PRESENTATION ON INDIAN PRESENTATION ON INDIAN LEGAL SYSTEMLEGAL SYSTEM

A PRESENTATION BY

INDIA – A GENERAL INDIA – A GENERAL OVERVIEWOVERVIEW

INDIA IN GENERAL…GEOGRAPHYINDIA IN GENERAL…GEOGRAPHY Total Area – 3,287,263 sq km

Distance from North to South - 3,214 km

Distance from East to West 2,933 km No. of States - 28

No. of UT - 7

Major Languages - 10

Population March 2001 - 1,027 million

INDIA IN GENERAL…GEOGRAPHYINDIA IN GENERAL…GEOGRAPHY

Diverse Language, Culture & ClimateCulture & Food Habits

– South Indian– Punjabi– Gujarati– Rajasthani / Marwari

A BRIEF OVERVIEW OF THE INDIAN A BRIEF OVERVIEW OF THE INDIAN POLITICAL SYSTEMPOLITICAL SYSTEM

LARGEST DEMOCRACY IN THE WORLD– Universal Franchise– Persons above the age of 18 vote to elect their

representatives. UNION OF INDIA

– The President of India – Constitutional Head– Prime Minister & Council of Ministers

EACH STATE– The Governor– Chief Minister & Council of Ministers

BUREAUCRACY

A BRIEF OVERVIEW OF THE A BRIEF OVERVIEW OF THE INDIAN POLITICAL SYSTEMINDIAN POLITICAL SYSTEM

Lok Sabha – Lower House– 5 years once elections are held– Elected persons are Members of the

Parliament.Rajya Sabha – Upper House

– Permanent Body– 250 Members of Parliament.

OVERVIEW OF INDIAN OVERVIEW OF INDIAN LEGAL, FINANCIAL & LEGAL, FINANCIAL &

DISPUTE RESOLUTION DISPUTE RESOLUTION SYSTEMSYSTEM

A BRIEF OVERVIEW OF THE INDIAN A BRIEF OVERVIEW OF THE INDIAN LEGAL SYSTEMLEGAL SYSTEM

Supreme Court – The Apex Court.

High Courts in each State .

Courts in each District.

– Civil Courts / Criminal Courts.

Specialised Tribunals.

A BRIEF OVERVIEW OF THE INDIAN A BRIEF OVERVIEW OF THE INDIAN LEGAL SYSTEMLEGAL SYSTEM

Indian Parliament

– The Lok Sabha

– The Rajya Sabha Legislative body for all Central enactments

State Legislative Assembly Legislative body for all State enactments

A BRIEF OVERVIEW OF THE INDIAN A BRIEF OVERVIEW OF THE INDIAN FINANCIAL SYSTEMFINANCIAL SYSTEM

RESERVE BANK OF INDIA

– Apex body in the Indian Financial System

Banks

– Nationalised Banks

– Private Banks

– Foreign Banks

DISPUTE RESOLUTIONDISPUTE RESOLUTION India has a separate Law on Arbitration It follows the UNCITRAL Model of Arbitration. Arbitration Award is Final & binding on all parties. Cannot be appealed before the Court, unless

there is any point of Law. If agreement contains Arbitration Clause, and any

party moves the Court, the other party should point to Court about the Arbitration Clause and ask the Court to refer parties to Arbitration.

A BRIEF OVERVIEW OF THE INDIAN A BRIEF OVERVIEW OF THE INDIAN FINANCIAL SYSTEMFINANCIAL SYSTEM

Money Market– A developed and regulated market for

Shares Commodities Derivatives

With the Securities and Exchange Board of India (SEBI) as the Apex Body.

– Trading in Stock Exchanges are Screen based with electronic clearing and transfer of shares through Depositories.

DOING BUSINESS IN A DOING BUSINESS IN A CORPORATE FRAMEWORK CORPORATE FRAMEWORK

IN INDIAIN INDIA

BASICS OF A CORPORATE FORM BASICS OF A CORPORATE FORM OF ENTITYOF ENTITY

Owners hold Shares;Each Shareholders gets a right to vote

based on the number of shares that he holds. One Share One Vote;

Management by a Board of Directors;Directors play a Trusteeship Role vis-à-vis

the shareholders;Powers of Directors are governed by the

provisions of the Companies Act, 1956.

A BRIEF OVERVIEW OF INDIAN A BRIEF OVERVIEW OF INDIAN COMPANY LAW SYSTEMCOMPANY LAW SYSTEM

Types of Companies

– Private Companies

– Public Companies

– Guarantee Companies - Non-profit

Organisations.

DOCUMENTS CONSTITUTING A DOCUMENTS CONSTITUTING A COMPANYCOMPANY

Memorandum of Association

– Constitution of the Company

Articles of Association

– Bye-laws of the Company, and provides

the manner in which the Company is to be

governed.

PRIVATE LIMITED COMPANIESPRIVATE LIMITED COMPANIES

Minimum TWO; Maximum 50

Shareholders.

Minimum TWO Directors.

Maximum TWELVE Directors.

Can restrict the right to transfer shares.

PUBLIC LIMITED COMPANIESPUBLIC LIMITED COMPANIES

Minimum 2 Shareholders. Maximum- No limit

Minimum THREE DirectorsMaximum TWELVE DirectorsShares freely transferable.

MEETINGS OF THE BOARD & MEETINGS OF THE BOARD & SHAREHOLDERSSHAREHOLDERS

Board Meetings– The Board should meet atleast once in 3 months

and a minimum of 4 meetings should be held in a year.

Shareholder Meetings– Called Annual General Meetings, to be held once

in each year Adoption of Annual Accounts. Declaration of Dividend. Other matters requiring approval of shareholders.

– Can hold Extra-ordinary General Meetings in respect of any matter when necessary.

QUORUMQUORUM FOR MEETINGSFOR MEETINGS

Board Meetings– Statutory Requirement – 2 Directors for

Private Companies and 3 for Public Companies.

Shareholders Meetings– Statutory Requirement – Presence of 2

shareholders in person for Private Companies and 5 for Public Companies.

OFOF DIRECTORSDIRECTORS

Managing Director / Whole-time Director– Vested with substantial powers of

management.

Directors– Have the responsibility for the overall

conduct and management of the affairs of the Company.

LIABILITYLIABILITY

Of Shareholders– Limited to the extent of the amount unpaid

on the shares agreed to be taken.

Of Directors– In respect of non-compliances of any

provisions of any enactment, penal provisions are specified.

MODES OF INVESTMENTS WITHOUT MODES OF INVESTMENTS WITHOUT CONTROLLING INTERESTCONTROLLING INTEREST

By way of issue of Preference Shares.

By way of issue of Debentures that are convertible

into shares.

By way of issue of Shares with differential rights with

regards to voting Rights and Dividend.

SHARES IN A COMPANY…A BRIEFSHARES IN A COMPANY…A BRIEF

– PREFERENCE SHARES Preference Shares carries preferential rights with

regards to : • The payment of dividend at a fixed rate • The return of capital on winding up of the Company.

Preference Shares carries voting rights only in the event the Company does not pay dividend on them.

– EQUITY SHARES– With voting rights– With differential rights as to dividend or voting.

Holders of Equity Shares are normally construed to be the Owners of the Company.

PREFERENCE SHARESPREFERENCE SHARESThe maximum tenure of the instrument is

20 years. Can be redeemed at a Premium.

The holders have no voting rights unless the agreed dividend is not paid.

While fixing the dividend rate care should be taken to ensure that there is sufficient profits retained in the business for ploughing back.

EQUITY SHARES WITH EQUITY SHARES WITH DIFFERENTIAL RIGHTSDIFFERENTIAL RIGHTS

A Type of Equity Share which can be so structured that the a higher dividend is offered to be paid with lesser voting rights. For Eg: 10 Equity Shares have 1 Vote, but get 1% more dividend than the normal equity share.

Certain Legal Issues to be addressed, with regard to issue of such instrument by a New Entity.

DEBENTURESDEBENTURES Debentures are a debt instrument. Can be issued with an option to convert

into Shares – Equity / Preference. They should be secured by mortgage

of any immovable property of the Company.

The interest rate is to be pre-determined.

Banks / FI’s will not construe this as Owners’ Funds.

EMPLOYEE RELATEDEMPLOYEE RELATED

EMPLOYEE SALARY EMPLOYEE SALARY STRUCTURINGSTRUCTURING

Decide on the total emoluments of the person either on per annum basis or on per month basis – preferably per annum basis– Break it up into

Basic Salary Monthly Allowances – House Rent, Telephone

etc. Yearly Allowances – Leave Travel, Medical

ENACTMENTS AFFECTING ENACTMENTS AFFECTING EMPLOYEESEMPLOYEES

PROVIDENT FUND FOR EMPLOYEES– Applicability

For business that does not use power as a main input

– When it employs 20 or more persons For business that uses power as a main

input– When it employs 10 or more persons

PROVIDENT FUNDPROVIDENT FUND

Rate of Provident Fund– Employee has to contribute 12% of Salary

(Basic Salary)– Employer contributes 12%.– Employer has to deduct the Employee

contribution and remit to the Government together with its contribution.

– Remittance to be made to the Government Account on monthly basis.

EMPLOYEE STATE EMPLOYEE STATE INSURANCEINSURANCE

Provision of Medical facilities to persons drawing total emoluments less than INR 10,000– Becomes applicable when more than 10

persons are employed.– Employer (3.75% of Basic Salary) &

Employee (1.75% of Basic Salary) contributes, and duty of employer to deduct and remit to the Government account.

INDIAN TAXATION SYSTEM INDIAN TAXATION SYSTEM FOR THE ASSESMENT YEAR FOR THE ASSESMENT YEAR

2009-10 (P.Y 2008-09)2009-10 (P.Y 2008-09)

TAXATIONTAXATION TAX ON GOODS

– Import & Export duties – Customs Duties & Countervailing Duties.

– Tax on Goods manufactured in India – Excise Duty

– Tax on Sale of goods – Value Added Tax. TAX ON SERVICES

– SERVICE TAX INDIA IS MOVING TOWARDS A GST –

SHOULD BE IN PLACE IN THE NEXT 5 YEARS.

TAXATION PERIOD TAXATION PERIOD

1ST APRIL of each year till 31st MARCH of the succeeding year.

TAXATIONTAXATION

TAX ON INCOME– Companies are liable to tax @ 30% of taxable

income plus surcharge of 10% (on the amount of 30%, where the taxable income exceeds Rs. 1,00,00,000) plus Education Cess of 3% (on the amount of 30%).

TAX ON CERTAIN EXPENSES MADE BY COMPANIES – FRINGE BENEFIT TAX (FBT)– This pertains to perquisites paid to employees.– Different rates for different items.

EMPLOYEE TAXATIONEMPLOYEE TAXATION

upto Rs.1.50 lakh Nil

Next Rs 1.50 lakh 10%

Next Rs 2.00 lakh 20%

Rest of the Income 30%

WITHHOLDING TAXESWITHHOLDING TAXES

On Contractual payments– 2% of the amount payable if payment is in

excess of Rs.20000/-(per contract) or Rs.50000/- per person.

– Rent in excess of Rs. 10000/- per month -15%

– Professional Payments excess of Rs.20000/- per annum - 10%

ADVANCE TAXADVANCE TAX

15% on or before 15th June; 45% on or before 15th September;75% on or before before 15th December;100% on or before 15th March.

TAXATIONTAXATION

Dividend is taxed in the hands of the Company paying the dividend.

No tax in the hands of the shareholder receiving the dividend.

CONTACTCONTACTseshwar@eshwars.comseshwar@eshwars.com

saisunder@eshwars.comsaisunder@eshwars.com