Legal & Regulatory

Largest Exchange to Enter Indian Market


Apr. 15 – The largest exchange in the world, the Chicago Mercantile Exchange (CME), has held talks to possibly enter the Indian market through the purchase of equity stakes in the Indian exchanges. According to the Business Standard, CME has already talked with several Indian exchanges to purchase stakes. The group is also talking to […]

Foreign Investors in Realty Locked in for Three Years


Mar. 25 – In a new ruling the Foreign Investment Promotion Board has said that foreign investors in real estate cannot sell their stake to another foreign investor before termination of the lock in period of three years, the Economic Times reported.

India Needs to Expedite Preparations for 2010 Commonwealth Games


Feb. 26 – A parliamentary panel released a report on Wednesday stating that the Commonwealth Games scheduled to be held in New Delhi in October 2010 would need nothing short of a miracle to be completed on schedule. At a time when India and China are competing neck and neck for Asian dominance, India seems drastically under prepared for what the country hails as India’s Olympics. According to the report, only half of the 30,000 extra hotel rooms and most of the sporting venues needed would be completed by October.

The panel blames the lackadaisical attitude on the poor coordination between the various government agencies. "The 2010 games are drawing near and so many projects are yet to be initiated, let alone being completed," the AFP quoted the report by the panel on transport and tourism headed by federal lawmaker Sitaram Yechury.

Regulation on Investing in Indian Equity Gains Clarity


Feb. 23 – Foreign firms looking at investing in Indian companies on an installment basis now have more clarity. A Foreign Investment and Promotion Board official recently clarified regulations for FDI via partly paid up equity. According to the clarification, the FIPB will allow Indian companies to issue partly paid up capital to foreign companies if the foreign companies agree to fully pay the requisite equity within 18 months.

The clarification means that there is no longer any disconnect between the Foreign Exchange Management Act and the Companies Act. Earlier, the FEMA didn’t allow issue of partly paid-up shares to non-residents while the Companies Act permitted it. This created ambiguity in the law leading FIPB officials to decide on partly paid up capital on a case by case basis.

As the financial crisis grips India tighter, the country is opening its doors wider to FDI. The Cabinet Committee on Economic Affairs (CCEA) recently released a statement that equity investments routed through companies in which a majority ownership and control is in the hands of Indians would be treated as fully domestic equity. The move effectively made room for millions of dollars of FDI to pour into the country.

Obtaining Technology Collaborations with India


Feb. 20 – India’s technology prowess and large consumer market is attracting transfers in both technology products and services. While India encourages both the transfer of technology and technical services it lays down certain ground rules for the import, sales and export of technology from Indian soil.

Below are some of the rules and regulations governing technology collaborations for foreign firms in India:

a. Technology Licensing

Technology licensing to Indian companies is permitted and encouraged under Indian exchange control regulations. Payment of royalties up to certain limits is permitted without any prior regulatory approvals. These limits are lump-sum royalties of US$2 million, and recurring royalties of 5 percent on domestic sales and 8 percent on export sales, based on the net ex-factory sales price of the products.

India’s Legal System in Need of Overhaul


Feb. 13 – Even as the Indian economy races ahead to become bigger and stronger, the country’s legal system lags behind. According to the Chief Justice of India, A.P. Shah, it would take the Delhi High Court 466 years just to clear its backlog of criminal cases.

In a report released by the judiciary, the lax legal system is a result of three major factors – the low number of sitting judges per population, India’s high rate of corruption and the tedious process of registering a court case.

The associated press reported that although the Delhi High Court resolves cases at an average speed of four minutes and 55 seconds, it still has innumerable cases pending including 600+ cases that are more than 20 years old. The United Nations Development Program estimates that some 20 million legal cases are pending in India. As a result, its not uncommon to hear stories of court cases lasting longer than the average human lifespan.

Foreign Law Firms Can now Register in India


Feb. 10 – Under the newly released Limited Liability Partnership Act 2008, foreign law firms are allowed to register and offer consultation services in India but not practice law. The new enactment was enforced as multinational companies needed international law firms to represent them across borders in complex international deals. The law ministry also felt the introduction of foreign firms would infuse professionalism creating global law firms of Indian origin.

"Foreign law firms can register in India under Section 59 of the LLP Act, for which rules are being framed, and offer consultation. But they can't practice law as right to legal practice is controlled by the Advocates Act which permits only an Indian lawyer enrolled in Bar Council here to do so,'' Union law minister H R Bhardwaj told the Times of India.

The Limited Liability Partnership Bill, 2008 seeks to give companies the best of a partnership and corporation set up. Incorporated under the Indian Companies Act 1956, a partner of an LLP firm is not liable for another partner's misconduct or negligence – each partner’s liability is limited to their agreed contribution in the LLP. Further the partners have the right to manage the business directly, allowing businesses where all investors wish to take an active role in management to flourish. An LLP is seen to be best suited for the services industry and for small scale industries which do require flexibility in legal set up procedures.

India to Form a National Agency to Fight Terrorism


Dec. 17 – Following mass public outrage at the bureaucracy, lack of finances and poor national co-ordination Indian security agencies get entwined in post the Mumbai terror attacks, the Indian government passed a bill allowing the formation of a national agency to investigate major militant attacks.

Proposed by the new Home Minister – P. Chidambaram, the Central Industrial Security Force Act if passed into law would establish a National Investigations Agency, styled on the US Federal Bureau of Investigation (FBI) or the UK’s MI5.

The NIA will be governed by the Defence of India Rules, normally used in times of war, giving the agency overriding powers to take over the investigation of terror attacks without direct interference from the states. The agency was earlier opposed by India’s 29 states as they felt it would allow the national government to usurp local law enforcement powers.

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