INVEST IN INDIA: THE FASTEST GROWING ECONOMY IN THE WORLD NOW AND FOR DECADES TO COME
Introduced in 1991 under Foreign Exchange Management Act (FEMA), Indian's FDI policy has been evolving into a dynamic instrument of the economy. Policy updates are frequent to ensure ease of business as well as creating traction. Change in sectoral policy / sectoral equity cap is notified from time to time through Press Notes by the Secretariat for Industrial Assistance (SIA) in the Department of Industrial policy and Promotion. Policy announcement by SIA are subsequently notified by RBI under FEMA. Government Incentives to attract as well as retain investments demand constant amendments so investors can benefit the most. When multinationals look at business opportunities in India, they are faced with the crucial question of structuring. The company has to be structured properly to claim tax reliefs, minimize tax and avoid double taxation.
FDI Manager provides complete, updated and real-time information (in most cases not available in the public domain) to its clients and advises the best options available.
The role of Legal advisory while setting up and running business within India can never be over-emphasized. Foreign companies face increasing government scrutiny and complex reporting requirements. Awareness of local laws, regulations, taxes and practices is of utmost importance. Current exchange control regulations require an Indian company, which is not eligible to avail of the automatic route for accepting investments from foreign entities, to obtain approval of the Reserve Bank of India (“RBI”) every time it receives investments from overseas companies. Certain set of compliance norms have to be followed while accepting investments from overseas companies. Our Legal Advisory Team comprises some of the best available legal minds specializing in the tough and highly evolving corporate law as well as its governance within India Clients from all over the world seeking to invest in India consistently require legal assistance not only during the setting-up phase but through their entire existence within India. FDI Manager provides a an expert legal team at clients' immediate and constant disposal.
As investors, clients well understand that entering into a foreign economy requires fair amount of dependable market intelligence backed by well researched and analysed data. Market entry strategy is a planned distribution and delivery method of goods or services to a new target market In the import and export of services, it refers to the creation, establishment, and management of contracts in a foreign country.
businesses can only achieve increased sales, brand awareness and business stability if they enter a new market.
Developing a market-entry strategy involves thorough analysis of potential competitors and possible customers. Relevant factors that must be considered when deciding the viability of entry into a particular market include trade barriers, localized knowledge, price localization, competition, and export subsidies.
FDI Manager provides its clients this advantage allowing them to decide the most suiable sector, timing, strategic location, etc., o help maximize their business bottomlines in an environment of minimized risks.
A foreign company can enter the market of India and set up business operations in India by following:
1. As Indian company
1. Wholly Owned Subsidiary.
2. Joint Venture
2. As foreign company
1. Setting up a Liaison Office
2. Representative Office or a Project Office or
a Branch Office of the foreign company
1. As Indian company
1. Wholly Owned Subsidiary.
2. Joint Venture
2. As foreign company
1. Setting up a Liaison Office
2. Representative Office or a Project Office or
3. a Branch Office of the foreign company
The Reserve Bank of India's Exchange Control Department, administers Foreign Exchange Management Act, 1999, (FEMA) which has replaced the earlier act , FERA, with effect from June 1, 2000. The new legislation is for "facilitating external trade" and "promoting the orderly development and maintenance of foreign exchange market in India". FEMA extends to the whole of India. Under FEMA an Indian company with foreign equity participation is treated at par with other locally incorporated companies. Accordingly, the exchange control laws and regulations for residents apply to foreign-invested companies as well.
FDI in Indian Company
In terms of Section 6(3) (b) of Foreign Exchange Management Act. 1999 Reserve Bank regulates transfer or issue of any security by a person resident outside India read with Notification No. FEMA 20/2000-RB dated May 3, 2000
FDI Manager provides a comprehensive service package to its clients that takes care of registration/ incorporation in India
1. Wholly owned subsidiary Company:
A foreign company invests 100% FDI in Indian company through automatic route then it becomes Wholly Owned Subsidiary Company of that Foreign Company.
2. Joint Venture: It is an arrangement where two or more parties cooperate to run a business. It may take various forms like Company, LLP, partnership etc., and it is a very flexible concept.
3. Liaison or Representative Office: A foreign company invests 100% FDI in Indian company through automatic route then it becomes Wholly Owned Subsidiary Company of that Foreign Company. It is an entity whose whole share capital is in the hands of a foreign corporate body. It can be a private company limited by guarantee or shares or an unlimited liability company
4. Project Office: RBI prescribes the setting up of Project office in India by a foreign company. A foreign company can establish office without prior permission from RBI only when they have secured a contract from an Indian company to execute a project in India and if it is funded directly by inward remittance from abroad or it is funded by a bilateral or multilateral International Financing Agency or
1. A company or entity in India providing the contract has been granted Term Loan by a Public Financial Institution or a bank in India for the project
2. If the above conditions are not met the foreign entity has to approach the RBI for the approval.
5. A Branch Office of the Foreign Company
Trust FDI Manager to care of all of these.
The Foreign Exchange Management Act, 1999 (FEMA) empowers the Reserve Bank of India (RBI) to frame regulations to prohibit, restrict and regulate the opening, holding and maintaining of foreign currency accounts and the limits up to which amounts can be held in such accounts by a person resident in India. These regulations are known as Foreign Exchange Management (Foreign currency accounts by a person resident in India) Regulations, 2015 notified under Notification No. FEMA 10 (R)/2015-RB of January 21, 2016, (FEMA 10 (R)) as amended from time to time.
Accounting is one of the most important part of a company without which the operations cannot be structured properly. Accounting services in the form of bookkeeping, payroll, taxation helps in recording the financial transactions, categorizing the data, periodically updating and reporting to the company about the financial behavior and analyzing the end financial results for a company.
The empanelled Chartered and Cost Accountants of FDI Manager provide:
Financial Accounting - summary, analysis, preparation of financial statements and reporting of financial transactions
Management Accounting – provides financial and non-financial decision making information to the managers
Auditing - scrutinizes the books, accounts, statutory records, documents and vouchers for presenting a fair and true picture of the financial scenario
Tax Accounting - governs the taxes of a company which is enforced by the law
Cost Accounting - record, classify, analyze summarize, and allocate costs connected with a process, and then develop various course of action to control the costs.
HR Consultancy and Support Services:
Employee engagement: We measure employee engagement levels through surveys and interviews, define and improve performance in employee engagement and retention encapsulating total rewards strategy, employee performance management, leadership transformation, and organisation structure design
Compensation: We help design and manage compensation programs related to basic salary, bonuses, and stock plans. Evaluation of positions and building of salary structures, bonus plans and stock plans for clients are done by experts with long and specialized HR experience.
Employee benefits: We help optimize benefit plan design and administration (inclusive of health-related benefits) by assessing competitiveness and effectiveness of benefit plans (analytics and design), and cost-effectiveness and quality of vendors (brokerage).
Actuarial and retirement: We provide actuarial and administration services to manage cost and effectiveness of retirement programs, including defined benefit and defined contribution plans.
Mergers and acquisitions: We help conduct human capital due diligence, coordinate and administer cross-functional activities during execution, including payroll and HR technology, align organizational cultures and work styles during post-merger integration.
Talent mobility: We provide the insight and execution for full international expatriates (usually for executives and specialized technicians) or local plus (partial-package expatriates), from pre-move informative guide, to post-move expat management program.
Compliance and Audits : We provide our expert services to conduct factory/workplace/site compliance audits to assess the work environment and ensure adherence to the acceptable Code of Conduct by employers.
Establishing a joint venture company is the preferred form of corporate structure for foreign investors doing business in India. In sectors where 100 percent FDI is not allowed in India, a joint venture is the best medium, offering a low risk option for companies wanting to enter into the vibrant Indian market.
All companies registered in India, even those with up to 100 percent overseas equity, are considered as local companies.
Corporate joint ventures are regulated by the Companies Act, 2013 and the Limited Liability Partnership Act, 2008.
Corporate JVs will also be subject to the country’s tax laws, The Foreign Exchange Management Act of 1999, labor laws (such as the Minimum Wage Act, 1948, Industrial Disputes Act, 1947, and state-specific shops and establishment legislation), The Competition Act of 2002, and various industry-specific laws.
A JV may be formed with any of the business entities existing in India.
Choosing a good home partner is the most important tool to the success of any joint venture.
Once an associate is selected, normally a memorandum of understanding (MoU) or a letter of intent is signed by the parties – stressing the foundation of the future joint venture agreement.
An MoU and a joint venture agreement must be marked after consulting a chartered accountant firm well versed in the Foreign Exchange Management Act; Indian Income-tax Act, 1961; the Companies Act, 2013; international laws and applicable Indian rules, regulations, and procedures.
FDI Manager helps locate a suitable JV Indian Partner and its experts ensure Terms and conditions of a JV Agreement are properly assessed before signing the contract keeping in vies the cultural and legal background of all the involved parties. FDI Manager helps obtain all the required governmental approvals and licenses within a specified period.
Techno Economic Viability (TEV) Study provides an appraisal of technological parameters of projects and its impact on the financial viability of projects. A TEV study is a risk mitigation exercise undertaken by banks and financial institutions prior to decision taken by a bank or financial institutions on its lending decisions for projects.No project can be absolutely risk less and hence the analysis of the degree of technical risk and associated financial viability, through a Techno-Economic Viability Study (TEVS) is to assist lenders take a view on the acceptability of the degree of risk involved in a project.A TEV study takes into account an analysis of technological risk, market risk, regulatory risk, financial risk. A critical evaluation of these parameters is essential for a meaningful TEV study.
Conducting a feasibility study is one of the key activities within the project initiation phase. It aims to analyze and justify the project in terms of technical feasibility, business viability and cost-effectiveness. The study serves as a way to prove the project’s reasonability and justify the need for launch. Once the study is done, a feasibility study report(FSR) should be developed to summarize the activity and state if the particular project is realistic and practical. Let’s find out what FSR means, why it’s important and how to write it.
It aims to identify, explore, and evaluate a project’s solutions to save time and money. It describes and supports the most feasible solution applicable to the project.
Formally this document is the starting point for running the Pre-Charter Sub-Phase. In practice, it signifies that the sponsor can proceed with deciding on project investment and make necessary assignments to the project manager.
FDI Manager has the expertise to conduct TEV Study and prepare FSR specific to its clients requirements for their newly formed businesses in India.
External commercial borrowing (ECBs) are loans in India made by non-resident lenders in foreign currency to Indian borrowers. They are used widely in India to facilitate access to foreign money by Indian corporations and PSUs (public sector undertakings). ECBs include commercial bank loans, buyers' credit, suppliers' credit, securitised instruments such as floating rate notes and fixed rate bonds etc., credit from official export credit agencies and commercial borrowings from the private sector window of multilateral financial Institutions such as International Finance Corporation (Washington), ADB, AFIC, CDC, etc. The DEA (Department of Economic Affairs), Ministry of Finance, Government of India along with Reserve Bank of India, monitors and regulates ECB guidelines and policies.
Foreign currency convertible Bonds (FCCB)
FCCBs are issued in accordance with the scheme [the Scheme for issue of Foreign Currency Convertible Bonds and Ordinary Shares (Through Depository Receipt Mechanism) Scheme, 1993] and subscribed by a non-resident in foreign currency and convertible into ordinary shares of the issuing company in any manner, either in whole, or in part, on the basis of any equity related warrants attached to debt instruments
An Indian corporate can raise foreign currency resources abroad through the issue of American Depository Receipts (ADRs) or Global Depository Receipts (GDRs). Regulation 4 of Schedule I of FEMA Notification no. 20 allows an Indian company to issue its Rupee denominated shares to a person resident outside India being a depository for the purpose of issuing Global Depository Receipts (GDRs) and/ or American Depository Receipts (ADRs),
E-procurement (electronic procurement) is the business-to-business or business-to-consumer or business-to-government purchase and sale of supplies, work, and services using the Internet as well as other information and networking systems such as electronic data interchange and enterprise resource planning
The e-procurement value chain consists of indent management, eTendering, eAuctioning, vendor management, catalogue management, Purchase Order Integration, Order Status, Ship Notice, e-Invoicing, e-Payment, and contract management. Indent management is the workflow involved in the preparation of tenders. In goods procurement, indent generation activity is done online. The end result of the stage is taken as inputs for issuing the NIT. Public sector organizations use eprocurement for contracts to achieve benefits such as increased efficiency and cost savings (faster and cheaper) in government procurement and improved transparency (to reduce corruption) in procurement services. E-procurement in the public sector has seen rapid growth in recent years. An e-procurement system manages tenders through a web site. This can be accessed anywhere globally and has greatly improved the accessibility of tenders.
Since the E-procurement process integrates several aspects of the government machinery, foreign companies find the going pretty tough to negotiate during its formative phase in India.
FDI Manager, with its experienced experts help clients negotiate this seemingly tough process with competitive ease.
Double Taxation Avoidance Agreement (DTAA) also referred as Tax Treaty is a bilateral economic agreement between two nations that aims to avoid or eliminate double taxation of the same income in two countries. In case, India and another nation are contracted under the DTAA, this income will have tax implications in accordance with the rate specified in the agreement. Otherwise, the interest income will attract tax @ 30.90 % i.e. the current withholding tax.
DTAAs can either be comprehensive to cover all sources of income or be limited to certain areas such as taxing of income from shipping, air transport, inheritance, etc. India has DTAAs with more than eighty countries, of which comprehensive agreements include those with Australia, Canada, Germany, Mauritius, Singapore, UAE, the UK and US. Further, Indian government is constantly working to establish DTAA with other nations. DTAAs are intended to make a country an attractive investment destination by providing relief on dual taxation. Such relief is provided by exempting income earned abroad from tax in the resident country or providing credit to the extent taxes have already been paid abroad. DTAAs also provide for concessional rates of tax in some cases.
Experts at FDI Manager provide their services to Investors to profit from benefits accruing through DTAA. Services include preparation of complete necessary documentation and advisory relating to changing DTAA negotiations between India and other nations.