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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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Types of Companies in IndiaDESCRIPTIONS PRIVATE COMPANY PUBLIC COMPANY
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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Types of Companies in IndiaDESCRIPTIONS PRIVATE COMPANY PUBLIC COMPANY
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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Types of Companies in IndiaDESCRIPTIONS PRIVATE COMPANY PUBLIC COMPANY
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