© MLS Chase 2007
The inormation in this document is provided or general inormation purposes only and does notconstitute legal or proessional advice. Relevant legal or proessional advice should be sought beoretaking any decision based on the contents o this document. This article was frst published by the Practical Law Company – www.practicallaw.com
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Establishing a joint vEnturE in india
An Overview
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Establishing a Joint VEnturE in india
Establishing an Equity joint vEnturE in india – an ovErviEw
i’ e ec veme (Fdi) e ve ee y ee ce e cy f wee veme e ey 1990. M ec e w pe 100% Fdi. hweve, my e ve pee e p j vee w i pe cmpy c, ce, ve em cce e i pe’ pe-ee mke ce, c meme kw-w.t ce exme e w key c vve e j vee ewee e ve i pe:
•Earlyconsiderations.•UnderstandingFDIrules.•Conductingappropriateduediligence.•Structuringthejointventurevehicle.•Companyformation.•Obtainingregulatorylicencesandapprovals.•Employeeissues.•Taxationandduties.•Protectingintellectualpropertyrights(IPR).•Jointventuredocuments.
Early Considerations
E j vee i c e evey w pce pe ppey, peve m ke cc c eece expec m e e. sme eece ppc e we ce e e e cme. We cme Wee jce e vey ee pecpve, i cme e y me ee pe ee e.ne i e e “” cvy mpy e c. a e, evee cme ee exece, ee pecep m i pe ccmce ce, ecme c y e mee, wc c e e e cep.i , e i ec-mk pce c e vey ecc, mp eeme we me ec mke vve m e e ey . i e, e e mec e we e e w eve.oe e e cee ey e pce ce w y pe e e e j vee w e e w, w e e ve w e e ww veme m i ce ex e vee.
l i evey w ee e ck ce. a e, my e vepee ve eve pe e ce e j vee eeme(
see below, Documents
). te eev e cce e mec
istheArbitrationandConciliationAct1996.Theactgivesexibilitytoconductarbitrationinvarious
jc e w pe e jc e ece ecee i.
rep ve cp evey w pce. ue e “mc ppv e”(ppce Fdi w e pece m e y e reeve bk i (rbi)), e eqy
5 www.mce.cm
1
Establishing a Joint VEnturE in india
2 www.mce.cm
veme ee i m k ce, e rbi me pece m w 30y e w emce, e ep peme w e ee y e ppv.
Understanding FDI rules
a m ec e i ecmy e y pe Fdi, ee e ce ec weeFdi ee cppe ( exmpe, eecm, ce eece mc) y pe
(suchasmulti-brandretail,atomicenergyandagriculture).(Priorgovernmentapprovalisalsorequired
e Fdi eece mc.) oe ec, c e ee evepme, e jec ce veme ce; ee e me, Fdi pe. a e, mp ceck e e e veme e e y j vee cfm w
permitted.FDIrulescanbefoundontheDepartmentofIndustrialPolicyandPromotionwebsite(
see http://dipp.nic.in
).
i veme w e e, eeme ve eceve “mc ppv” m e rbi, wc e epe e-keep e veme i. te rbi m e fe pecem w 30 y e cp. a e eqy veme eqe e p ppv e rbi.
Conducting due diligence
a w y j vee, e e (, me, e i) pe e y we y ey e cmmec e my ec e e py e ppe j vee. We e e m i cmpe ve pcy, me ce ( exmpe, e me cmpe) m e ece exece my e e y wy f e ecey m.
de ece exece e evey e i, e ve my ee “e” e pce pcce w jc. te epe pve y e i pe e my we y eqe j vee eeme py cke y eme e eve e we e pve e mepee (
see below, Documents
).
Corporate structure
te cpe vece e ve y ce e j vee e e pveme cmpy e pc me cmpy. te pve me cmpy me cmmy e. tem pve e e ce e e mp e j vee vece e pve me cmpy.te w e e we e pve me cmpy:
•
Capitalisation
. a pve me cmpy eqe mmm p p cp inr100,000 (
EUR1,706orUS$2,270).Ifthecompanyusescertainwordssuchas“India”or“Hindustan”initsnamethentheminimumpaidupcapitalrequirementisINR500,000(aboutEUR8,533orUS$11,351).•
Minimum directors and shareholders.
a pve me cmpy eqe mmm w ec w ee. te ec ee e i ee. hweve, pcce ( exmpe, e ey y cme), ve ee e ec ee i. i veme k pce ecmc ec wee 100% Fdi peme, e e ee ei j vee cmpy (ic) c e ee. te eqeme w ee m e fe
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