Alike any other commonwealth nation India carries complex legal & compliance structure for doing commercial activities. Up to a larger extent, the License raj, though abolished under liberalized policy of 1991 still makes its way in one form or the other. The regulatory regime under different regulatory bodies & quasi-judicial authorities’ attempt to protect the misuse of consumer wisdom & natural resources.
With the advent of new technology complex products like Cryptocurrencies or Cash loans via App or Gaming websites create challenges for all three bodies i.e. legislature, executive and judiciary to regulate the business environment. At times it tilts in favour of the business or may be at times in favour of the consumer. This is an ongoing process which in some cases is behind the need or ahead of the time.
The first and foremost action required to set up a shop in India is the choice to be made whether the business wants to have direct control or it wishes to be carried via third party. Both options have their merits and demerits. Direct control requires the incorporation of subsidiary, Joint venture, Liaison office, Project office or Branch office while the third party options are available in the form of distribution agreement, third party manufacturing under license or outright sale of product via export.
Once chosen, the process of establishing the legal relationship can be either governed by a statute like Companies Act, 2013 or by mere agreement. The agreement need not necessarily follow the laws of India so far dispute resolution is concerned. However, it should confirm the legal position as it stands in India. Agreements governing the relationship between overseas entity and Indian third party entity must be well drafted to avoid any issue qua parties and qua the law. In many of the cases the clauses of an agreement are drafted without considering the latest legal position whereby it creates state of confusion at the time of interpretation.
In ‘Ab Initio’ experience while dealing with specific sectoral product like defense, liquor, aviation, telecom or other similar regulated businesses its very much essential to consider legal opinions beforehand from reputed firms before even considering the business. Moreover, the past experience no way guarantees the similar outcome in light of the fact that judicial pronouncements, notifications and circulars keep tweaking the legal position as it stood at some point in time.
To sum up, doing business in India requires a pre incorporation analysis of legal environment, public policies, judicial pronouncements and regulatory provisions. Once a decision is taken, the practical aspect of licenses, approvals and procedural laxities needs to be addressed through an expert who understands the business completely. There can be huge gap between the legal position and practical aspects governing a license or approval. GOI has made huge attempts for ease of doing business However, it is prudent to have meetings with officials through chambers and business enabling forums to know what lies ahead.
The repatriation of profits in the form of dividend, royalty, technology fee and alike requires deep study of taxation laws of the country. The motive of a business should be categorically informed to the advisors so that the strategy is built around the objective of business. Even after all the precautions still a business can feel trapped under red tape or irritating and lengthy procedures. However, this is the game of profit. Once you are into it, you start enjoying it too, as the gain is always more than the pain.
