5 Legal Aspects_Presentation

8/12/2019 5 Legal Aspects_Presentation

1/62

5 LEGAL ASPECTS YOU MUST KNOW

WHEN STARTING A VENTUREJanuary 18, 2014

Srinivas KotniFounder & Managing Partner

Advocates & Legal Consultants

Delhi | Bangalore


2/62

FIVE LEGAL ASPECTS Shareholders Agreement & Formation of A Company

Intellectual Property Rights

Contract Law & Dispute Resolution

Human Resources (HR) Laws

Indirect Taxes


3/62

SHAREHOLDERS AGREEMENT

&

FORMATION OF A COMPANY


4/62

Why Shareholders Agreement?Meaning:

A legal document between the shareholders of the company

providing the nature of their relationship with each other

Provides answer to WHAT IF?

What if there is a fundamental breakdown in therelationship between the shareholders

What if there is shortage of funds


5/62

Why Shareholder Agreement?(Cont..)

What if one wants to exit from Company

What if one shareholder is unable to work

What if one does not take active part in business


6/62

Key Terms Role of each promoter

What does each promoter contribute - expertise

Duties of each promoter

Shareholding Pattern

Authorised Share Capital Types of SecurityEquity / Preference Share

Shareholding of each promoter


7/62

Key Terms (Cont..)

Transfer of Shares

Restrictions on Transfer

Transfer to Relatives/Nominees Valuation mechanism

RoFR / RoFO

Anti-Dilution Provisions Ability to match Third Party Price

Tag Along / Drag Along


8/62

Key Terms (Cont..)

Management Structure:

Constitution of the Board

Reserved Items or Veto Rights Right to appoint key persons like Director, CFO,

CEO etc

Board Meetings and Shareholders Meetings

Method of holding

Quorum


9/62

Key Terms (Cont..)

Non Compete Clause

Term

Territory

Services / Products Books, Registers, Reports and Inspection/ Audit Rights

Selection of Auditors

Termination and Consequences of Termination

Valuation Mechanisms


10/62


11/62

Formation of A Company


12/62

Brief Steps in forming a Company

Obtain Director Identification Number

Digital Signature Certificate of Director

Apply to the Registrar of Companies for

obtaining the proposed name of the Company.


13/62


After approval of name; file the following

incorporation Documents:

Memorandum of Associationdefining basicobject & structure of Company

Articles of Associationdefine procedure for

functioning of a Company

Form32 ; details of directors


14/62


Form18; Situation of Registered Office

Form1; Declaration of compliance with the

requirements of the Act with respect toincorporation.

Obtain the Certificate of Incorporation


15/62

NAME APPROVAL

Choose three to four proposed names

Get the Trademark Search for proposednames


16/62

Articles of Association

Ensure that the provisions of the Shareholders

Agreement are incorporated in this


17/62

Contract Law & Disputes Resolution


18/62

Basics

An Agreement enforceable by law is a Contract

A Contract may be for: Sale/Purchase of Goods

Provisions of Services

Lease Deeds

Business Association

Any commercial dealing with any stakeholder etc.


19/62

Basics (Cont..)

The terms of contract must be precise, definite and without anyambiguities.

Price Variation Clause must be provided in long-termcontracts, where the delivery period extends beyond 18 months

The contract should also contain the mode and terms of payment and penal consequence for any default.

Warranty clause should be incorporated in contract, whereverapplicable.

Suitable provision for settlement of disputes to be incorporated


20/62

DISPUTES RESOLUTION

Modes of Disputes Resolution

Litigation

Alternate Disputes Resolution

Mediation

Conciliation Arbitration


21/62

INTELLECTUAL PROPERTY RIGHTS


22/62

Types of Intellectual Property

Trademarks

Geographical Indications

Copyright Patents

Designs

Trade Secrets Integrated Circuits

Plant Variety Protection

Domain Name


23/62

Trademarks The Trademarks Act, 1999Governing law

Meaning : Trademark is any sign which candistinguish the goods and services

of one Person

from

those of another.


24/62

Trademarks In India a mark includes: word or letter

a device

Brand, Logos

heading,

label, ticket, name, signature,

three-dimensional shapes

numeral, shape of goods, packaging or

combination of colours or any combination thereof


25/62

Kinds of Trademarks WORD MARK

LEXport

YAHOO

Google

LOGOS, PICTURES OR DRAWINGS


26/62

Kinds of Trademarks SLOGANS

PRODUCT SHAPES


27/62

Why Registration? More evidence of the ownership of the trademark.

To seek monopoly & better remedies under the Act

Registration can be used as a basis for obtaining

registration in other countries.


28/62

Registration Procedure


29/62

Duration of Protection A trademark is registered initially for a period of 10

years from the date of the application.

The registration can be renewed for further period of

ten years and can subsequently be renewed.


30/62

Copyright

The Copyright Act, 1957governing law

Meaning : A set of exclusive rights granted by the law

to the author or creator of an original work,

to copy,

to distribute

to adapt the work

to authorize others to use by: Licensing

assignment


31/62

Works Protected

Following works are protected under the Act:

Artistic work

sculpture,

drawing (including a diagram, a map, a chart or plan),

an engraving,

photograph, a

work of architecture or artistic craftsmanship.

Cinematograph work


32/62

Works Protected (Cont..)

Sound recording

Dramatic works;

Musical work;

Original literary work computer programmes,

tables,

compilations and computer databases


33/62

Why Registration? Registration not mandatory for seeking protection ofCopyright

However, it is advisable to register a Copyright: for claiming effective protection before the enforcement

authorities

As a Prima-facie proof of first publication


34/62

Registration Procedure


35/62

Duration of Registration Registration valid for 60 years from the year followingthe death of the author of the works mentioned below:

Literary work

Dramatic work

musical work

artistic work


36/62

Domain Name Meaning : Means any alphanumeric designation

which is registered with or assigned by any domain

name registrar, domain name registry, or other domain

name registration authority as part of an electronic

address on the Internet.


37/62

Domain Name No specific law for enforcing intellectual

property rights in domain names.

High Courts have been protecting IPRs in

domain names under the common law right of

passing off.


38/62

Patent A patent is an exclusive right granted for an invention, which is a product ora process that provides a new way of doing something, or offers a new

technical solution to a problem

A Patent is registered for a period of 20 years from the date of filing the

application.

Why Registration?

Patent for a product: Product cannot be made, used, offered for sale or imported for

these purposes without the consent of the Patentee

Patent for a Process: Process cannot be used, offered for sale or imported for these

purposes without the consent of the Patentee


39/62

Industrial Design An industrial design is the ornamental or aesthetic aspect of an articlewhich must appeal to the eye. The design may consist of three-dimensional

features, such as the shape or surface of an article, or of two-dimensional

features, such as patterns, lines or colour.

The proprietor of the registered design has the exclusive right to apply a

design to any article in the class in which the design is registered

It is initially registered for ten years which is extendable by 5 years.

The registration can be renewed for further period of ten years and can

subsequently be renewed.


40/62

HR Laws


41/62

Statutory Laws The Industrial Disputes Act, 1947;

The Factories Act, 1948;

Shops and Establishment Acts of various states;

The Contract Labour (Regulation and Abolition) Act, 1970;

The Trade Unions Act, 1926;

The Workmens Compensation Act, 1923; The Employees Provident Funds and Miscellaneous Provisions Act, 1952;

The Employees State Insurance Act, 1948;

Contractual Laws Employment Contract

Employment Bond

HR Manual/Policies of company

SOME IMPORTANT LABOUR LAWS


42/62

INDIRECT TAX


43/62

Types of Indirect Taxes

Central Excise DutyManufacturer of goods

Customs DutyImporter of Goods

Value Added Tax (VAT) / Central Sales TaxTrader of Goods

Service TaxService Provider


44/62

SERVICE TAX

BASIC CONCEPTS


45/62

WHAT IS TAXABLE

+ SERVICES

NEGATIVE LIST

EXEMPTED SERVICES

SERVICES OUTSIDE TAXABLE TERRITOY


46/62

SERVICE (Cont)

WHAT IS INCLUDED

All activities for consideration. Both active (promise to do something) or passive (promise not

to do something) actions.

Declared Services


47/62

SERVICE (Contd)

WHAT IS INCLUDED

Services by an employee to the employer outside the course of

employment (like non-compete fee, payments received as

Director of Company, etc.)

Services by an employer to the employee forconsideration(like provision of car or telephone for personal use of employee)


48/62

SERVICE (Cont)

WHAT IS EXCLUDED

Sale of goods or immovable property

Transaction in money or actionable claim

Service by employee to employer

Fees taken by Court or Tribunal


49/62

SERVICE (Cont)

WHAT IS EXCLUDED

Activities without consideration

Activities performed for self consumption

EXCEPTION :

Activities between establishment in taxable territory and non-taxable

territory of same entity or person

Activities between un-incorporated association / body of individuals and

their members


50/62

NEGATIVE LIST [u/s 66D of Finance Act, 1994 ] It is made effective from 1st July 2012.

INCLUDESHighlights

Trading of goods

Space selling for advertisement (except radio or television)

Entertainment/ amusement

Education namely, pre-school, higher secondary, curriculum/ qualification

recognized by law, approved vocational courses

Renting of residential dwelling


51/62

NEGATIVE LIST (Cont) Services by way of

Interest/discount on deposits, loans or advances

Inter se-sales/ purchase of FOREX by Banks/ Authorized Dealers

Transportation of passengers by stage carriage, railway (not being 1st

class/AC,), metro, monorail, tram way, inland water ways, public transport (not

being for tourism), metered cabs, radio taxis and auto rickshaws

Transportation of goods by road ( except by a GTA or courier), aircraft or

vessel from abroad to India, inland water base

Funeral, burial, crematorium or mortuary services including transportation of

the deceased


52/62

SERVICE TAX EXEMPTIONS


53/62

SERVICE TAX EXEMPTIONS

Further Notified Exemptions of Services:

Given to UN and International Organisations

Healthcare services

Veterinary Clinics

Charitable services under Income tax

Renting for religion

Individual Advocates or Partnership firm of Advocates to specifiedpersons/entitys.

Technical testing for clinical research

Training / Coaching in arts, culture, sports Specified services to educational institutes

Specified services to a recognised sports body


54/62

BASIS FOR TAXATION UNDER NEW

REGIME

Section 66 B is the charging section

Following ingredients should be satisfied for levy of tax:

Services other than negative list shall be provided or agreed to be provided

Includes declared services in section 66 E

Such service shall be provided for a consideration

Service shall be provided in a taxable territory as per Place of Provision of

Services Rules, 2012.

The service shall be provided by one person to the another

The services provided or agreed to be provided by any person who is located in

non taxable territory and received by the person located in taxable territory.


55/62

PLACE OF PROVISION OF SERVICE

Generally place of provision shall be where the service receiver is located

Place of Provision in case of goods that are required to be physically made

available by the service provider would be the place where the services are

actually performed

Where the physical presence of the service provider is ordinarily required toprovide the services, in representative capacity or otherwise ,then such place shall

be place of provision of service.

Services in relation to immovable property shall be deemed to be rendered at the

place where such property is located.

Where any service is provided at more than one place then the place where

greatest proportion of service is rendered shall be place of provision.

In case of GTA, destination shall be place of provision


56/62

PLACE OF PROVISION OF SERVICE

Place of provision in respect of following services shall be service provider.

Service provided by banking company, financial institution or banking

financial company

Online information and database access or retrieval of services

Intermediary services Services consisting of hiring of means of transport up to one month


57/62

POINT OF TAXATION Point of Taxation Rule, 2011 have been linked the payment of service tax

with the invoice.

These rules have shifted the basis of tax collection from cash towards

accrual basis


58/62

REVERSE CHARGE MECHANISM

Under this mechanism service recipient has the liability to pay the amount

of specified service tax, which may amount to full payment of service tax

by the service recipient

Service recipient is eligible to take credit of the tax paid

If both service provider and recipient are liable to pay service tax

according to the prescribed proportion then the service provider has to

mention the prescribed service tax liability in the invoice.


59/62


Following services are subject to reverse charge:

Sr. No Nature of Service Person Liable

1. By an insurance agent to any person carrying on the

insurance business

Recipient of service

2. By a GTA in respect of transportation of goods by road Recipient of service

3. By way of sponsorship to any body corporate or

partnership firm located in taxable territory


4. I. Arbitral tribunal , or

II. An individual advocate or a firm of advocate ,To any business entity located in the taxable territory


5. By Specified Government authorities Recipient of service


60/62


(CONTD)

Sr. No Nature of Service Person Liable

6. A. Renting of Motor vehicle designed to carry

passengers

B. Supply of manpower

C. Security Services

D. Execution of works contract

To any registered business entity

Both provider and service

receiver are liable to pay

specified percentage of service

tax

7. By any person which is located in a non taxable

territory and received by any person located in the

taxable territory

Recipient of Service

8. Services by a director of a company to the said

company

Recipient of Service


61/62


62/62

THANK YOUSrinivas Kotni, Managing Partner

E-mail : [email protected];Mob: 91 9811282863

Delhi:R-1, SF, Park View Apartments, Hauz Khas

Enclave, New Delhi - 110 016, India |

delhi@lexport in

Bangalore:516, 10th A Cross, 29th Main, Sector 1, HSR

Layout, Bangalore - 560 102, India |

bangalore@lexport in
mailto:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]

5 Legal Aspects_Presentation

Documents

Transcript of 5 Legal Aspects_Presentation