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Mercury GeneralLPC&Partners
Regulations and Legal Issues to be careful for
in company incorporation in India
Neerendra U
padhyayaForeign
Busin
ess Adviso
r (Hiro
shim
a Prefectu
re, Govern
men
t of H
irosh
ima, Jap
an)
Registered
Foreign
Law
yer (Mercu
ry Gen
eral LPC
& P
artners, Jap
an)
Mercury
General LPC
& Partners
Copyright ©
2017 Mercury G
eneral LPC &
Partners All R
ights Reserved
IND
EXStep
1R
eviewofBusinessPlan
1.W
hatbusinessdoyou
wantto
doin
India
2.C
hoiceofm
odeofbusiness(C
ompany,B
ranchO
ffice,LiaisonO
fficeetc.)
Step2
Review
ofFDIPolicy
1.W
hetherFDIpolicy
restricts/regulatesforeigninvestm
entinyourbusinesssector,ornot
2.G
overnmentR
outeand
Autom
aticR
oute
Step3
Com
panyIncorporation
1.W
hataJapanese
company
shouldpay
attentionto
incom
panyincorporation
2.Processofcom
panyincorporation
3.Share
Capital&
Authorized
ShareC
apital
4.Shareholdersand
ShareholdersMeeting
5.B
oardofD
irectorsandD
irectors,
6.A
uditorandC
ompany
Secretary
7.E-governance
1
Mercury
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& Partners
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eneral LPC &
Partners All R
ights Reserved
1R
eview of Business Plan
Flowchart for m
odes of Entry into India
Mercury
General LPC
& Partners
Copyright ©
2017 Mercury G
eneral LPC &
Partners All R
ights Reserved
1R
eview of Business Plan
1.W
hattypeofB
usinessdo
youw
anttodo
inIndia?
¾A
tfirst,
thebusiness
planshould
befixed,
becauseit
dependson
typeof
business;•
Whetherthe
businesscanbe
carriedoutin
India?
•W
hichisthe
bestmode
ofbusiness(i.e.Com
pany,BO
,LO,orPO
)?•
How
many
percentagesof
sharesin
acom
panyyou
wantto
invest?(like
Jointventure,Equity
ownership
?)
3
BO
–B
ranch Office
LO –
Liaison office
PO
–P
roject Office
Mercury
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& Partners
Copyright ©
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eneral LPC &
Partners All R
ights Reserved
1R
eview of Business Plan
2.C
hoiceofm
odeofB
usiness¾
Thefollow
ing4
typesofm
odeofbusiness
youcan
choosem
ainly;�
Com
pany–
Com
panycan
bePublic
orPrivate
limited
(Same
askabushiki
Gaisha
inJapan)
�Branch
Office
(BO)
�Liaison
Office
(LO)
�LO
means
aplace
ofbusiness
toact
asa
channelof
comm
unicationbetw
eenthe
Principalplaceof
businessor
Head
Office
byw
hatevernam
ecalled
andentities
inIndia
butw
hichdoes
notundertake
anycom
mercial
/trading/industrial
activity,directly
orindirectly,
andm
aintainsitself
outof
inward
remittances
receivedfrom
abroadthrough
normalbanking
channel;�
ProjectOffice(PO
)�
POm
eansa
placeofbusiness
torepresentthe
interestsofthe
foreigncom
panyexecuting
aprojectin
Indiabutexcludesa
LiaisonO
ffice
4
Mercury
General LPC
& Partners
Copyright ©
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eneral LPC &
Partners All R
ights Reserved
1R
eview of Business Plan
2.C
hoiceofm
odeofB
usinessA
pprovalsRequired
RBI-R
eserveBank
ofIndia
1.A
pprovalfrom
RB
I(through
AD
Bank)
isrequired
forN
on-residentfor
openingB
O,LO
,orPO.
Governm
entApproval
1.D
ependingon
theFD
IPolicy,G
overnment
approvalm
ayalso
berequired
firstbyN
on-R
esident.
5
AD –
Authorized Dealer
Mercury
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eneral LPC &
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ights Reserved
1R
eview of Business Plan
2.C
hoiceofm
odeofB
usiness¾
Permitted
activitiesfor
BOin
Indiaof
aperson
residentoutside
India;•
Export/Importofgoods;
•R
enderingprofessionalorconsultancy
services;•
Carrying
outresearchw
ork,inw
hichthe
parentcompany
isengaged;•
Promoting
technicalor
financialcollaborations
between
Indiancom
paniesand
parentor
overseasgroupcom
pany;•
Representing
theparentcom
panyin
Indiaand
actingasbuying/selling
agentinIndia;
•R
enderingservicesin
Information
Technologyand
developmentofsoftw
arein
India;•
Rendering
technicalsupporttothe
productssuppliedby
parent/groupcom
panies;•
Foreignairline/shipping
company.
Pleasenotethatthefollow
ingactivitiesare
notallowed;
•R
etailtradingactivitiesofany
nature.•
Manufacturing
orprocessingactivities,directly
orindirectly.
6
Mercury
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& Partners
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eneral LPC &
Partners All R
ights Reserved
1R
eview of Business Plan
2.C
hoiceofm
odeofB
usiness¾
Permitted
activitiesforLO
inIndia
ofaperson
residentoutsideIndia;
•actas
achannelofcom
munication
between
theprincipalplace
ofbusiness
orheadoffice
andentitiesin
India.•
cannotundertakeanycom
mercialactivity
directlyorindirectly
•collecting
information
aboutpossiblem
arketopportunities•
providinginform
ationaboutthe
company
anditsproductsto
Indiancustom
ers•
promoteexport/im
portfrom/to
India•
facilitatetechnical/financialcollaboration
between
parentcompany
andcom
paniesinIndia.
¾Perm
ittedactivitiesfor
POin
Indiaofa
personresidentoutside
India;•
executespecificprojectsinIndia
cansetup
temporary
project/siteoffices.
•C
arryoutrelating
andincidentalforthe
project.•
ProjectOfficesm
ayrem
itoutsideIndia
thesurplusofthe
projectonitscom
pletion
7
Mercury
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& Partners
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eneral LPC &
Partners All R
ights Reserved
1R
eview of Business Plan
2.C
hoiceofm
odeofB
usiness¾
Differencesbetw
eencom
pany,BO,PO
,andLO
8
Com
panyBO
POLO
Business
No R
estriction(D
ependingon
FDI Policy)
Pleasesee the
previous slideC
onstruction,Infrastructure etc.
Pleasesee the
previous slide
Funding•
Capital
infusionby
aholdingcom
pany•
FreeR
eserves
•R
emittance
byH
Q•
FreeR
eserves
•R
emittance
byH
Q•
FreeR
eserves
•R
emittance
byH
Q
Income Tax
30.90%-34.61%
41.20% -43.26%
41.20% -43.26%
N/A
Mercury
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& Partners
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eneral LPC &
Partners All R
ights Reserved
2R
eview of FD
I Policy1.
Whether
FDI
policyrestricts/regulates
foreigninvestm
entin
yourbusinesssector,ornot
¾FD
IPolicy•
IndianG
overnment
issuespress
notefrom
time
totim
e,and
allof
which
areconsolidated
andupdated
everyyear.
Thelatest
oneis
Consolidated
FDI
Policy,2016
(datedJune
7,2016);•
FDI
Policyshall
bereview
edin
advanceso
thatyou
canunderstand
whether
yourbusinesssectorin
Indiaisopen
toforeign
investorsornot.
9
FDI –
Foreign Direct Investm
ent
Mercury
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& Partners
Copyright ©
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eneral LPC &
Partners All R
ights Reserved
2R
eview of FD
I Policy1.
Whether
FDI
policyrestricts/regulates
foreigninvestm
entin
yourbusinesssector,ornot
¾C
aseStudy
9O
neofthe
conditionsIn
respectof
proposalsinvolving
foreigninvestm
entbeyond
51%,sourcing
of30%
ofthe
valueof
goodspurchased,
will
bedone
fromIndia,
preferablyfrom
MSM
Es,village
andcottage
industries,artisansandcraftsm
en,inallsectors.
•M
UJI(R
yohinK
eikaku)setupJV
company
with
anIndian
Retailerto
openits
shopsin
India.•
MU
JIholds51%
oftheshares
inJV
company,This
maybe
thereason
why
MU
JIdidn’tset
upits
wholly-ow
nedsubsidiary
andseem
sto
bethat
itw
antsto
avoidthe
saidcondition.
10
Sector / Activity
%of Equity/
FDI C
apEntry R
oute
Single Brand product retail trading
100%•
Autom
atic up to 49%•
Governm
ent route beyond49%
Mercury
General LPC
& Partners
Copyright ©
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eneral LPC &
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ights Reserved
2R
eview of FD
I Policy2.
Governm
entRoute
&A
utomaticR
oute¾
EntryR
oute•
Thereare
two
kindsofentryroute,one
isgovernmentroute
andanotherisautom
aticrote
11
Governm
entRoute
Priorapprovalof
theG
overnmentof
Indiais
required.Proposals
forforeign
investment
underG
overnment
route,areconsidered
byFIPB
.
Autom
aticRoute
Thenon-resident
investordoes
notrequire
anyapprovalfrom
Governm
entofIndiaforthe
investment
FIPB –Foreign Investm
ent Promotion Board
Mercury
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eneral LPC &
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ights Reserved
3C
ompany Incorporation
1.W
hata
Japanesecom
panyshould
payattention
toin
company
incorporation¾
Wholly-ow
nedsubsidiary
VS
JVcom
pany
12
Merit
Dem
erit
Wholly-ow
nedsubsidiary
•M
anagement
controlonly
byholding
company
•Easierto
exit•
Protectionof
technology,know
-how
,andIPR
•H
ugecosts
andtim
eto
startup
andexpand
thebusiness
•R
estrictionofbusiness
underFD
Ipolicy
JV com
pany•
Easierto
startup
andexpand
thebusiness
•Less
Risk
andFast
expansionof
business
•D
ifficultto
finda
goodJV
partner•
Managem
entcontrol
alongw
itha
JVcom
pany
Mercury
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& Partners
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eneral LPC &
Partners All R
ights Reserved
3C
ompany Incorporation
2.ProcessofC
ompany
Incorporation¾
Main
3steps
1.D
SCand
DIN
•Proposed
subscribersto
theM
OA
andA
OA
andproposed
firstdirectorsshallobtain
DSC
(Digital
SignatureC
ertificate)and/orDIN
(DirectorIdentification
Num
ber),which
shallbedescribed
inthe
relatedform
sforcom
panyincorporation
2.C
ompany
Nam
eA
pproval•
Before
applicationforcom
panyincorporation,com
panynam
eapprovalshallbe
required.
2.C
ompany
Incorporation•
Application
forcom
panyincorporation
shallbe
made
within
60days
fromthe
aforesaidnam
eapproval.
�R
ecentUpdate
•To
make
company
incorporationeasier,the
Govt.India
amended
theprocedures.Forexam
ple,PAN
andTA
Nofthe
proposedC
ompany
willnow
mandatorily
beapplied
inthe
incorporationForm
,andobtained
atthe
same
time
ofgetting
Certificate
ofIncorporation.
(Inthe
past,PA
Nand
TAN
applicationcould
bem
adeonly
afterincorporationofcom
pany.)
13
Mercury
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& Partners
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eneral LPC &
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ights Reserved
3C
ompany Incorporation
3.Share
Capital&
Authorized
ShareCapital
¾ShareC
apital•
Recently,
therequirem
entsof
them
inimum
capitalrequirem
entfor
theprivate
Com
panyas
well
aspublic
Com
panyhave
beenom
itted.
¾A
uthorizedShareC
apital•
Theauthorized
sharecapitalofa
company
isthe
maxim
umam
ountofsharecapitalthatthe
company
isauthorised
byitsM
OA
toissue
toshareholders.
•The
amountofthe
authorizedshare
capitalshouldbe
decidedcarefully
sincethe
statutoryfee
tobe
paidin
company
incorporationdepends
onthe
amountof
theauthorized
sharecapital(m
oream
ountofthe
authorizedshare
capital,more
statutoryfee.)
14
Before amendm
entA
fter amendm
ent
Private Com
panyN
ot less than INR
100,000/-N
/A
Public Com
panyN
otless than INR
500,000/-N
/A
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eneral LPC &
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ights Reserved
3C
ompany Incorporation
4.Shareholdersand
ShareholdersMeeting
¾The
Num
berofShareholders
15
Private Com
pany2 (Tw
o) ore more but up to 200 (Tw
oH
undred) persons
Public Com
pany7 (Seven) or m
orepersons
Mercury
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eneral LPC &
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ights Reserved
3C
ompany Incorporation
4.Shareholdersand
ShareholdersMeeting
¾ShareholdersM
eeting
16
Notice for
Meeting
•N
otlessthanclear21
(Twenty-onedays)’notice
eitherinw
ritingorthrough
electronicm
ode.•
How
ever,ageneralm
eetingcan
becalled
aftergivinga
shorternoticeifconsentis
givenin
writing
orby
electronicm
odeby
notlessthanninety-five
percent.ofthem
embers
entitledto
voteatsuch
meeting.
Quorum
(Minim
um
person)
Unlessthe
AO
Aprovidesfora
largernumber
•PrivateC
ompany:2
(Two)m
embers
•Public
Com
pany:(a)5(five)m
embers
incase
ofthecom
panyhaving
notmore
than1,000
mem
bers,(b)15
(fifteen)mem
bersin
caseofthe
company
havingm
orethan
1,000butup
to5,000
mem
bers,and(c)30
(thirty)mem
bersin
caseofthe
company
havingm
orethan
5,000m
embers.
Voting
Aresolution
shallbedecided
ona
showofhands(one
votingrightperm
ember).
9Therefore,it
isvery
important
tospecified
inthe
AO
Aw
ithrespect
toa
poll(one
votingright
pershare).
Resolution
•O
rdinaryR
esolution:Majority
oftheshareholderspresent
•SpecialR
esolution:Notlessthan
75%ofthe
shareholderspresent
Place•
AG
M:A
ttheregistered
officeofthe
company
oratsome
otherplacew
ithinthe
city,town
orvillagein
which
theregistered
officeofthe
company
issituated•
EGM
:InIndia
AG
M –
Annual G
eneral Meeting
EGM
–Extra-ordinary G
eneral Meeting
Mercury
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eneral LPC &
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ights Reserved
3C
ompany Incorporation
5.Board
ofDirectors&
Director
¾Board
ofDirectors
17
Num
ber•
PrivateCom
pany:notlessthan2
(two)butup
to15
(fifteen)directors•
PublicCom
pany:notlessthan3
(three)butupto
15(fifteen)directors
Providedthat
acom
panym
ayappoint
more
thanfifteen
directorsafter
passinga
specialresolution.
Notice
•N
otlessthan7days’notice
inw
ritingby
electronicm
ode.•
Providedthata
Meeting
oftheB
oardofD
irectorsm
aybe
calledatshorternotice
totransact
urgentbusinesssubjectto
thecondition
thatatleastoneindependentdirector,ifany,shallbe
presentatthem
eeting.
Quorum
(M
inimum
Person)
Onethird
ofitstotalstrengthortw
odirectors,w
hicheverishigher
Resolution
Majority
ofthedirectorspresent
PlaceA
nywhere
Mercury
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eneral LPC &
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ights Reserved
3C
ompany Incorporation
5.Board
ofDirectors&
Director
¾D
irectortobe
appointedin
acertain
classofcompanies
Thefollow
ingclassofcom
paniesshallappointthe
following
typesofdirector.
18
TypeN
umber
Requirem
ents
Wom
an D
irectorA
t least1 (one)
1)Every
listedcom
pany;2)
everyotherpublic
company
having–
•paid–up
sharecapitalofone
hundredcrore
rupeesormore;or
•turnoverofthree
hundredcrore
rupeesormore
IndependentD
irectorN
ot less than one-
third
Everylisted
company
At least
2 (two)
•The
PublicC
ompanieshaving
paidup
sharecapitaloften
crorerupeesorm
ore;or•
ThePublic
Com
panieshavingturnoverofone
hundredcrore
rupeesormore;or
•The
PublicC
ompanies
which
have,in
aggregate,outstanding
loans,debentures
anddeposits,exceeding
fiftycrore
rupees:
Resident
Director
At least
1 (one)Every
Com
panyshallhave
atleastonedirector
who
hasstayed
inIndia
fora
totalperiod
ofnot
lessthan
onehundred
andeighty-tw
odays
inthe
previouscalendar
year.
Mercury
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eneral LPC &
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ights Reserved
3C
ompany Incorporation
6.A
uditor&
Com
panySecretary
¾A
uditor•
TheBoardofD
irectorsin30
daysofIncorporationshallappointtheFirstA
uditorofthecompany.
•Every
company
shall,atthefirstannualgeneralm
eeting,appointanindividualora
firmas
anauditorw
hoshall
holdoffice
fromthe
conclusionof
thatm
eetingtill
theconclusion
ofits
sixthannual
generalm
eetingand
thereaftertilltheconclusion
ofeverysixth
meeting.
•A
uditorshallbeaqualified
charteredaccountantsorchartered
accountantsfirm.
¾C
ompany
Secretary•
Everylisted
company
andevery
otherpublic
company
havinga
paid-upshare
capitaloften
crorerupees
orm
oreshallhave
whole-tim
ew
hole-time
company
secretary.•
Acom
panyotherthan
acom
panycovered
abovew
hichhas
apaid
upshare
capitaloffivecrore
rupeesorm
oreshallhave
aw
hole-time
company
secretary.Foreg.any
Privateor
Publiccom
panyw
hichhave
paidup
capitalabove5
Cr).
19
Mercury
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& Partners
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eneral LPC &
Partners All R
ights Reserved
3C
ompany Incorporation
7.E-Governance
E-bizm
issionw
illtransforme-governance
beyondonline
transactionsto
deliveringservices
toinvestors
andbusinessespecially
foreign.
¾Single-w
indowclearancefor
BusinessandInvestorsin
processingrequests.
¾O
neintegratedapplication
formform
ultiplelicenses
¾Singleconsolidated
paymentforvariouslicenses
¾R
eductionin
number
ofprocedures,costandtim
eto
obtainapproval.
¾24
X7
facilityforInform
ationand
Services.
¾O
fferscoverageofEntirebusinesslife-cycle.
¾Itisaim
edto
towardseaseofbusinessin
India.
Mercury
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& Partners
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eneral LPC &
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ights Reserved
Thank You
Mercury
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2017 Mercury G
eneral LPC &
Partners All R
ights Reserved
当法人概要
弁護士法人マーキュリー・ジェネラル
Mercury G
eneral LPC &
Partners
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903TEL
:03-5215-8875FA
X:03-5215-8876
WEBサイト:http://w
ww
.mercury-law
.com/
【主要取扱分野】
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