Overview of Doing Business in India

by Poorvi Chothani, Esq. LawQuest

www.lawquestinternational.com

July 8, 2010

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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 the world'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 will have over 1.6 billion people Occupies 2.4% of the world's land area and supports over 17.5% of the world's population.

As per the 2001 census, 72.2% of the population lives in about 638,000 villages and the remaining 27.8% lives in more than 5,100 towns and over 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 data for 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 for issue 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 existing joint 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 an

additional cap on the total number being 20 employees. IT and ITES companies 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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