An Overview of Doing Business in India - July 2010

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LawQuest 2010. All Rights are Reserved.

Overview ofDoing Business in India

by Poorvi Chothani, Esq.LawQuest

www.lawquestinternational.com

July 8, 2010
http://www.lawquestinternational.com/http://www.lawquestinternational.com/


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India Demographics Total Population: 1,166,079,217 (July 2009 est. CIA World Factbook) Age Structure:

014 years: 30.8%, male: 188,208,196, female: 171,356,024

1564 years: 64.3%, male: 386,432,921, female: 364,215,759

65+ years: 4.9%, male: 27,258,259, female: 30,031,289 (2007 est.)

Median Age: 25.1 years Population Growth Rate: 1.548% (2009 est.) Birth Rate: 21.76 births/1,000 population (2009 est.) Death Rate: 6.4 deaths/1,000 population (2009 est.) Literacy Rate: 79.9% Percent of the Population under the Poverty Line: 22% (2006 est.) Unemployment Rate: 7.8%

Net Migration Rate: -0.05 migrant(s)/1,000 population(2007 est.)

Sex ratio: At Birth: 1.12 male(s)/female

under 15 Years: 1.098 male(s)/female

1564 Years: 1.061 male(s)/female

65 Years and Over: 0.908 male(s)/female


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India Demographics(Remarkably Diverse)

Second-most populous country in the world with over 1.18 billion people(estimate for April, 2010) consisting of more than one-sixth of theworld's population

Contributes 17.31% of the world's population and is projected to be the

largest populated country by 2025 surpassing China, and by 2050 it willhave over 1.6 billion people

Occupies 2.4% of the world's land area and supports over 17.5% of theworld's population.

As per the 2001 census, 72.2% of the population lives in about 638,000villages and the remaining 27.8% lives in more than 5,100 towns andover 380 urban agglomerations.

Contd


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India An Overview

Judicial and Governance Systems

Demographics Large, Young Population

Growing Middle Class

Increasing Wealth

Protectionist Environment Labor Laws

Problem Areas

Bureaucratic hurdles Weak Infrastructure

Judicial Delays

Diverse and Fragmented Markets


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Entry Options

Liaison Office/Representative Office Branch Office

Project Office Company

Agent

Distributor

Franchise Indirect Investments


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Company Structure in India

Private Limited Company Minimum two shareholders and two directors

Minimum Capital USD 2500

Public Company

7 members and 3 directors

Minimum Capital USD 12500 Indian director and shareholder not mandatory


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Foreign Direct Investment

Prohibited Sectors multi-brand retail trading, atomic energy and agriculture

Sectors subject to cap Examples Telecommunication upto 49%, Insurance upto 26%

Automatic Route Post Facto intimation to Reserve Bank of India (RBI)

Special Economic Zones (SEZ)


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FDI Inflows into India

Cumulative Amount Of FDI Flows Into India (from April

2000 to March 2010) - US$ 1,61,536 million (Equity inflows + including data on Re-invested earnings &

Other capital, which is available from April 2000 onwards.

These are the estimates on an average basis, based upon datafor the previous two years, published by RBI in their Monthly

Bulletin)

Cumulative Amount of FDI Equity Inflows (from August

1991 to March 2010) - US$ 1,32,428 million

Note : FDI inflows include amount received on account of advances pending forissue of shares for the years 1999 to 2004.


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Competition Issues: Press Note 18 and 1

No Objection Certificate from existing Indian partner

Proof that the new venture will not harm the existingjoint venture

Joint Venture includes technology transfer and

trademark license


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Critical Issues in Foreign Investments

Minority shareholder protection

Minority holding at least 10% - right to statutory action against

majority shareholder for oppression and mismanagement

Some special rights holding 26%

amendment of charter documents

issue of shares other than in accordance with pre-emptive rights

reduction of share capital

buyback of shares by the company

making inter-corporate loans or investments or providing

guaranties or other securities beyond certain thresholds


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Critical Issues in Foreign Investments

Shareholders Agreements

Liability of Board of Directors

Employment Laws

Disputes Resolution

IP Protection

Tax


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Employment of Foreign Nationals in India

Types of Visas Employment

Business

Quasi Employment

Quota - should not exceed 1% of the total workforce with anadditional cap on the total number being 20 employees. IT and ITEScompanies have been absolved from this requirement.

Justification Letter - stating why a foreign national employee

is being hired over an Indian national Tax Liability Letter

Salary - Annual salary should be over US$ 25,000 (INR 11 Lakhs)


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LawQuests Areas of Practice

Foreign Direct Investment

Foreign Indirect Investment

Company and Commercial

Transactions

Real Estate

Private Clients

Intellectual Property

Employment Law

Global Business Migration

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An Overview of Doing Business in India - July 2010

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