP) is a leading full-service Indian law firm established in 2001 by eminent lawyers from diverse fields. ELP brings to the table a unique combination of professionals which constitutes of lawyers, chartered accountants, cost accountants, economists and company secretaries, enabling the firm to offer services with seamless cross-practice experience and top-of-the-line expertise to its clients.

With offices in Mumbai, New Delhi, Pune, Ahmedabad, Bangalore and Chennai, ELP has a team of over 180 qualified professionals with professional acumen in diverse practice areas. The firm works closely with leading global law firms in the UK, USA, Middle East and Asia Pacific region, giving it the ability to provide a pan-India and global service offering to its clients.

ELP is committed to develop and nurture long-term relationships with its clients by providing the most optimal solutions in a practical, qualitative and cost-efficient manner. The firm offers its clients:

Personalised attention: ELP offers clients a high level of partner involvement, personalised attention, and business and sector-specific solutions. It ensures that each mandate gets the personalised attention and time of individual partners and a dedicated team of professionals with the right mix of experience and expertise.

Practical, implementable and enforceable advice: ELP’s professionals have typically appeared in various tribunals, fora and courts as a part of their development at the firm. Armed with this litigation experience, its lawyers are better positioned to understand the complexities of a mandate and the eventual consequences of the documents that anchor the matter or deal.

Access to experts: as the majority of ELP’s lawyers hold dual qualifications as lawyers and company secretaries/chartered accountants/economists or hold multi-jurisdictional qualifications, clients benefit from advice which is efficient, comprehensive, practical and business-oriented. The firm’s professionals work seamlessly across practices and provide advice with the objective of minimising the risk of unanticipated exposures and helping clients to maximise outcomes.

Geographic reach: with offices in six different cities in the country and close working relationships with leading global law firms in the UK, USA, the Middle East and Asia Pacific region, the firm is able to assist clients with their domestic as well as cross-border legal requirements.

Areas of practice: ELP has a unique positioning among law firms in India from the perspective of offering comprehensive services across the entire spectrum of transactional, advisory, litigation, regulatory and tax matters.

The firm’s areas of expertise include banking and finance; competition law and policy; corporate and commercial; hospitality; infrastructure; international trade and customs; litigation and dispute resolution; private equity and venture capital; securities laws and capital markets; tax; and telecommunications, media and technology. It is a dynamic firm that continues to reinvent itself by identifying and harnessing market trends to establish a high level of expertise in some of India’s current key market sectors.

Some of the firm’s notable achievements include: ranked among the top ten firms in the country with the highest client satisfaction score at 9/10, and also recognised as the fastest growing law firm in India in RSG Report 2015; winner of Law Firm of the Year for Competition and Antitrust; Dispute Resolution; Policy and Regulation; and Taxation in Indian Business Law Journal‘s Indian Law Firm Awards 2015; recognised as one of the world’s top specialist arbitration firms by Global Arbitration Review‘s GAR100 2016 and 2017; winner of Export Controls/Sanctions Law Firm of the Year (Rest of the World) Award in the WorldECR Awards 2016; recognised as an Outstanding Firm for Tax by Asialaw Profiles 2016 and 2017; winner of Competition and Antitrust Law Firm of the Year Award in the LegalEra Awards 2015-16; recognised as a top tier firm for dispute resolution; projects and energy; tax; and WTO/international trade by The Legal 500 Asia-Pacific 2016 and 2017; highly recommended for banking; capital markets; M&A; private equity; and project finance by IFLR1000 Financial & Corporate Guide 2016 and 2017.

Department Name Email Telephone
Banking and finance
Competition law and policy
Corporate and commercial
Hospitality
International trade and customs
Litigation, arbitration and dispute resolution
Policy and regulation
Private equity and venture capital
Projects, infrastructure and energy
Real estate and construction
Securities laws and capital markets
Tax (including direct tax, indirect tax, transfer pricing and GST)
Technology, media and telecommunications (TMT)
Number of partners and associate partners : 33
Number of other professionals : 150
English
Hindi
majority of the regional Indian languages

India

ECONOMIC GROWTH

India is the world’s sixth largest economy by nominal gross domestic product (GDP). According to the data, India’s Gross Domestic Product (GDP) has amounted to USD 2.59 trillion and the  country’s economy has grown at a seven-quarter high of 7.7 per cent in the last three months ended March 2018.

India is projected to further grow at 7.4% of its GDP in 2019 as against China’s 6.8%, making it the fastest growing economy amongst emerging economies. According to the figures of the Department of Industrial Policy and Promotion (DIPP), India received USD 7.59 billion foreign direct investment (FDI) during April-June 2016-17.  In the ease of doing business report 2019 released by the World Bank on India climbed 23 places from 100 to 77 among the 190 countries surveyed .

The year so far as of June 6, 2018 has recorded 542 deals—M&A and PE—worth $71 billion (INR     4.48 lakh crore), a significant value, which is the highest year-to-date value recorded and supported by increased big ticket transactions, according to the estimates of Grant Thornton India. In 2017, there were 1,147 such transactions worth USD 57.85 billion .

LIBERALISATION OF THE REGULATORY FRAMEWORK

The Liberalisation of industrial and trade policies during the 1980s was accompanied by an increasingly receptive attitude towards regulatory reforms. The Industrial Policy Resolution of 1956 and the Statement of Industrial Policy of 1991 provided the basic framework for the overall industrial policy of India. Reforms which are being progressively implemented relate to investment licensing, taxation, particularly indirect taxation, prices and distribution systems, and trade. Over the years, India has removed restrictions on investment and expansion and facilitated easy access to FDI. With a view to liberalise the FDI in the country, the Government has increasingly brought a number of sectors under the automatic route, where no government approval is required. For instance, FDI in Single Brand Retails Trading was liberalized to permit FDI beyond 49% up to 100% under the Government approval route with effect from January 10, 2018. 100% FDI is permitted in Single Brand Retail Trading and Construction Development whereas foreign airlines have been permitted to invest up to 49% in Air India .

TAX REFORMS

India has a robust taxation system at par with global standards. It also has double taxation avoidance agreements with most of the advanced jurisdictions. The Government of India in 2017 introduced the Goods and Service Tax (GST) regime. The GST regime broadly based on the OECD International VAT/GST Guidelines, subsumes most indirect taxes such as sales tax and excise tax and introduces a single destination-based consumption tax.

ESTABLISHED JUDICIAL SYSTEM

India has a single integrated judicial system with Supreme Court of India as the apex court at the top of the pyramid. An important feature of the Indian judicial system is that it’s a ‘common law system’. In a common law system, law is developed by the judges through their decisions, orders, or judgments. Enforcement of contract is at the heart of the judicial reforms being undertaken in the country. As a step in that direction, and to enhance the rights of the stakeholders, the jurisdiction of the Company Law Board, the Board for Industrial and Financial Reconstruction, Appellate Authority for Industrial and Financial Reconstruction, and the company law jurisdiction of High Courts in relation to winding up, amalgamation, mergers, and all other matters is now consolidated and referred to the National Company Law Tribunal (NCLT). The focus of NCLT is time-bound dispensation of proceedings.

START-UP INDIA POLICY

On January 16, 2016, at an event organised by the DIPP, Prime Minister Narendra Modi launched the ‘Start-up India’ initiative and unveiled the much awaited ‘Start-up India Action Plan’. This action plan lists a comprehensive set of structural and regulatory reforms necessary to build a strong ecosystem for start-ups, in order to result in sustainable economic growth and generate large scale employment opportunities. The plan comprises of a 19-point action list which envisions, amongst others, setting up of incubation centers, easing patent filings, tax -exemptions, setting up a INR 10,000 crore corpus fund for start-ups, easing setting-up of businesses, self-certification, and a faster exit mechanism. The Government has introduced a number of reforms to give impetus to the start-up ecosystem in India. To attract more FDI, the start-ups are permitted to issue the convertible notes, for an amount of INR 25, 00,000/- or more in a single tranche, which evidence receipt of money initially as debt, and are repayable at the option of the holder, or are convertible into equity shares of startup company upon occurrence of specified events, however the conversion period cannot exceed (five) 5 years.

CONCLUSION

The regulatory environment in India today is more conducive for conducting business. With a number of regulatory reforms in the pipeline, India is likely to attract more interest from foreign investors in the coming years. In this chapter, we have analysed, in detail, the requirements and considerations while investing and doing business in India. Though this chapter is a broad guide for carrying on business in India, it is highly recommended that a comprehensive legal advice from our team of experienced professionals is obtained prior to establishing business in India. Nothing herein is construed as legal advice provided to any of the readers.

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CONDUCTING BUSINESS IN INDIA

India is an attractive destination for foreign investors and a non-resident entity looking to enter the Indian market may make use of one of the following avenues:

  1. Incorporating a new company;
  2. Setting-up a joint-venture with an Indian partner;
  3. Incorporating a limited liability partnership (LLP); or
  4. Setting-up a liaison office (LO) or branch office (BO) or Project Office (PO).

INCORPORATING A NEW COMPANY:

A new company can be incorporated as a private limited company or a public limited company. A private limited company is required to have a minimum of two (2) shareholders and two (2) directors and a public company is required to have a minimum of seven (7) shareholders and three (3) directors. Every company shall have at least one director who stays in India for a total period of not less than one hundred and eighty-two days during the financial year. In case of a newly incorporated company this requirement shall apply proportionately at the end of the financial year in which it is incorporated.

The wholly owned subsidiary of the foreign entity is treated as a resident entity for the purpose of company law, and the Income Tax Act. However, for the purpose of exchange control regulations, the wholly owned subsidiary of the foreign entity, while making downstream investment in India, needs to comply with the guidelines issued by Reserve Bank of India (RBI) in relation issue/transfer/pricing/valuation of capital from time to time.

By introducing the Companies (Incorporation) Fifth Amendment Rules, 2016, which came into effect from January 1, 2017, incorporating a company in India has been made easier. The company is required to make a filing with the Registrar of Companies, i.e. SPICe Form INC-32, which now integrates a number of steps involved in incorporation of a company into a single step making the process of incorporation much faster. SPICe Form 32 contemplates allotment of a director identification number (DIN) to a director who does not hold a valid DIN and the company’s Permeant Account Number (PAN), Tax Deduction and Collection Account Number.

(TAN) registration can be obtained easily in a single step. The Registrar of Companies takes a maximum of two (2) working days to inform deficiencies or issue the certificate of incorporation of the new company once all required documents have been submitted to it. The approximate time taken to collate the requisite documents and incorporate a new company would be 3-4 weeks.

Prior to 2015, minimum paid-up share capital requirement for a private company was INR 100, 000/- and for a public company was INR 500, 000/-. This minimum capitalization requirement under the company law has been done away with.  However, depending upon the sector in which the company operates, the sectoral regulator, e.g. RBI for non-banking financial companies etc., may prescribe minimum capitalization requirements.

With effect from June 13, 2018, any person acquiring beneficial interest in the shares of a company is required to make a declaration to the company specifying the nature of his interest and the particulars of the person in whose name the shares stand registered in the books of the company.  The Company whose shares are being invested in is required to make a note of such declaration in the register of members. Pooled investment vehicles/Investment funds such as Mutual Funds, Alterative Investment Funds (AIFs), Real Estate Investment Trusts and Infrastructure Investment Trusts regulated under the SEBI Act are exempt from the above requirements. However, pursuant to General Circular No.8- 2018, dated September 10, 2018, the requirement for stakeholders to file a declaration in form BEN-1 has been relaxed until the final form BEN-1 is notified by the Ministry of Corporate Affairs, Government of India.

JOINT VENTURE WITH INDIAN PARTNER

Joint-venture (JV)with an Indian partner is a preferred option in sectors where the foreign investor and/or collaborator is looking at the Indian partner to provide support in market penetration or for procuring regulatory approvals etc. While dealing with the Indian partner, the joint venture agreement which captures the provisions in relation to governance mechanism, reporting requirements to the shareholders, dead-lock on decision making, exit provisions needs to be robust in order to protect the interest of the foreign investor and/or collaborator. It is pertinent to capture the transfer restrictions and the governance mechanism in the constitutional documents of the joint venture company in order to make such provisions enforceable against the joint venture company. The courts and tribunals in India are increasingly inclined to give effect to the contractual rights and obligations of the parties captured in the joint venture agreement, sometimes disregarding the technical objections raised by one of the contacting parties.

INCORPORATING AN LLP

LLP is a relatively new vehicle in India. It combines the advantages of a company, such as being a separate legal entity having perpetual succession, with the benefits of operational flexibility associated with a partnership. An LLP is required to have minimum of two (2) partners and two (2) designated partners who are individuals and out of which, one (1) of them should be a resident in India. There is no personal liability of a partner except in the case of a fraud. Moreover, a partner is not responsible or liable for another partner’s misconduct or negligence as there is no joint liability in the case of LLP. A foreign entity can invest in an LLP under the automatic route, where the LLP operates in sectors and/or activities where 100% FDI is allowed through the automatic route and there are no FDI-linked performance conditions. Further, distribution of profits to partners of the LLP is specifically exempt from tax and hence, there is no tax (equivalent to dividend distribution tax as in case of a company) in India when the LLP distributes profits to its partners.

Liaison Office, Branch Office or Project Office

To open an LO, BO or PO, depending on the principal business being carried out by the foreign entity, the nationality of the foreign entity, and the organizational structure of the foreign entity, an approval of the Authorised Dealer Category – I Bank (AD Bank) or RBI is required. If the principal business of the foreign entity falls under sectors where 100% FDI is permitted under automatic route, the approval of AD Bank will suffice, in all other cases, the approval of RBI will be required.

LO cannot carry out any business in India or earn any income in India but can merely serve as a conduit for communication between the foreign entity and other persons in India. BO is only entitled to be engaged in the activities in which the parent company is engaged. Additionally, it can carry out ancillary activities such as (i) export and/or import of goods; (ii) rendering professional or consultancy services; (iii) carry out research work in which the parent company is engaged; (iv) promote technical or financial collaborations between Indian companies and parent or overseas group company; (v) represent the parent company in India and act as buying and/or selling agent in India; (vi) render services in information technology and development of software in India; (vii) render technical support to the products supplied by parent and/or group companies; and (viii) represent a parent foreign airline and/or shipping company. Foreign entity may establish POs in India, once it has secured a contract from an Indian company to execute a project in India and carry out activities in furtherance of execution of such contract.

FDI IN INDIA

As per the data released by DIPP, the amount of FDI equity inflows from April 2018 to June 2018 have been to the tune of USD 12,752 million with an annual growth of 23% for the same period in 2017.  India still continues to receive the highest inflow of FDI from Mauritius followed by Singapore.

PROTOCOL WITH MAURITIUS

The Ministry of Finance by its notification dated August 10, 2016 notified the protocol for amendment of the Convention for the avoidance of double taxation and the prevention of fiscal evasion with respect to taxes on income and capital gains between India and Mauritius. Pursuant to the protocol, (i) India now has the taxation rights on capital gains arising from the alienation of shares acquired on or after April 1, 2017 in a company resident in India with effect from financial year 2017-18; (ii) protection to investment has been granted in relation to the shares acquired before April 1, 2017 i.e. gains from the transfer of shares acquired before April 1, 2017 will not be taxable in India even if the shares are transferred on or after March 31, 2017; (iii) the rate of taxation on the capital gains arising between the transition period of April 1, 2017 to March 31, 2019 is 50% of the domestic tax rate; and (iv) the reduced rate is subject to limitation of benefit (LOB) article. A resident of Mauritius, including a shell and/or conduit company, is not entitled to the benefit of 50% reduced rate of tax, if such resident fails the main purpose test or bona-fide business test.

SECTORS ATTRACTING FDI

As per the data released by DIPP, post liberalization of the FDI policy, from the year 2000 till June 2018, the services sector, i.e. Financial, Banking, Insurance, Non-Financial and/or Business, Outsourcing, R&D, Courier, Tech. Testing Analysis services has received the highest FDI equity inflow of USD 68,617 Million.  Computer software and hardware, telecommunications and construction and development are some of the sectors attracting large amounts of FDI inflows.

PROHIBITED SECTORS

FDI is prohibited in the following sectors and/or activities:

  1. Lottery Business including Government and/or private lottery, online lotteries, etc.;
  2. Gambling and Betting including casinos etc.;
  3. Chit funds;
  4. Nidhi company;
  5. Trading in Transferable Development Rights;
  6. Real Estate Business7 or Construction of Farm Houses;
  7. Manufacturing of cigars, cheroots, cigarillos and cigarettes, of tobacco or of tobacco substitutes; and
  8. Activities and/or sectors not open to private sector investment e.g. Atomic Energy and Railway operations (other than railway infrastructure8).

Further, foreign technology collaboration in any form including through licensing for franchise, trademark, brand name, management contract is also prohibited for the lottery business and for gambling and betting activities.

LIBERALISATION OF THE FDI POLICY

India has consistently taken steps to liberalise the FDI policy in order to attract more foreign capital in India. Over the years, most sectors have been brought under the automatic route, where FDI is permitted without the Government approval. However, there are certain sectors of strategic importance which are yet to be liberalised, and for which, till recently, approval was required to be obtained from Foreign Investment Promotion Board (FIPB). On June 5, 2017, the Government of India abolished the FIPB and work of granting approval for FDI has been entrusted to the concerned administrative ministries and/or departments. The standard operating procedure for processing FDI proposals can be found at /wp-content/uploads/2019/05/SOP-1.pdf

As a step in that direction, pursuant to Press Note 1 of 2018, DIPP has liberalised FDI in single brand retail trade permitting FDI of up to 100%, with investment beyond 49% requiring Government approval. The liberalisation is aimed at attracting investments in production and marketing, improving the availability of such goods for the consumer, encouraging increased sourcing of goods from India, and enhancing competitiveness of Indian enterprises through access to global designs, technologies and management practices.

On October 25, 2016, the Government of India liberalised the FDI policy on Other Financial Services and Non-Banking Finance Companies (NBFCs). Prior to liberalisation, FDI in NBFCs engaged in permitted eighteen (18) activities was allowed under the automatic route. After liberalisation, 100% FDI under automatic route in Other Financial Services activities regulated by financial sector regulators, viz., RBI, SEBI, IRDA, PFRDA, NHB or any other financial sector regulator as may be notified by the Government of India is permitted. Further the minimum capitalisation requirement as per the earlier policy is done away with and the FDI in ‘Other Financial Services’ activities is made subject to conditionality’s, including minimum capitalisation norms, as specified by the concerned Regulator and/or Government Agency.

CAPITAL INVESTMENTS IN INDIA

Subject to the sectoral guidelines prescribed in the FDI policy, a foreign investor can invest in an Indian company by subscribing to or purchasing capital instruments, i.e. equity shares, compulsorily convertible debentures, compulsorily convertible preference shares and share warrants. However, the price at which such capital instruments can be subscribed to or purchased from a resident seller cannot be lower than (a) the price worked out in accordance with the SEBI guidelines, as applicable, where the shares of the company are listed on any recognised stock exchange in India or (b) the fair valuation of shares done by a SEBI registered Merchant Banker or a Chartered Accountant as per any internationally accepted pricing methodology on arm’s length basis in case of unlisted companies (such price being the FairMarket Value).  An Indian company can issue partly paid-up capital instruments to a foreign investor, provided such capital instrument is made fully paid-up within 12 months. When any amounts are due from an Indian company to a foreign entity, and the remittance of such amounts is permitted as per the RBI regulations, the Indian company can issue equity shares in lieu of such amounts due in accordance with other guidelines issued by RBI.

The capital instruments are freely transferable, unless the FDI is under the Government approval route, however, the price at which such capital instruments are transferred to a resident buyer cannot be higher than the Fair Market Value.

Alternatively, an Indian company can receive debt from foreign sources in accordance with the guidelines issued by RBI in relation to External Commercial Borrowings (ECB). ECB can be availed either under the automatic route or under the approval route. Under the automatic route, the Government has permitted some eligibility norms with respect to industry, amounts, end-use etc. If the Indian company complies with the prescribed norms, it can avail ECB without any prior approval. For certain specified sectors, a borrowing by way of ECB is subject to approval of the Government.

FOREIGN PORTFOLIO INVESTMENT

Other than FDI, portfolio investment is the other popular route for foreign investors looking to invest in India. In 2014, SEBI notified the Securities Exchange Board of India (Foreign Portfolio Investors) Regulations, 2014 (FPI Regulations) which harmonized the investment by Foreign Institutional Investors (FIIs), sub accounts and Qualified Foreign Investors (QFIs) into a single category, referred to as ‘Foreign Portfolio Investors’ (FPI).

PERMITTED INVESTMENTS BY FPI

As per the FPI Regulations, an FPI can only invest in the following securities, namely:

  1. Shares, debentures and warrants of companies, listed or to be listed on a recognized stock exchange in India through primary and secondary markets;
  2. Units of schemes floated by domestic mutual funds, whether listed on a recognized stock exchange or not;
  3. Units of schemes floated by a collective investment scheme;
  4. Derivatives traded on a recognized stock exchange;
  5. Treasury bills and dated government securities;
  6. Commercial papers issued by an Indian company;
  7. Rupee denominated credit enhanced bonds;
  8. Security receipts issued by asset reconstruction companies;
  9. Perpetual debt instruments and debt capital instruments, as specified by the Reserve Bank of India from time to time;
  10. Listed and unlisted non-convertible debentures and/or bonds issued by an Indian company in the infrastructure sector, where infrastructure’ is defined in terms of the extant external commercial borrowings (ECB) guidelines;
  11. Non-convertible debentures or bonds issued by Non-Banking Financial Companies categorized as “Infrastructure Finance Companies” (IFCs) by the Reserve Bank of India;
  12. Indian Rupee denominated bonds or units issued by infrastructure debt funds;
  13. Indian depository receipts;
  14. Such other instruments specified by the Board from time to time.

RESTRICTIONS ON HOLDING BY FPI

An FPI can purchase or sell capital instruments10 of an Indian company on a recognised stock exchange in India subject to:

  1. The total holding by each FPI or an investor group being less than 10 % of the total paid-up equity capital on a fully diluted basis or less than 10% of  the  paid-up  value  of  each series of debentures or preference shares or share warrants issued by an Indian company and the total holdings of all FPIs put together shall not exceed 24  %  of  paid-up  equity capital on a fully diluted basis or paid up value of each series of debentures or preference shares or share warrants.
  2. The said limit of 10 % and 24 % is called the individual and aggregate limit, respectively. The aggregate limit of 24% can be increased by the Indian company up to the sectoral cap/statutory ceiling as prescribed in the FDI policy issued from time to time, with the approval of its board of directors and its general body through a resolution and a special resolution, respectively.
  3. In case the total holding of an  FPI increases to 10% or more of the total paid-up equity  capital on a fully diluted basis or 10% or more of the paid-up value of each series of debentures or preference shares or share warrants issued by an Indian company, the total investment made by the FPI shall be re-classified as FDI subject to the conditions  as  specified by SEBI and RBI in this regard and the reporting requirements as prescribed in exchange control regulations being complied with.

Enforcing Contracts

Enforcement of contracts is one of the key parameters based on which World Bank’s ranking on ease of doing business is determined. The enforcing contracts indicator measures the time and cost for resolving a commercial dispute through a local first-instance court (competent court), and the quality of judicial processes index, evaluating whether the country has adopted a series of good practices that promote quality and efficiency in the court system. India has taken a number of steps in the right direction in this sphere. The Arbitration and Conciliation Act, 1996 which deals with the alternate dispute mechanism system in India was amended from October 23, 2015 (the Arbitration Amendment Act). The Arbitration Amendment Act has substantial changes to reduce the timelines within which a dispute is adjudicated. As per the Arbitration Amendment Act, the arbitral tribunal has been vested with the power to impose heavy costs for adjournments without sufficient cause. Every arbitral award is to be made within 12 months from the date the arbitrator receives a written notice of appointment. The parties may mutually decide to extend the time limit by not more than six (6) months. If the award is not made within 18 months, the mandate of the arbitrator(s) will terminate unless the court extends the period upon an application filed by any of the parties. Additionally, the courts have been proactive in giving effect to the contractual rights agreed between the parties.

Pursuant to an amendment to the specific relief act, the specific performance of a contract is now required to be mandatorily granted by the court as a rule rather than at its discretion, except in certain identified situations.

Resolving Insolvency

The Insolvency and Bankruptcy Code, 2016 (IBC) notified on May 28, 2016, consolidates the fragmented legal framework under Indian law in relation to the re-organisation and insolvency resolution of corporate persons, partnership firms and individuals. It provides a time bound framework for the maximisation of value of assets of corporate debtors, promotes entrepreneurship, availability of credit, and balances the interests of all the stakeholders in reorganization and/or insolvency resolution proceedings in India. It applies to the insolvency, liquidation, voluntary liquidation or bankruptcy of companies, limited liability partnerships, body corporates, partnership firms, and individuals. Under the IBC, if a corporate debtor committing a default of INR 100,000 (Indian Rupees One Hundred Thousand only) or more, a financial creditor, an operational creditor or the corporate debtor can initiate corporate insolvency resolution under the IBC

CORPORATE GOVERNANCE

Corporate Governance plays an important role in maintaining transparency, encourages accountability of the management to the stakeholders, and leads to prompt, accurate and appropriate disclosure of information. Corporate Governance plays a larger role in listed companies, where large public shareholders are not involved in day to day management of the listed company. With the aim of improving standards of Corporate Governance of listed companies in India, a committee headed by Mr. Uday Kotak was requested to make recommendations to SEBI on issues related to: (a) ensuring independence in spirit of Independent Directors and their active participation in functioning of the company; (b) improving safeguards and disclosures pertaining to Related Party Transactions; (c) issues in accounting and auditing practices by listed companies; (d) improving effectiveness of Board Evaluation practices; (e) addressing issues faced by investors on voting and participation in general meetings; (f) disclosure and transparency related issues. The Committee released its report on October 5, 2017.

In SEBI’s board meeting held on March 27, 2018, after much deliberation the board accepted several of the recommendations of the Kotak Committee such as enhanced disclosure requirements on utilization of funds from qualified institutional placement /preferential issues, disclosures pertaining to auditor credentials, audit fee, reasons for resignation of auditors. Further, measures to strengthen the institution of the board of directors by augmenting the strength of the board and diversity, capping the maximum number of directorships etc. was accepted. Another key recommendation accepted by the board was down streaming of corporate governance by enhancing obligations on listed companies with respect to their subsidiaries such as secretarial audit being made necessary for the listed entities and their material unlisted subsidiaries, the board of all listed entities shall have to be informed of all the significant transactions involving all unlisted subsidiaries. The most crucial of the recommendations incorporated has been in relation to the participation and involvement in the affairs of the Company by the shareholders such as requiring shareholders’ approval being majority of minority for royalty/brand payments to a related party exceeding 2% of consolidated turnover instead of the proposed 5% .

HUMAN RESOURCES

According to a Bloomberg News analysis of United Nations population-projection data, India’s millennial generation is bigger than China’s or the U.S., which will boost the nation’s labour force to the world’s largest by 2027.11 A large amount of FDI is attracted by labour intensive export-oriented units. Therefore, it becomes imperative for foreign investors to be well acquainted with the labour laws in India. Labour laws in India are administered by both the Central Government and the various State governments. The existing labour laws in India govern not just the factory workers but all employees who are employed in organized sector. Social security, employee safety, industrial disputes, and welfare of labourers fall in the concurrent list of the subjects Constitution of India, and therefore both the Central Government and state Governments are empowered to enact, administer and enforce labour laws and implement labour welfare reforms. All employers having more than 20 employees are required to make social security contribution, i.e. provident fund contribution for all employees earning up to INR 15, 000/- per month to the provident fund board and provide insurance by making contribution to state insurance board for all industrial workers earning salary upto INR 21,000/- per month.

The Government has also introduced a number of labour law reforms. In 2017, the Maternity Benefit Act, 1961 was amended to extend the duration of maternity leave from 12 weeks to 26 weeks. Further, with a view to improve the ease of doing business in India, the labour ministry has also launched common registration service on the e-biz Portal for registrations under Employees Provident Fund & Miscellaneous Provisions Act, 1952, Employees State Insurance Act, 1948, Building & Other Construction Workers (Regulations of Employment and Conditions of Service) Act, 1996, Contract Labour (Regulation and Abolition) Act, 1970 and Inter-State Migrant Workmen (Regulations of Employment and Conditions of Service) Act, 1979.

DATA PROTECTION

Presently India does not have a comprehensive data protection mechanism, the main enactment that deals with protection of data is the Information Technology Act, 2000 and the rules framed thereunder. Other than the above, the respective sectoral regulators prescribe the data privacy measures required to be undertaken by the relevant sectors.

However, the recently the Personal Data Protection Bill. 2018 has been formulated by the Srikrishna Committee with a view to create a collective culture that fosters a free and fair digital economy, respecting the informational privacy of individuals, and ensuring empowerment, progress and innovation. The Srikrishna Committee was headed by retired Supreme Court judge BN Srikrishna which submitted its initial assessment and recommendations on data privacy and management, pursuant to which the Personal Data Protection Bill. 2018 was introduced. Currently, the two cases pending before the Supreme Court of India likely to have an impact on the way the data protection legislature shapes up are (a) the challenge to the Aadhaar Act, and (b) the case filed by Karmanya Singh Sareen challenging the change in privacy policy of WhatsApp Inc..

While it remains to be seen if the Data Protection Bill, 2018 finds its way to the upcoming monsoon session of the Indian Parliament for further discussion, the report’s recommendations suggest far-reaching ramifications for India’s rapidly growing technology industry.

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https://indianexpress.com/article/business/economy/india-becomes-sixth-largest-economy-in-the-world-overtakes-france-5256279/

https://www.livemint.com/Politics/9fx4v1xGMkvCk05WLP78GO/IMF-sees-India-GDP-growth-at-74-in-2018-Chinas-at-68.html

https://www.livemint.com/Opinion/gDTnRkzbR9ao1fRdYMGEdM/India-improves-its-ease-of-doing-business-but-much-work-lef.html

https://www.livemint.com/Politics/GwXhAdltCo1TCbRTAm5z0H/India-up-23-places-in-ease-of-doing-business-rankings.html

http://pib.nic.in/newsite/PrintRelease.aspx?relid=175501

http://dipp.nic.in/sites/default/files/FDI_FactSheet_29June2018.pdf

Clarifications on the standard operating procedures can be found at http://fifp.gov.in/Forms/SOP_Clarification.pdf

http://dipp.nic.in/sites/default/files/pn1_2018.pdf

https://www.moneycontrol.com/news/business/economy/sebi-accepts-kotak-committee-recommendations-getting-closer-to-global-best-practices-2542795.html