bo - forms of organization

7/30/2019 BO - Forms of Organization

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BUSINESS ORGANIZATION

Dr. Sarbesh Mishra

Finance Area.


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Sole Proprietorship

Partnership

Private Limited Company

Public Limited Company

Charitable Organization

Types of Business Entities


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No registration required

Unlimited liability

Used for small business or by Professionals

No Separate Legal Entity

Sole Proprietorship


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

Partnership

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


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Governing Act

Companies Act, 1956

Company

Special Features of Company

a) Company is a Separate Legal Entity

b) It can sue and be sued in its own namec) 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


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Types of Companies in IndiaDESCRIPTIONS PRIVATE COMPANY PUBLIC COMPANY

Definition Which by its article restricts:Numbers of members to 50

Transfer of sharesInvitation of public to subscribe

its debenture, shares etc.

Acceptance of deposits fromperson other than its shareholdersand directors

Which is not * private

Governing Laws Companies Act, 1956 Companies Act, 1956SEBI Act, 1992 and alliedlaws.


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IncorporationTime

22 to 3 weeks 2 to 3 weeks

Minimum Paid upCapital

INR 1,00,000/- INR 5,00,000/-

Maximum No. ofshareholders50 (Fifty) No limit

Minimum No. ofShareholders

2 (Two) 7 (Seven)

Transferability of

Shares

Restricted Freely. If company is listed

then through stockexchange(s)

Minimum No. ofDirectors

2 3


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Whether aForeigner canbe Director

YYesYes

Whole TimeDirector (WTD) /ManagingDirector (WTMD):Appointment

Appointment notcompulsory and

No restriction onappointment

Appointment :Not compulsory, If

paid up capital < Rs. 5 Cr.Compulsory. Ifpaid up capital => Rs.5 Crs

WTD / WTMD:

Remuneration

No restriction As per schedule XIII,

otherwise permission ofCentral Government.

Foreigner asWTM D / WTD

No restriction With the approval of

Central Government


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Loan toDirector etc.

YYes With the previousapproval of CentralGovernment

Contracts withDirector etc.

Yes With the consent of Board,If paid up capital of the

company is (One) 1 Cr. ormore, approval of CentralGovt. is necessary

Loan, Investment

& Guarantee bythe company

No restriction Some restrictions


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Charitable Organization

- Trust

- Society

- Section 25 Company

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


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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)


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

TELECOM 49% ( 74%)

INSURANCE 26% (Proposed 49%)

POWER 100%

PETROLEUM REFINING 100%

DRUGS & PHARMA 100%

HOTELS 100%

ROADS 100%


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FDI in India

Automatic Route for FDI is not available forDomestic 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 servicesCourier Services

Establishment and Operation of satellite

Development of Integrated Township

Tea Sector


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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, mushroomsetc. under controlled conditions and services related

to agro and allied sectors) and Plantations (Other

than Tea plantations)

FDI in India


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How a Foreign Company can enterinto India?

Liaison Office

Branch Office

Project / Site Office Joint Venture

100 % Wholly Owned Subsidiary


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Liaison Office

Permitted activities for a Liaison Office in India

Representing in India the parent company/groupcompanies.

Promoting export import from/to India.

Promoting technical / financial collaborationsbetween parent / group companies and companiesin India.

Acting as a communication channel between theparent company and Indian companies.


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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 inthe country of registration.

Latest balance sheet of the applicant company / firm.

Certified photo-copy of the agency Agreement, if any, withparties in India.

Photo-copy of the Agreement / draft- Agreement /correspondence indicating the terms of appointment of theproposed representative duly authenticated by the applicant.

Where applicable, certified photocopy of Government ofIndias approval for undertaking projects in India.

Where applicable, certified photocopy of the contract /Agreement for undertaking activities / rendering services.


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Liaison OfficeConditions Imposed While Granting Permission

No commission / fee will be charged or any otherremuneration received by the Indian office of the foreigncompany for its liaison activities in India.

Except the liaison work, the office will not undertake anyactivity of a trading, commercial or industrial naturewithout the prior permission of RBI

The entire expenses of the Indian office will be metexclusively by remittance from abroad through normalbanking channels.


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Branch OfficePermitted activities Export/Import of goods

Rendering professional or consultancy services.

Carrying out research work, in which the parent company isengaged.

Promoting technical or financial collaborations between Indiancompanies and parent or overseas group company.

Representing the parent company in India and acting asbuying/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


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Joint Ventures

Joint Ventures are of two typesa) Incorporated Joint Ventures

b) 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


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Joint Ventures

Verify Limit of FDI permitted inproposed JV

Drafting of Moa & Aoa in accordancewith JV Agreement

Incorporation of JV company

Private & Public JV Company


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100% Wholly Owned Subsidiary

Verify FDI for 100% WOS

Incorporation of WOS

Private & Public WOS

bo - forms of organization

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