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Indian Company Act 1956 and Regarding Factors

By:-> Sunil jeenger Rmat 2nd Sem RAPIM 2010-2012

Types of Business Entities

Sole Proprietorship

Private Limited Company

Public Limited Company

Charitable Organization

Sole Proprietorship
No registration required

Unlimited liability

Used for small business or by Professionals

No Separate Legal Entity

Section 11 of Companies Act, 1956
No partnership consisting of more than 20 persons shall be formed

Indian Partnership Act, 1932

Section 4 Partnership is the relation between persons who have agreed to share profits of business carried on by all or any of them acting for all

Unlimited Liability Registration not Compulsory

Governing Act Companies Act, 1956

Special Features of Company

a) Company is a Separate Legal Entity b) It can sue and be used in its own name c) The liability of the shareholders are limited to the extent of their shareholdings d) Company is distinct from its shareholders e) It can hold property in its own name

Types of Companies in India


Which by its article restricts:
Numbers of members to 50 Transfer of shares Invitation of public to subscribe its debenture, shares etc. Acceptance of deposits from person other than its shareholders and directors

Which is not * private

Governing Laws

Companies Act, 1956

Companies Act, 1956 SEBI Act, 1992 and allied laws.

Types of Companies in India

DESCRIPTIONS Incorporation Time Minimum No. of Shareholders Maximum No. of shareholders Minimum Paid up Capital Transferability of Shares Minimum No. of Directors PRIVATE COMPANY
2 to 3 weeks 2 (Two) 50 (Fifty) INR 1,00,000/Restricted

2 to 3 weeks 7 (Seven) No limit INR 5,00,000/Freely. If company is listed then through stock exchange(s) 3

Types of Companies in India

DESCRIPTIONS Whether a Foreigner can be Director Whole Time Director (WTD) / Managing Director (WTMD): Appointment WTD / WTMD: Remuneration Foreigner as WTM D / WTD PRIVATE COMPANY
Yes Yes Appointment not compulsory and No restriction on appointment Appointment : Not compulsory, If paid up capital < Rs. 5 Cr. Compulsory. If paid up capital => Rs.5 Crs As per schedule XIII, otherwise permission of Central Government. With the approval of Central Government


No restriction

No restriction

Types of Companies in India

DESCRIPTIONS Loan to Director etc. Contracts with Director etc. PRIVATE COMPANY

With the previous approval of Central Government With the consent of Board, If paid up capital of the company is (One) 1 Cr. or more, approval of Central Govt. is necessary Some restrictions


Loan, Investment & Guarantee by the company

No restriction

Charitable Organization Trust Society Section 25 Company

It can do business and earn any amount of profits, but the distribution of profits cannot be made to Shareholders / trustee

Regulatory Bodies in India

Foreign Investment Promotion Board (FIPB) Reserve Bank of India (RBI) Security Exchange Board of India (SEBI) Registrar of Companies (RoC) Trade Mark Registry (TMR) Director General of Foreign Trade (DGFT)

Law relating to JV & Foreign Cos. in India - FDI In India

TELECOM 49% ( 74%) 49%)




100% 100% 100% 100%

FDI in India

Automatic Route for FDI is not available for

Domestic Airlines Petroleum Sector (except for private sector oil refining) Investing companies in Infrastructure & Services Sector Defence and Strategic Industries Atomic Minerals Print Media Broadcasting Postal services Courier Services Establishment and Operation of satellite Development of Integrated Township Tea Sector

FDI in India

FDI is Prohibited in
Retail Trading Atomic Energy Lottery Business Gambling and Betting Housing and Real Estate business Agriculture (excluding Floriculture, Horticulture, Development of seeds, Animal Husbandry, Pisiculture and Cultivation of vegetables, mushrooms etc. under controlled conditions and services related to agro and allied sectors) and Plantations (Other than Tea plantations)

How a Foreign Company can enter into India?

Liaison Office Branch Office Project / Site Office Joint Venture 100 % Wholly Owned Subsidiary

Liaison Office
Permitted activities for a Liaison Office in India Representing in India the parent company/group companies. Promoting export import from/to India. Promoting technical / financial collaborations between parent / group companies and companies in India. Acting as a communication channel between the parent company and Indian companies.

Procedure for setting up Liaison Office

Apply in Form FNC-1 in quadruplicate to RBI English version of the certificate of incorporation / registration attested by Indian Embassy / Notary public in the country of registration. Latest balance sheet of the applicant company / firm. Certified photo-copy of the agency Agreement, if any, with parties in India. Photo-copy of the Agreement / draft- Agreement / correspondence indicating the terms of appointment of the proposed representative duly authenticated by the applicant. Where applicable, certified photocopy of Government of Indias approval for undertaking projects in India. Where applicable, certified photocopy of the contract / Agreement for undertaking activities / rendering services.

Conditions Imposed While Granting Permission

Liaison Office


commission / fee will be charged or any other remuneration received by the Indian office of the foreign company for its liaison activities in India.
the liaison work, the office will not undertake any activity of a trading, commercial or industrial nature without the prior permission of RBI entire expenses of the Indian office will be met exclusively by remittance from abroad through normal banking channels.



Branch Office
Permitted activities

Export/Import of goods Rendering professional or consultancy services. Carrying out research work, in which the parent company is engaged. Promoting technical or financial collaborations between Indian companies and parent or overseas group company. Representing the parent company in India and acting as buying/selling agent in India. Rendering services in Information Technology and development of software in India. Rendering technical support to the products supplied by parent/group companies. Procedure for setting up Branch Office Same as Liaison Office

Joint Ventures


Joint Ventures are of two types

Incorporated Joint Ventures Contractual Joint Ventures a) Financial Joint Venture b) Technical Joint Venture


Essentials for Joint Ventures

Name of the JV Shareholding Pattern Funding and Financing of JV Constitution of Board of Directors, Powers of Directors, Meeting Transfer of shares, right of refusal, buy out provisions Non disclosure, non competition, IPRs Governing laws, Dispute resolution

Joint Ventures

Verify Limit of FDI permitted in proposed JV Drafting of Moa & Aoa in accordance with JV Agreement Incorporation of JV company Private & Public JV Company

100% Wholly Owned Subsidiary

Verify FDI for 100% WOS

Incorporation of WOS Private & Public WOS