INDIA 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…GEOGRAPHY Diverse Language, Culture & Climate Culture & Food Habits – South Indian – Punjabi – Gujarati – Rajasthani / Marwari
A BRIEF OVERVIEW OF THE INDIAN POLITICAL 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 INDIAN 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 LEGAL, FINANCIAL & DISPUTE RESOLUTION SYSTEM
A BRIEF OVERVIEW OF THE INDIAN LEGAL 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 LEGAL 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 FINANCIAL SYSTEM RESERVE BANK OF INDIA –Apex body in the Indian Financial System Banks –Nationalised Banks –Private Banks –Foreign Banks
DISPUTE 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 FINANCIAL 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 CORPORATE FRAMEWORK IN INDIA
BASICS OF A CORPORATE FORM OF 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 COMPANY LAW SYSTEM Types of Companies –Private Companies –Public Companies –Guarantee Companies - Non-profit Organisations.
DOCUMENTS CONSTITUTING A COMPANY 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 COMPANIES Minimum TWO; Maximum 50 Shareholders. Minimum TWO Directors. Maximum TWELVE Directors. Can restrict the right to transfer shares.
PUBLIC LIMITED COMPANIES Minimum 2 Shareholders. Maximum- No limit Minimum THREE Directors Maximum TWELVE Directors Shares freely transferable.
MEETINGS OF THE BOARD & SHAREHOLDERS 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.
QUORUM FOR 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.
OF DIRECTORS 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.
LIABILITY 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 CONTROLLING 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 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 SHARES The 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 DIFFERENTIAL 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.
DEBENTURES 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 SALARY STRUCTURING 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 EMPLOYEES 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 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 INSURANCE 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 FOR THE ASSESMENT YEAR 2009-10 (P.Y 2008-09)
TAXATION 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 1 ST APRIL of each year till 31 st MARCH of the succeeding year.
TAXATION 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 TAXATION upto Rs.1.50 lakhNil Next Rs 1.50 lakh 10% Next Rs 2.00 lakh 20% Rest of the Income30%
WITHHOLDING 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 TAX 15% on or before 15 th June; 45% on or before 15 th September; 75% on or before before 15 th December; 100% on or before 15 th March.
TAXATION Dividend is taxed in the hands of the Company paying the dividend. No tax in the hands of the shareholder receiving the dividend.