Investment outside-india-international-laws-compliances-and-regulatory

Investment Outside India –International Laws, Compliances and Regulatory

Presentation by Hemant Shah @

HEDGE-SQUARE

Introduction

It is not the strongest of the species that survive, nor the most intelligent, but the one most responsive to change……………Charles Darwin

Introduction

I. Indian Economic Liberalization 1991

• Balance of Payment of Crisis

• Bailout Deal with International Monetary Fund (IMF)

• Demand of Structural Economic Reforms

• Economic Policy 1991

II. Gross Domestic Product

• It represents the total dollar value of all goods and services produced over a specific

time period

• Indian economy has made significant progress over the last few years, with the gross

domestic product (GDP) growing at an average rate of 5.3 per cent

• Raising power of and co-ordination between BRICS Economies

Overseas Investment

Particulars Volume Value ($ Mn.)

Year to date 2011 2012 2013 2011 2012 2013

Inbound 8 9 7 7,459 270 1,988

Outbound 11 5 4 206 441 66

Total 19 14 11 7,665 711 2,054

I. Outbound Investment:

• India ups trade target with Africa to US$ 100 billion by 2015

• Indian Companies raising capital overseas more cheaply

• The total value of outbound deals in February, 2013 was US$ 0.07 billion (4 deals) as compared to US$ 0.44 billion (5 deals) during February, 2012.

II. Deal Tracker – Cross Border – February 2013 (Source: Grant Thornton)

Overseas Investment

III. Recent Crossborder Deals

• ONGC eyes $2 billion deal for Nigeria field to expand its international portfolio

• Infosys BPO has opened a call centre in Costa Rica, which is considered as the fourth

best outsourcing destination in Latin America.

• Tata Steel has acquired half the interest in Labrador Iron Mines’ (LIM) House deposit for

Canadian dollars 30 million (Rs 160 Crore), through its subsidiary Tata Steel Minerals

Canada (TSMC)

• JSPL to set up 1,500 MW plants in 5 African countries

• Tata Consultancy Services, the country’s largest software exporter, has set up a new

delivery centre in Liverpool, expanding its operations in the UK.

• Bangalore-based Wipro had signed a definitive agreement to acquire 100 per cent

ownership in LD Waxsons, a Singapore-based FMCG company.

• Tata Communication plans cable link to Bangladesh in collaboration with BD Link

Communications Ltd.

Overseas Investment

Structuring

Structuring

I. Structuring

• Business Model

• Birth of various laws on domestic as well as international platform

• It is a best planning for both business as well as regulations

II. Factors:

• Present and Future Plans of the Company

• Laws, Rules & Regulations of the jurisdictions where Company wants to operate

• Agreements, Conventions, Treaties between home country and that country

• Laws, Rules & Regulations of the home country

• Synergies of operations

• Requirement of Joint Venture partner

• Project specifics

Structuring

III. Examples:

• Transfer of funds from one entity to other

• IHC – Intermediate Holding Company

• FC – Foreign Company

Indian Company

IHC Registered Outside India

FC1 FC2 FC3 FC4

Structuring

IV. TATA Motors:

Equity Funding

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Corporate Guarantee

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Equity Funding

Sale of Jaguar assets

Acquisition of debt of $3bn.

2.3 bn

TATA Motors

IHC (Singapore)

SPV (UK)FORD Motors

Structuring

V. Misc.

Germany Royalty

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India

Tech. Support

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100% 50%

Mauritious

26%

24%

ABC

JV (Overseas Trading Activities)

HSQ(Manufacturing UnitLocal Sales

IHC

Hurdles

Hurdles

I. Laws, Rules and Regulations of the home country and respective jurisdictions

II. Compliance and regulatory Issues

III. Cultural Integration Issues

IV. Environmental issues

V. Political Issues

VI. Expectation of Consumers

VII. Examples of Legal Hurdles:

• Bharti – MTN Deal:

• Dual listing requirement as a hurdle to $24 billion deal

Hurdles

• Wall-Mart – Massmart Holdings Ltd.

• Procurement condition by South African Competition Commission

• US FDA and Pharma Companies

• Despite improving infrastructure, impressive technological development, and a fairly

stable economic and political landscape, Brazil has challenging compliance issues and

lengthy process for registering business operations.

• Many Private Companies in Telecom sector got stuck in compliance issues in countries

such as Nepal and Bangladesh

• Capital Costs and Registration Costs involved in the global compliances

• Law specific requirements varies from country to country

Indian Regulatory

Indian Regulatory Issues

I. Companies Act

• Provisions of section viz. Section 125, 293, 212 etc.

II. Foreign Exchange Management Act and Rules & Regulations

• FEMA (Transfer or Issue of any Foreign Security) Regulations, 2004

• FEMA (Issue of Security in India by a Branch, Office or Agency of a Person Resident

outside India)

• Liberalized Remittance Scheme - $ 2,00,000

• FEMA (Export of Goods and Services) Regulations, 2000 &

• Such other Rules & Regulations and directions issued there under.

III. SEBI Rules & Regulations

IV. Listing Agreements

V. Competition Act

Some International Jurisdictions

International Jurisdictions

I. South Africa:• Hybrid and Mixed Legal System• Companies Act, 2008 (Recently amended)• Security Service Act, 2004• Currency and Banking Act, 1920 and other foreign exchange controls• Trade Mark Registry and Companies House got merged to establish Companies and

Intellectual Property Commission (CIPC)• No name Companies• No audit if Shareholders and Directors are same

II. Bangladesh:• English Legal System• Companies Act, 1994• The Security & Exchange Ordinance, 1969• Foreign Exchange Regulation Act, 1947• Approval from Bangladesh Bank and BOI• Employment of domestic personnel are mandatory in the ratio of 10:2• Qualification shares mandatory for Directors

International JurisdictionsIII. Nepal:

• English Legal System• Companies Act, 1994• Securities Act, 2007• Foreign Investment and Technology Transfer Act, 1992• FDI approval for Foreign Companies • Time taking process and concept of translations• Indian FEMA states restrictions on Investing in Nepal. • Foreign Exchange Controls in Nepal don’t allow business without Office.

IV. Singapore:• English Legal System• Companies Act, 1994• Securities and Future Act, 2002• Tax Heaven • Easy process and laws• CMS License requirement for some categories• No foreign exchange controls• Favorite Destination for Outbound Investment

International JurisdictionsV. Mauritius:

• English Legal System• The Companies Act, 2001• The Securities Act, 2005• Tax Heaven but no remittance under LRS is permissiable.• Easy process and laws• Concept of GBC 1 and GBC 2 and protected cell companies• No foreign exchange controls

VI. Dubai:

a) Free Trade Zones:• Jabel Ali• Dubai Internet City• Dubai Airport Free Trade Zone• Tax Heavens • No Local Partner requirement• Only specific kind of business can be carried• Regulation varies from each free trade zone• Different labour laws prevails

International Private laws &

International Organisations

International Private Law

I. History & Development

• Started after the fall of the Roman Empire

• Entry of various state Rules, Regulations, Treaties, Conventions etc.

II. Three Principal Questions

• Choice of Jurisdiction

• Choice of Law

• Recognition of Foreign Judgment

III. Factors or Components

• Domicile

• Jurisdiction

International Organizations

I. Organization for Economic Co-operation and Development (OECD)

II. World Trade Organisation (WTO)

III. International Chamber of Commerce (ICC)

IV. International Monetary Fund (IMF)

V. World Bank

VI. United Nation (UN)

VII. South Asian Association for Regional Cooperation (SAARC)

Contact Us

HEDGE-SQUARE CONSULTANCY SERVICES PRIVATE LIMITED

Reach @:Hemant Shah – Founder & CEOC.S, L.L.B, B.Com121/123, Nafees Chambers, Block – 27/ 28, Modi Street, Fort,Mumbai – 400 001

Web @:www.hedge-square.com

Speak @:(+91) 98705 51611 / 97699 51611(+91) 0226182380/ 81/ 82/ 83/ 84

Write @:[email protected]@gmail.com

Skype @: hedge.square

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